<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20552

                                   FORM 10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended                                Commission file number
February 28, 2001                                               0-13394

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

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

              1868 Tucker Industrial Drive, Tucker, Georgia 30084
             (address of principal executive offices and zip code)

Registrant's telephone number, including area code:          (770) 938-2080

Securities Registered Pursuant to Section 12(b) of the Act:      NONE

Securities Registered Pursuant to Section 12(g) of the Act:

                                                          Name of each exchange
Title of each class                                        of which registered

Common stock (no par value)                                    NASDAQ/NMS

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant at May 14, 2001 is $13,666,735.

The number of shares outstanding of the registrant's Common Stock as of May 14,
2001 is 4,559,480.

                  DOCUMENTS INCORPORATED BY REFERENCE HEREIN
Certain exhibits which were filed with the Securities and Exchange Commission as
part of the registrant's Registration Statement on Form S-18 (Commission File
No. 2-94626-A) are incorporated by reference into Part IV.

Portions of the proxy statement for the annual 2001 shareholders meeting are
incorporated by reference into Part III.
<PAGE>

                                    PART I

ITEM 1.  BUSINESS

General

Video Display Corporation (the "Company") is a leading supplier of a complete
range of Display Products and component parts for the Display industry. Its
product line consists of a wide variety of electron optic parts for original
equipment manufacturers ("OEMs"), cathode ray tube ("CRTs") and monitor
manufacturers. The Company manufactures monochrome and color CRTs for medical,
military, industrial and television applications and high and low-end monochrome
and color CRT and AMLCD monitor displays for specialty high performance and
ruggedized requirements. The Company also acts as a wholesale distributor of
electronic parts and CRTs purchased from domestic and foreign manufacturers. The
Company's operations are principally located in the U.S.; however, the Company
does have subsidiary operations located in Mexico, the U.K. and the Netherlands.

Description of Principal Business

Video Display Corporation was incorporated in the State of Connecticut in 1975,
and through a tax-free reorganization became a Georgia corporation in 1984. The
Company began its operations as a single recycling plant in Stone Mountain,
Georgia providing replacement CRTs for color and black/white television sets.
Beginning in 1983, with the growth of the computer industry, the Company
expanded to meet the needs of the replacement market for computer monitors and
other data display screens. To accomplish this objective, the Company acquired
production equipment and customers from other smaller CRT remanufacturers. In
fiscal 1993, the Company, through its Mexican subsidiary Video Electronics S.A.
de C.V. ("Video Electronics"), obtained the CSA (Canadian Standards Association)
and UL (Underwriters Laboratory) safety approvals for its recycled products. The
Company and its plants in Louisiana, Pennsylvania, Georgia, Texas, New York,
Connecticut, Florida, Massachusetts, Kentucky, Mexico, the U.K. and the
Netherlands combine to form an international CRT-OEM manufacturing and
distribution network with recycling capabilities and years of OEM production
experience.

In May 2000, the Company acquired the common stock of Lexel Imaging Systems,
Inc. ("Lexel") of Lexington, Kentucky. Lexel has developed specialized processes
used in manufacturing a wide range of monochrome CRTs for commercial and
military programs.

In June 2000, the Company acquired certain assets of the Electro Optical
division of Imaging and Sensing Technology ("IST") in Horseheads, New York. IST
provides a product line that includes specialty CRTs used to produce computer
generated graphics, high quality photography and medical diagnostic images. The
acquired assets of IST were integrated into Lexel's Lexington, Kentucky
facility.

In September and December 2000, the company acquired the CRT operations of the
Raytheon Corporation and the former Datagraphix business unit of Anacomp,
respectively. These operations were consolidated into Lexel's facility in the
latter part of fiscal 2001.

During fiscal 2000, in order to support the data display segment, the Company
opened offices in Cape Canaveral, Florida and Wolcott, Connecticut. The Florida
location ("Display Systems") provides custom projection display solutions for
training rooms, board rooms, teleconferencing, flight training simulators,
command and control centers, air traffic control, ship simulators, process
status displays and integrated home theater. The Wolcott, Connecticut location
("VDC Wolcott") offers high-resolution monochrome displays for use in medical
and military applications.

                                       2
<PAGE>

During fiscal 1999, the Company acquired the assets and assumed certain
liabilities of the U.S. and U.K. Display Divisions of Aydin Corporation
("Aydin"); acquired 100% of the outstanding common stock of Mengel Industries,
Inc. ("MII"); and acquired the net assets of both Wintron, Inc. ("Wintron") and
MegaScan Corporation ("MegaScan"). Aydin offers a complete line of
high-resolution commercial and ruggedized CRT monitors, AMLCD flat panel
displays and monitors used by the public and private sector industries including
medical diagnostic or treatment centers, utility and financial companies, and
the military industry. MII supplies independent, OEM and hospital service
personnel with CRTs, camera tubes and other components for medical imaging
within the healthcare industry. Wintron manufactures high quality,
custom-designed deflection components, high voltage power supplies, coils and
flyback transformers and other CRT drive circuitry for airborne, commercial and
military applications. MegaScan offers a complete line of high-resolution
monochrome CRT monitors to the medical display industry.

Also in fiscal 1999, the Company opened an office in the Netherlands, Video
Display Europe, B.V. ("VDC Europe"). This was done to more efficiently service
customers in continental Europe. In fiscal 2002, the Company will be
consolidating VDC Europe into their recently expanded UK operations and will
service the European continent from that location.

In fiscal 1996, the Company acquired the assets and assumed certain of the
liabilities of Teltron Technologies, Inc. ("Teltron") and the stock of Z-Axis,
Inc. ("Z-Axis"). Teltron is involved in the development and production of new
and recycled camera and CRTs and special purpose sensors. Teltron's products are
used in camera tube applications including nuclear inspection, UV sensing, x-ray
and astronomy; military applications including avionics instrument displays,
marine radar displays, helmet mounted displays, vehicular displays, and target
monitoring image tubes; and in CRT applications including OEM displays, flying
spot scanners, photo typesetting and electrostatic deflection tube applications.
Z-Axis is involved in the design and production of color and monochrome video
display monitors. Z-Axis' monitors are used in industrial control, medical
instruments, test equipment, visual aid devices, on-board tracking systems,
point-of-sale terminals and naval tactical displays.

The Company, through Southwest Vacuum Devices, Inc. ("Southwest Vacuum") located
in Tucker, Georgia, and Apex Electronics, Inc. ("Apex") of Passaic, New Jersey,
is involved in the manufacturing, marketing and distribution of electron guns
and related hardware. The electron gun is the main component of a CRT and these
companies give Video Display the ability to supply virtually all of its electron
gun requirements. In fiscal 2001, the Company consolidated the electron gun
business by relocating the Apex inventory and manufacturing operations to
Southwest Vacuum's facility.

In the late 1980's, the Company entered the market of wholesale distribution of
consumer electronic parts and consumer products and accessories with the
acquisition of Fox International Ltd., Inc. ("Fox International") of Cleveland,
Ohio. Fox International later added locations in Chicago, Illinois; Dallas,
Texas; Setauket, New York and Orlando, Florida by acquiring assets and existing
leases of operating distributors. Upon acquiring these locations, Fox
International increased their total inventory lines and implemented the
Company's operating policies so that all locations of this subsidiary operated
on a similar basis. Subsequently, with the investment in a phone and electronic
ordering system, the New York, Illinois and Florida locations were closed and
all customer requirements are now handled exclusively from the Ohio and Texas
locations. Fox International is involved in the wholesale distribution of
consumer electronic parts for most major U.S. and foreign electronic
manufacturers.

                                       3
<PAGE>

The Company continues to explore opportunities to expand the products offered in
the display industry. This expansion will be achieved by adding new products to
its inventory or by acquiring existing companies which enhance the Company's
position in the display industry. Research and development primarily consists of
establishing the interchangeability of products from various manufacturers and,
when advantageous, manufacturing products to replace original electronic parts.

Segment Information

This information is provided in the notes to the consolidated financial
statements, Note 11, Page F-21.

Products

Cathode Ray Tubes ("CRTs")

Since its organization in 1975, Video Display Corporation has been engaged in
the distribution and manufacture of CRTs using new and recycled CRT glass bulbs,
primarily in the replacement market, for use in data display screens, including
computer terminal monitors, medical monitoring equipment and various other data
display applications and in television sets. The Company currently markets CRTs
in over 3,000 types and sizes.

The Company's CRT operations are conducted at its facilities near Atlanta,
Georgia, and at facilities located in White Mills, Pennsylvania (Chroma);
Bossier City, Louisiana (Novatron); Monterrey, Mexico (Video Electronics);
Dallas, Texas (Magna View); Lexington, Kentucky (Lexel); Warwickshire, England
(VDC, Ltd.); and Amsterdam, Netherlands (VDC-Netherlands). At each North
American facility, the Company manufactures new or recycles CRTs to meet
original specifications. The European locations are sales and distribution
facilities only.

The recycling process for monochrome CRTs involves the cleaning and
reconditioning of the glass bulb and the insertion of new electronic components,
which are purchased from OEMs and the Company's electron gun subsidiary. The
Company's Atlanta, Georgia and Monterrey, Mexico facilities also assemble
monochrome CRTs using new glass bulbs obtained from suppliers in standard sizes
where customer requirements warrant the higher cost of new glass. The recycling
of color CRTs involves the insertion of new electronic components, while leaving
the original display screen intact. All CRTs manufactured by the Company are
tested for quality in accordance with standards approved by UL and are shipped
to customers or warehoused to meet future customer demand. The Company provides
one-year limited warranties on its computer and other data display CRTs and
two-year limited warranties on its color television components. Management
believes that the Company is the largest recycler of CRTs in the domestic
replacement markets for both television and data display uses.

The Company also distributes new CRTs and other electronic tubes purchased from
original manufacturers, both domestic and international. Some of these
manufacturers offer large quantities of overstocked original manufactured tubes
from time to time at significant price reductions. The Company acquires these
tubes when the existing replacement market demonstrates adequate future demand
and the purchase price allows a reasonable profit for the risk. However, these
purchased inventories sometimes do not turn as quickly as other inventories. In
fiscal 2001, distribution of new CRTs purchased from domestic and foreign
manufacturers accounted for approximately 63% of the Company's data display CRT
sales.

The Company markets its products through approximately 200 independent wholesale
electronics distributors located throughout the U.S. and sells directly to OEMs
and their service organizations. The Company also supplies, under private-brand
labeling, many of the replacement tubes marketed by several national brand name
television manufacturers.

                                       4
<PAGE>

In addition to factors affecting the overall market for such products, the
Company's sales volumes in both the color television and the data display CRT
replacement markets are dependent upon the Company's ability to provide prompt
response to customers' orders, while maintaining quality control and competitive
pricing. While the Company's manufacturing activities are scheduled primarily
around orders received, it also manufactures a wide variety of CRTs for stock
inventory in anticipation of customer demand.

With its most recent acquisitions, the Company has begun to position itself to
compete in the design and manufacture of complete monitor units for use in the
healthcare, military and industrial sectors.

The Company's monitor operations are conducted at Phelps, New York (Z-Axis);
Birdsboro, Pennsylvania (Teltron); Horsham, Pennsylvania (Aydin); Sanatoga,
Pennsylvania (MII); Billerica, Massachusetts (MegaScan); Wolcott, Connecticut
(VDC Wolcott); Cape Canaveral, Florida (Display Systems) and Lexington, Kentucky
(Lexel).

The Company's monitor segment involves the design, engineer and manufacture of
complete monochrome and color monitor units using new CRTs or flat panel
displays. The Company will customize these monitors for specific applications,
including ruggedization for military uses or size reduction due to space
limitations in industrial and medical applications. Because of the Company's
flexible and cost efficient manufacturing, it is able to handle low volume
orders that generate higher margins.

Electron Guns and Components

The Company, through its electron gun manufacturing subsidiary Southwest Vacuum,
manufactures electron gun assemblies comprised of small metal and ceramic parts
in a glass housing. The assembly process is highly labor intensive. While the
particular electron guns being sold are of the Company's own design, most are
replacements for electron guns previously designed for original equipment CRTs
used in television sets and computer monitors. Therefore, the total amount of
research and development expense is not significant and is not segregated in the
consolidated financial statements, but is instead included in cost of sales. Raw
materials consist of glass and metal stamped parts.

The electron gun division markets electron gun component parts to OEMs who
manufacture high resolution and specialty tubes for unique applications. The
majority of electron guns produced by this division is consumed internally among
the Company's own CRT manufacturing facilities. Sales to these related
divisions, which have been eliminated in the consolidated financial statements,
amounted to approximately $434,000 for fiscal 2001, $483,000 for fiscal 2000 and
$520,000 for fiscal 1999.

Electron gun sales are historically dependent upon the demand by domestic and
foreign television CRT remanufacturers. The Company continues to seek
alternative, growth-oriented markets to fully utilize its electron gun and
component assembly facility.

The Company, through its subsidiary of Wintron located in Howard, Pennsylvania,
produces flyback transformers, coils and power transformers. Intercompany sales
transactions were $85,000, $14,000 and $20,000 for fiscal 2001, 2000 and 1999,
respectively; but may become more significant as the Company's monitor segment
grows.

Electronic Parts

Fox International distributes consumer electronic parts of most major consumer
electronics manufacturers, both foreign and domestic. This subsidiary resells
these products to major electronic distributors, retail electronic repair
facilities, third party contractual repair shops and directly to consumers. In
its relationship with consumer electronic manufacturers, Fox International
receives the

                                       5
<PAGE>

right, frequently exclusive, to ship parts to authorized dealers. Many of the
manufacturers also direct inquiries for replacement parts to Fox International.
Each manufacturer requires a distributor to stock its most popular parts and
monitors the order fill ratio to ensure that their customers have access to
sufficient replacement parts. Fox International maintains very high fill ratios
in order to secure favored distributor status from the manufacturers, requiring
a significant investment in inventories. To a limited extent, Fox International
has the ability to rotate its stock with certain vendors to mitigate any risk of
investment in inventories.

Patents and Trademarks

The Company holds certain patents with respect to some of its products and
markets its services and products under various trademarks and tradenames.
Additionally, in fiscal 2001 the Company began licensing certain electronic
technology to other manufacturing companies, which is expected to generate
royalty revenues of approximately $100,000 in fiscal 2002. Although the Company
believes that the patents and trademarks owned are of value, the Company
believes that success in its industry will be dependent upon new product
introductions, frequent product enhancements, and customer support and service.
However, the Company intends to protect its rights when, in its view, these
rights are infringed upon.

Seasonal Variations in Business

Historically, there have not been any seasonal variations in the Company's CRT
operating subsegments. The wholesale electronic parts distribution segment has
experienced minimally higher sales during the Company's third quarter, which
includes the impact of higher repair parts sales during the beginning of the new
fall television season.

Working Capital Practices

Information contained under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" ("MD&A") in this Report is
incorporated herein by reference in response to this item.

Concentration of Customers

The Company sells to a variety of domestic and international customers on an
open-unsecured account basis. These customers principally operate in the
medical, military, television and avionics industries. The Company's CRT
division had net sales to the U.S. government that comprised approximately 17%
and 15% of CRT segment net sales and 13% and 11% of consolidated net sales in
fiscal 2001 and 2000, respectively. The Company's wholesale electronic parts
distributor had net sales to one customer that comprised approximately 22%, 19%
and 26% of that subsidiary's net sales in fiscal 2001, 2000 and 1999,
respectively. Other subsidiaries have a few concentrated customers and vendors
that could, if lost, negatively effect sales. The Company attempts to minimize
credit risk by reviewing all customers' credit history before extending credit,
and by monitoring customers' credit exposure on a daily basis. The Company
establishes an allowance for doubtful accounts receivable based upon factors
surrounding the credit risk of specific customers, historical trends and other
information.

Backlog

The Company's backlog is comprised of undelivered, firm customer orders, which
are scheduled to ship within eighteen months. The Company's backlog was
approximately $25,623,000 at February 28, 2001 and $9,561,000 at February 29,
2000. The increase in backlog between periods is due to the Lexel acquisition in
fiscal 2001. Lexel comprises $16,400,000 (64%) of the February 28, 2001 backlog.
Approximately 68% of the February 28, 2001 backlog is expected to ship during
fiscal 2002.

                                       6
<PAGE>

Government Contracts

The Company, primarily through its Aydin, Teltron, Wolcott and Display Systems
subsidiaries, had contracts with the U.S. government which generated revenues of
approximately $9,282,000, $7,134,000 and $2,613,000 for the fiscal years ended
2001, 2000 and 1999, respectively. The Company's costs and earnings in excess of
billings on these contracts was approximately $158,000 at February 28, 2001 and
$325,000 at February 29, 2000. The Company's billings in excess of costs and
earnings on these contracts was approximately $164,000 at February 28, 2001 and
$194,000 at February 29, 2000.

Environmental Matters

The Company's operations are subject to federal, state and local laws and
regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. The costs of
complying with environmental protection laws and regulations have not had a
material adverse impact on the Company's financial condition or results of
operations in the past and are not expected to have a material adverse impact in
the future.

Research and Development

The objectives of the Company's research and development activities are to
increase efficiency and quality in its manufacturing and assembly operations and
to enhance its products by implementing new developments in cathode ray and
electron optic technology. The Company's commercial and military divisions
continue their research and development in advanced infrared imaging ("FLIR").
Recently, the Company has funded additional FLIR research in partnership with
the University of Rhode Island. Potential future markets for FLIR include
military and security surveillance, target acquisition, fire fighting, and
industrial and medical thermography. Through fiscal 2001, the Company has not
incurred significant costs for basic research or new product development and,
therefore, has not segregated these costs as a separate item but have included
such costs in the consolidated financial statements as a part of costs of goods
sold. As the Company continues to increase its development of new technology,
these costs will be monitored and separately categorized, if material.

Employees

As of February 28, 2001, the Company employed a total of 497 persons on a full
time basis. Of these, 70 are employed in executive, administrative, and clerical
positions, 56 are employed in sales and distribution, and 371 are employed in
manufacturing operations. Of the Company's 497 employees, 154 are employed at
the Company's Mexican subsidiary and 60 are employed at the Company's other
foreign locations. Fourteen employees are represented by a union. The Company
believes its employee relations to be satisfactory.

Competition

Although the Company believes that it is the largest domestic recycler and
distributor of recycled CRTs in the United States CRT replacement market, it
competes with other CRT manufacturers, as well as OEMs, many of which have
greater financial resources than the Company. The Company believes it is the
only company that offers complete service in replacement markets with its
manufacturing and recycling capabilities. As a wholesale distributor of original
equipment purchased from other manufacturers, the Company also competes with
numerous other distributors, as well as the manufacturers' own distribution
centers, many of which are larger and have substantially greater financial
resources than the Company. The Company's ability to compete effectively in this
market is dependent upon its continued ability to respond promptly to customer
orders and to offer competitive pricing. The Company expects that competition
may increase, especially in the computer and other

                                       7
<PAGE>

display replacement markets, should domestic and foreign competitors expand
their presence in the domestic replacement markets.

Compared to domestic manufacturing prices on new CRTs, the Company's prices are
competitive due to lower manufacturing costs associated with recycling the glass
portion of previously used tubes, which the Company obtains at a fraction of the
cost of new glass. The Company has, to date, been able to maintain competitive
pricing with respect to imported CRTs because, generally, the CRT replacement
market is characterized by customers requiring a variety of types of CRTs in
quantities not sufficiently large enough to absorb the additional transportation
costs incurred by foreign CRT manufacturers.

The Company believes it has a competitive advantage and is a sole source in
providing many of its CRTs to the customer base of its Teltron and Lexel
subsidiaries as these operations have been providing reliable products and
services to these customers for more than 30 years.

The Company believes that it has a competitive advantage in the monitor industry
due to its flexibility to handle lower volume orders as well as its ability to
provide internally produced component parts. As a result, the Company can offer
more customization in the design and engineering of new products.

With the Company's recent acquisition of Lexel and the relatively new operations
of Display Systems and VDC Wolcott, the Company has become one of the leading
suppliers within the specialty CRT and monitor markets, especially in the
military and medical imaging industries.

The Company's competition in the consumer electronics parts segment comes
primarily from other parts distributors. Many of these distributors are smaller
than the Company but a few are of equal or greater sales size. Prices for major
manufacturers' products can be directly affected by the manufacturers' suggested
resale price. The Company feels that its service to customers and warehousing
and shipping network give it a competitive advantage.

                                       8
<PAGE>

ITEM 2.  PROPERTIES

The Company leases its corporate headquarters at 1868 Tucker Industrial Drive in
Tucker, Georgia (within the Atlanta metropolitan area) and occupies
approximately 10,000 square feet of the total 59,000 square feet at this
location. The remainder is utilized as warehouse and assembly facilities. This
location, as well as several others, is leased from related parties at current
market rates. See "Item 13 - Certain Relationships and Related Transactions".

The following table details manufacturing, warehouse, and administrative
facilities:

       Location                       Square Feet             Lease Expires
       --------                       -----------             -------------

CRT and Electron Gun Manufacturing
       nd Warehouse Facilities
---------------------------------------

Tucker, Georgia                            59,000             October 31, 2003
Stone Mountain, Georgia                    45,000             December 31, 2001
Tucker, Georgia                            40,000             January 2,  2006
White Mills, Pennsylvania                 110,000             Company Owned
Bossier City, Louisiana                    26,000             Company Owned
Dallas, Texas                              24,000             January 31, 2002
Monterrey, Mexico                         129,000             Month to Month
Lye, England                                4,800             February 28, 2003
Herts, England                              1,250             September 1, 2001
Phelps, New York                           20,000             Month to Month
Birdsboro, Pennsylvania                    10,000             Company Owned
Phelps, New York                           32,000             Company Owned
Howard, Pennsylvania                       19,000             Company Owned
Sanatoga, Pennsylvania                      4,200             Month to Month
Horsham, Pennsylvania                      84,000             March 31, 2002
Billerica, Massachusetts                    7,900             Month to Month
Wolcott, Connecticut                       21,000             Company owned
Cape Canaveral, Florida                    15,600             January 17, 2003
Lexington, Kentucky                       152,000             March 31, 2005

Wholesale Electronic Parts Distribution
---------------------------------------

Solon, Ohio                                19,000             November 30, 2001
Bedford Heights, Ohio                      60,000             Company Owned
Richardson, Texas                          10,000             Month to Month


ITEM 3.  LEGAL PROCEEDINGS

The Company is involved in various legal proceedings relating to claims arising
in the ordinary course of business. There are no material proceedings to which
the Company is a party and management is unaware of any contemplated actions
against the Company.

                                       9
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
         SHAREHOLDER MATTERS

The Company's common stock is traded on the over-the-counter market under the
symbol VIDE.

The following table shows the range of prices for the Company's common stock as
reported (and as adjusted for the stock dividend discussed below) by the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
for each quarterly period beginning on March 1, 1999.


                                     For Fiscal Years Ended
                         -----------------------------------------------------
                           February 28, 2001          February 29, 2000
                         -----------------------------------------------------
Quarter Ended              High               Low              High       Low
-------------

May                       $7.083            $3.229            $5.313     $3.282
August                     6.458             4.479             4.532      3.438
November                   7.136             5.313             4.167      3.125
February                   6.875             5.417             3.750      2.761

There were approximately 800 holders of record of the Company's common stock as
of May 14, 2001.

The Company has issued options to purchase shares of its common stock. For more
specific information concerning the outstanding options, see "Item 11 -
Executive Compensation" and Note 9 to the consolidated financial statements.

The Company has not paid cash dividends in the past. Payment of cash dividends
in the future will be dependent upon the earnings and financial condition of the
Company and other factors which the Board of Directors may deem appropriate. The
Company is restricted by certain loan agreements regarding the payout of cash
dividends, as further described in the notes to the consolidated financial
statements.

In March 2001, the Company's Board of Directors declared a stock dividend of
0.20 shares of common stock for each common share outstanding. The stock
dividend was issued on April 16, 2001 to all common stock shareholders of record
as of March 31, 2001. All per share data for all periods presented in this
Report, including the consolidated financial statements, reflect the increase in
the amount of common stock outstanding due to the stock dividend.

                                       10
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data with respect to
the Company's last five fiscal years.

Data relating to the five fiscal years ended February 28, 2001 are derived from
the Consolidated Financial Statements appearing elsewhere in this Report or in
previous reports, which have been audited by BDO Seidman, LLP, independent
certified public accountants. The selected consolidated financial data should be
read in conjunction with, and is qualified in its entirety by reference to, the
consolidated financial statements of the Company, the notes thereto and the
report thereon included elsewhere in this Report.

<TABLE>
<CAPTION>

                                                                          For Fiscal Years Ended
                                                     ------------------------------------------------------------------
                                                       Feb. 28,     Feb. 29,     Feb. 28,     Feb. 28,      Feb. 28,
                                                       2001(c)      2000(c)      1999(c)        1998          1997
                                                     ------------------------------------------------------------------
                                                                   (In Thousands, Except Per Share Data)
<S>                                                   <C>          <C>         <C>          <C>            <C>
Income Statement Data
Net sales                                             $  70,806    $  63,838    $  58,889    $   57,913     $  53,865
Operating profit                                          2,489        2,713        3,594         6,941         3,970
Net income                                                   31          705        1,122         3,541         1,898
                                                     ------------------------------------------------------------------

Net income per share - basic (a)                      $    0.01    $    0.15    $    0.24    $     0.75     $    0.40
Net income per share - diluted (a)                    $    0.01    $    0.15    $    0.23    $     0.68     $    0.39
Average number of shares
   outstanding - basic (a)                                4,552        4,708        4,729         4,705         4,688
Average number of shares
   outstanding - diluted (a)                              4,639        5,233        5,337         5,346         5,036
Cash dividends                                        $       -    $       -    $       -    $        -     $       -

Balance Sheet Data (at year end)
Total assets                                          $  57,486    $  49,851    $  51,641    $   40,582     $  40,887
Working capital                                          26,311       21,862       26,564        16,441        13,784
Long-term obligations (b)                                14,173        8,644       13,987         2,791         3,962
</TABLE>

(a)      Includes the effects of a 20% stock dividend declared in March 2001 and
         issued on April 16, 2001 for all periods presented.
(b)      Includes convertible debentures of $1,775,000 in fiscal 2001, 2000,
         1999 and 1998 and $2,000,000 in 1997.
(c)      Includes the impact of the Lexel acquisition in 2001, the Vanco
         International disposition in 2000 and the Aydin acquisition in 1999.

                                       11
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement under the Private Securities Litigation Reform Act: Except
for the historical information contained herein, the matters discussed herein
are forward-looking statements that involve risk and uncertainties, including
but not limited to (i) economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices, and (ii) other factors discussed in the Company's filings with the
Securities and Exchange Commission.

Results of Operations

The following table sets forth, for the fiscal years indicated, the percentages
which selected items in the Company's consolidated statements of income bear to
total revenues:
<TABLE>
<CAPTION>
                                                    2001                        2000                       1999
                                          -------------------------   -------------------------   -----------------------
                                                                (in thousands, except percentages)

                                          Amount           %          Amount           %          Amount            %
<S>                                       <C>             <C>         <C>            <C>          <C>             <C>
Sales:
CRT segment
   Data display CRTs                      $  10,476       14.8%         $10,319       16.2%         $11,791       20.0%
   Entertainment CRTs                         7,544       10.6            9,350       14.6           11,651       19.8
   Electron guns and components               1,857        2.6            2,029        3.2            2,631        4.5
   Monitors                                  36,361       51.4           25,430       39.8           11,311       19.2
Wholesale distribution segment
   Consumer electronic parts                 14,568       20.6           16,710       26.2           21,505       36.5
                                          -------------------------   -------------------------   -----------------------
                                             70,806      100.0           63,838      100.0           58,889      100.0
                                          -------------------------   -------------------------   -----------------------

Costs and expenses:
Cost of goods sold                           49,923       70.5           43,522       68.2           38,897       66.1
Selling and delivery                          6,314        8.9            5,058        7.9            4,749        8.1
General and administrative                   12,080       17.1           12,545       19.6           11,649       19.7
                                          -------------------------   -------------------------   -----------------------
                                             68,317       96.5           61,125       95.7           55,295       93.9
                                          -------------------------   -------------------------   -----------------------
Operating profit                              2,489        3.5            2,713        4.3            3,594        6.1

Interest expense                             (2,092)      (2.9)          (1,515)      (2.4)          (1,161)      (2.0)
Other income (expense), net                     (73)      (0.1)            (178)      (0.3)            (143)      (0.2)
                                          -------------------------   -------------------------   -----------------------
Income before taxes on income                   324        0.5            1,020        1.6            2,290        3.9
Taxes on income                                 293        0.4              315        0.5            1,168        2.0
                                          -------------------------   -------------------------   -----------------------
Net income                                $      31        0.1%         $   705        1.1%         $ 1,122        1.9%
                                          =========================   =========================   =======================
</TABLE>

Fiscal 2001 Compared to Fiscal 2000

Net Sales

Consolidated net sales for fiscal 2001 increased $6,968,000 or 10.9% over fiscal
2000 net sales. CRT division segment sales increased $9,110,000 or 19.3% over
fiscal 2000 while the wholesale parts segment declined $2,142,000 or 12.8%.

Within the CRT segment, data display CRT sales increased $157,000 or 1.5%;
entertainment CRT sales decreased $1,806,000 or 19.3%; the electron
gun/component parts segment decreased $172,000 or 8.5%; and the monitor division
increased $10,931,000 or 43.0%.

                                       12
<PAGE>

The net increase in CRT division sales is primarily attributed to growth within
the monitor segment. The Company's newest locations within this segment, Display
Systems in Florida and Lexel in Kentucky, contributed $2,687,000 and
$10,268,000, respectively, for the year ended February 28, 2001. Excluding these
sales, overall CRT division sales were down $3,845,000. With data display and
electron gun component parts being relatively flat, the decline excluding new
locations is attributed primarily to the entertainment and monitor divisions.

The Company is the primary supplier of replacement CRTs to the entertainment
market. Due to the continued decrease in retail sales prices of mid-size
television sets (25" to 30"), declines in extended warranty sales by major
television retailers have continued to occur. In turn, the Company's
entertainment division sales have been negatively impacted as a majority of
their sales within this division are for warranty related repairs. Extended
warranties on the larger size television sets (32" and up) are anticipated to
increase both in volume and dollars as the demand for these sets have increased
and the CRT costs are more expensive than the smaller sized sets. The Company
continues to supply manufacturer warranty replacements in the smaller size range
(up to 25"). Additionally, being in the replacement market, the Company has the
ability to track retail sales trends. Accordingly, the Company adjusts quantity
levels of CRT sizes thereby reducing the impact of obsolete inventory exposure.

Flat panel technology has not had an impact on the television replacement
market. Most of the flat panel units sold within the television market are for
commercial usage rather than end user consumer usage. Within the data display
and monitor subsegments, there has been an impact by flat panel technology. The
Company has made adjustments internally and several of the subsidiaries within
these subsegments currently produce flat panel products. As noted above, being
in the replacement market, the Company has the ability to see product trends and
make marketing, production and stocking decisions based on those trends.

The monitor division sales, net of sales at the newest locations, declined
$2,024,000 from the same period a year ago. Sales within the monitor segment
included military contracts which vary from year to year. While the Company has
not lost a military contract in the past year, the completed contracts are not
immediately being replaced with new contracts. Additionally, during the
transition of manufacturing processes between Aydin and Z-Axis during fiscal
2000, the Company lost business to competitors within the commercial market. The
transition was done so that Aydin could focus primarily on ruggedized monitors
used for military applications and Z-Axis could continue to focus on the
commercial monitor market. Extended lead times during the transition period
caused former Aydin commercial customers to seek other procurement alternatives.
Z-Axis took steps to address these issues and was successful in reducing lead
times. The Company has also allocated marketing personnel to these areas in an
attempt to reclaim the lost sales.

The decline in the wholesale consumer parts segment of $2,142,000 is attributed
primarily to the sale of Vanco International ("Vanco") in September 1999. Vanco
had sales of $2,130,000 for the year ended February 29, 2000.

Gross Margins

Consolidated gross margins decreased from 31.8% to 29.5% for the year ended
February 28, 2001 as compared to the year ended February 29, 2000. CRT division
margins decreased from 30.5% to 28.2% and wholesale electronic parts division
margins decreased from 35.6% to 33.9% for the same comparative period.

The decline in margins within the CRT division resulted from the increases in
the monitor segment due to the Company's recent acquisition, Lexel, whose gross
margin rates are lower than the other CRT division locations. Lexel's reduced
margins are a reflection of higher quality requirements, including more
expensive materials and increased labor demanded by the products' intended use.
These uses

                                       13
<PAGE>

include military applications. Also included in the reduced margins are costs
incurred due to the integration of the IST business acquired in June 2000 into
the Lexel facility. The Company incurred additional expenses in the fourth
quarter with the incorporation of the Raytheon and Anacomp businesses into
Lexel, but on a much smaller scale than the IST integration.

The wholesale consumer parts division margins were down in part due to the
exclusion of Vanco in fiscal 2001. Additionally, there were declines in margins
realized on the fire and safety product line as selling prices were reduced to
move some older, slower moving merchandise. Lastly, margins on the increased
volume sales to the major electronics distributor are lower than to other retail
customers.

Operating Expenses

Operating expenses as a percentage of sales decreased from 27.6% for the year
ended February 29, 2000 to 26.0% for the year ended February 28, 2001.

The CRT division operating expenses increased $2,217,000 for the year ended
February 28, 2001 as compared to February 29, 2000. Included in these increases
were expenses for the new Florida and Kentucky operations of $1,382,000 that
were not present in the previous year. Additionally, included in the CRT
division expenses for fiscal 2001 is a $514,000 write-down of a note receivable.
The Company holds an unsecured note receivable as a result of a litigation
settlement. The note had an original face value of $1,500,000 due in monthly
installments of $15,000 over a term of 100 months. During 2001, monthly payments
on the note were delinquent and payments made were less than the required
contractual amounts. Payments eventually ceased in the fourth quarter of 2001.
As of February 28, 2001, the Company believes that it is probable that they will
be unable to collect any of the outstanding amounts due under the contractual
terms of the loan agreement and considers the loan impaired. In accordance with
SFAS No. 114, "Accounting by Creditor's of Impairment of a Loan", the Company
has written off the remaining $514,000 balance of the note.

The wholesale consumer parts division reduced operating expenses $1,426,000 in
the year ended February 28, 2001 as compared to a year ago. Included in this
reduction is the elimination of operating expenses from Vanco of $866,000.
Additionally, Fox International reduced its operating expenses by approximately
$334,000 by eliminating two locations and reducing personnel at its headquarter
location in Cleveland, Ohio. Also, reductions in delivery expense of $148,000
incurred as a result of more cost effective packaging and a switch by Fox
International to a more cost competitive shipping provider.

Interest Expense

Interest expense increased $577,000 to $2,092,000 for the comparative fiscal
period due to increases in overall debt and changes in variable interest rates
through fiscal 2001. The increase in debt can be attributed primarily to the
increase in the Primary line of credit from $3,040,000 to $5,500,000; the
$3,000,000 loan in conjunction with the Lexel acquisition; and the increase in
notes payable to an officer of $1,400,000 relating to the IST acquisition. The
Primary line was a gradual increase throughout the period at a fixed rate of
7.25%. The Lexel acquisition loan was funded in May 2000 and has an interest
rate based on LIBOR plus up to 2%. During the ten months outstanding in fiscal
2001, the Lexel loan's interest rate fluctuated from 9.0% at inception to 9.5%
in November 2000 and to 8.5% by February 28, 2001. The note payable to officer
has an interest rate of prime plus 1%, which varied from 9.5% at its June 2000
inception to 8.5% by February 28, 2001.

                                       14
<PAGE>

Income Taxes

The effective tax rate for fiscal 2001 is 90.4% as compared to 30.9% for fiscal
2000. The increase in the effective rate is attributable to the
non-deductibility of amortization on certain intangible assets combined with
lower income before income taxes. Also, the fiscal 2000 rate was positively
impacted by foreign effective rates in the amount of $80,000.

Fiscal 2000 Compared to Fiscal 1999

Net Sales

Consolidated net sales for fiscal 2000 increased $4,949,000 or 8.4% over fiscal
1999 net sales. CRT division segment sales increased $9,744,000 or 26.1% over
fiscal 1999 while the wholesale parts segment declined $4,795,000 or 22.3%

Within the CRT segment, data display CRT sales were down $1,472,000 or 12.5%;
entertainment CRT sales were down $2,301,000 or 19.7%; the electron
gun/component parts segment was down $602,000 or 22.9%; and the monitor division
was up $14,119,000 or 125%.

The decline in data display CRTs was attributed to several factors. Projection
tube rework done for OEM manufacturers in the Company's Monterrey, Mexico
facility, involving the cleaning and polishing of bulbs, was down $245,000 from
the comparative period. Additionally, a one time sale in fiscal 1999 of $360,000
was not repeated in fiscal 2000. A second factor for data display declines
involves customers switching over to high resolution color products where the
replacement needs for high resolution color tubes had not yet impacted data
display sales. Lastly, several third party customers had withdrawn from the
monitor repair business which also contributed to the decline.

Entertainment sales declines are directly related to the sales volumes of major
television retailers. Their sales as well as the number of extended warranties
sold and the size of sets sold directly impact the entertainment division sales.
This division continues to seek alternative sales sources including offshore
sales for smaller size television CRTs until the domestic market demand
increases for larger tubes (32" and up). Fiscal 1999 reflected the completion of
backorders for one larger television retailer, Zenith. The later part of 1999
and fiscal 2000 represented a more normal volume for this customer.

Electron gun and component part sales declines are attributed to two primary
factors. In mid fiscal 1999, the Company began the relocation and consolidation
of Apex Electronics into the Southwest Vacuum facility. Sales for the Apex
location were down $180,000 during this time. Sales at the Wintron location were
down $494,000 during the comparative periods. This location had many customers
who stocked up on inventory just prior to the Company's purchase of Wintron's
assets because they anticipated that the Wintron location was going out of
business. Thus, continuing sales to those customers were negatively impacted.

The 125% growth in the monitor division was attributed to a full year's revenue
for two acquisitions completed in late fiscal 1999, Aydin and MegaScan. That
increase accounted for $13,953,000 (98.8%) of the $14,119,000 reflected above.
The remainder of the increase was due to increased volume at the existing
locations.

The wholesale parts segment decline was impacted by the sale of Vanco in
September 1999. Vanco sales in fiscal 2000 were $2,130,000 compared to
$4,085,000 reported in fiscal 1999. The balance of the decline is attributed
primarily to the decline in sales at Fox International to major electronics
distributors of $1,875,000 or 8.7% of fiscal 1999 total wholesale parts segment
sales. Additionally, this subsidiary continued to see trends of small
distribution and consumer shops being absorbed or eliminated by larger discount
chains. There also was a decline of end user consumer sales in fiscal 2000.

                                       15
<PAGE>

Gross Margins

Consolidated gross profit margins percentages decreased 6.2% in 2000 from 33.9%
to 31.8%. CRT division margins declined 7.0% from 32.8% in fiscal 1999 to 30.5%
in fiscal 2000. Wholesale parts margins remained essentially the same for the
comparative periods.

The CRT division margin declines were primarily attributed to Aydin. Aydin,
acquired in late fiscal 1999, added $12,261,000 to sales in fiscal 2000 but at a
lower margin (22.9%) than the other CRT division segments had historically
provided. This decrease in margins was offset somewhat by an approximate
$714,000 decrease in inventory provisions from 1999 to 2000.

During the last quarter of fiscal 1999, throughout fiscal 2000 and into fiscal
2001 the Company realigned several manufacturing locations within the CRT
division in efforts to streamline its production, provide for better plant
utilization, and reduce production overhead costs. During this time additional
costs were incurred as materials and equipment were relocated and personnel
trained. Order backlog, though reduced by year end 2000, still remained as a
result of the manufacturing locations adjusting to volume changes and the
expenses related thereto.

Operating Expenses

Operating expenses were up $1,205,000 in the comparative periods but were
essentially unchanged as a percentage of sales. Included in these increases was
$3,197,000 related to the Company's recent acquisitions. The wholesale parts
division reduced expenses by $1,676,000 which included the sale of Vanco and the
elimination of two Fox International locations as well as reductions of home
office personnel.

Interest Expense

Interest expense increased $354,000 to $1,515,000 for the comparative fiscal
period. The increase was attributed primarily to the increase of debt in
conjunction with the Aydin acquisition, which was completed in November 1999
and, thus, only three and one-half months outstanding during fiscal 1999. The
Aydin acquisition note has an interest rate based on LIBOR plus up to 2.5%. This
rate increased 1.44% from fiscal 1999 to fiscal 2000.

During the second quarter of fiscal 2000, the Company paid off a term note with
its primary bank and during the third quarter paid down the line of credit with
proceeds received from the sale of its Vanco subsidiary. Both the term note and
line of credit had fixed interest rates.

Income Taxes

The effective tax rate for fiscal 2000 was 30.9% as compared to 51.0% for fiscal
1999. Fiscal 1999 included the effect of certain foreign taxes primarily from
the Company's Mexican subsidiary. Excluding those rates, fiscal 1999's effective
rate was 40.3%. Fiscal 2000's tax rate included utilization of a previously
reserved capital tax loss carry forward that offset the tax gain realized on the
Vanco sale.

                                       16
<PAGE>

Liquidity and Capital Resources

As of February 28, 2001, the Company had total cash and cash equivalents of
$4,137,000. The Company's working capital was $26,311,000 and $21,862,000 at
February 28, 2001 and February 29, 2000, respectively. The majority of the
working capital increase between 2000 and 2001 resulted primarily from the use
of long-term debt to finance business acquisitions and the extension of the
Company's credit facility to beyond one year, thereby reducing current
liabilities.

Cash provided by operations for fiscal 2001 and 2000 was $973,000 and
$4,700,000, respectively. Fiscal 2001 net income adjusted for non-cash items
provided cash of $2,314,000 while customer advances provided $1,652,000.
Increases in accounts receivable and prepaid expenses and other assets used cash
of $1,637,000. Decreases in accounts payable and accrued liabilities used cash
of $1,291,000. The changes in working capital items exclude the effects of the
assets purchased and liabilities assumed in fiscal 2001. During fiscal 2000,
operating cash flows were provided primarily by net income adjusted for non-cash
items of $3,125,000, a decrease in inventories of $1,040,000 and increases in
accounts payable and accrued liabilities of $726,000.

The increase in accounts receivable of $1,441,000 during was due primarily to a
7% increase in sales in the fourth quarter of fiscal 2001 as compared to the
same period in fiscal 2000. The decrease in accounts payable and accrued
liabilities was due in part to the Company paying an additional $2,311,000 in
interest and taxes during fiscal 2001 as compared to the prior year. Customer
advances were received by the Company's Lexel subsidiary, which was acquired in
fiscal 2001. Absent the current year acquisitions, inventories remained
relatively flat for the comparative periods, partly due to decreased amounts of
availability on the Company's lines of credit during the latter part of fiscal
2001.

Investing activities used cash of $6,686,000 in fiscal 2001 and provided cash of
$708,000 in fiscal 2000. During fiscal 2001, the Company paid $5,357,000 for the
acquisitions of Lexel, IST and two other CRT operations. The Company borrowed
$3,000,000 to finance the Lexel acquisition. The note was for 120 days with an
interest rate of LIBOR plus 2% and is guaranteed by an officer of the Company.
The note was extended to May 2001, at which time it was consolidated into the
Company's new $10,000,000 credit facility with its primary bank. During fiscal
2001, the Company increased the demand note payable to its CEO by $1,400,000 to
finance the IST acquisition. The note bears interest at a rate of prime plus 1%.
Also during fiscal 2001, the Company repaid a full year, or $1,250,000, of
principal payments on its Aydin loan as compared to one quarter, or $312,500, in
fiscal 2000. This was in accordance with the terms of the loan agreement.

On May 4, 2001, the Company signed an agreement with its primary bank to
consolidate its existing Primary Line and the $3,000,000 Lexel acquisition loan
into one $10,000,000 credit facility. The interest rate is based on a floating
LIBOR rate based on a debt to EBITDA ratio, as defined. Depending on the ratio,
the LIBOR adjustment can fluctuate from 1.5% (for a ratio less than 1.75) to
3.0% (for a ratio greater than 4.25). The effective rate at the date of
commitment was 9.375%. The note matures on July 1, 2003. The amount of credit
available for advance will be reduced by $500,000 on July 1, 2001 and an
additional $500,000 on July 1, 2002.

During fiscal 2000, the Company purchased the Wolcott, Connecticut facility for
approximately $570,000 cash, which was funded by operations. Additional fiscal
2000 expenditures included an expansion of the Teltron manufacturing facility
and a restructuring of the monochrome CRT manufacturing facilities in Georgia
and Monterrey, Mexico totaling approximately $900,000. Current operations and
the restructuring of the Company's line of credit financed these expenditures.
The sale of the Company's Vanco subsidiary in fiscal 2000 provided cash of
$1,784,000.

The Company has established 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. During fiscal 2000,

                                       17
<PAGE>

the Company repurchased 180,460 shares under this program, at prices ranging
from $3.60 to $4.26 per share. This is compared to the repurchase of 73,700
shares at prices ranging from $5.63 to $9.26 per share in fiscal 1999. No shares
were repurchased in fiscal 2001.

There are no significant capital expenditures anticipated for fiscal 2002,
except for the building expansion planned for the Company's Teltron facility in
Birdsboro, Pennsylvania. Approximately 30,000 square feet will be added to the
existing 10,000 square feet facility. Most of the construction costs are to be
funded by a low interest industrial development loan. These costs are
anticipated to be approximately $900,000.

Foreign Currencies

The Company consolidates its Mexican subsidiary on the basis of the functional
currency being the U.S. dollar as over 90% of the subsidiary's sales and
purchases are with the parent with accounts receivable and accounts payable
settled in U.S. dollars. Additionally, the subsidiary leases its facilities and
incurs rent based upon U.S. dollars. Any exchange gains or losses due to the
actual exchange of pesos and U.S. dollars is minimal. The Company also has
subsidiaries in the U.K. and the Netherlands, which are not material to the
consolidated financial position or results of operations.

Management Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Examples
include provisions for returns, bad debts, inventory obsolescence, valuations on
deferred tax assets and the length of product life cycles and fixed asset lives.
Actual results could vary from these estimates.

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.

Recent Accounting Pronouncements

Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. Historically, the Company has not entered into derivatives
contracts either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect the standard, which was adopted on
March 1, 2001, to affect its financial statements.

                                       18
<PAGE>

The FASB issued Interpretation ("Interpretation") No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an Interpretation of APB
Opinion No. 25" which was effective July 1, 2000. Interpretation No. 44
clarifies (a) the definition of employee for purposes of applying Opinion 25,
(b) the criteria for determining whether a stock compensation plan qualifies as
a noncompensatory plan, (c) the accounting consequence of various modifications
to the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. Adoption
of the provisions of the Interpretation did not have a significant impact on the
Company's financial statements.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - A Replacement
of FASB Statement No. 125," which revises the standards of accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures. SFAS No. 140 is effective for transfers occurring
after March 31, 2001 and for disclosures relating to securitization transactions
and collateral for fiscal years ending after December 15, 2000. Adoption of this
new standard is not expected to have an effect on the Company's financial
statements.

In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101 -
"Revenue Recognition" which outlines the basic criteria that must be met to
recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements filed
with the SEC. The Company adopted the provisions of SAB No. 101 in the fourth
quarter of fiscal 2001 and has determined that its policies for revenue
recognition are consistent with the views expressed within SAB No. 101.

Impact of Inflation

Inflation has not had a material effect on the Company's results of operations
to date.

                                       19
<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 $21,154,000 of outstanding debt at February 28, 2001
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, at the Company's option, 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 $212,000 in pre-tax net income assuming no further changes in the
amount of borrowings subject to variable rate interest from amounts outstanding
at February 28, 2001. The Company does not trade in derivative financial
instruments.

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 effect the Company's financial position.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements listed on page F-1 of this Report are filed as part of
this Report on the pages indicated.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURES

None.

                                       20
<PAGE>

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained in Video Display Corporation's Proxy Statement to be
filed within 120 days of the Company's 2001 fiscal year end, with respect to
directors and executive officers of the Company, is incorporated herein by
reference in response to this item. In no event shall the information contained
in Video Display Corporation's Proxy Statement under the heading "Compensation
and Stock Option Committee Report" or under the heading "Performance Graph" be
incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information contained in Video Display Corporation's Proxy Statement to be
filed within 120 days of the Company's 2001 fiscal year end, with respect to
executive compensation and transactions, is incorporated herein by reference in
response to this item. In no event shall the information contained in Video
Display Corporation's Proxy Statement under the heading "Compensation and Stock
Option Committee Report" or under the heading "Performance Graph" be
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

The information contained in Video Display Corporation's Proxy Statement to be
filed within 120 days of the Company's 2001 fiscal year end, with respect to
security ownership of certain beneficial owners and management, is incorporated
herein by reference in response to this item.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained in Video Display Corporation's Proxy Statement to be
filed within 120 days of the Company's 2001 fiscal year end, with respect to
certain relationships and related transactions, is incorporated herein by
reference in response to this item.

                                       21
<PAGE>

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   The following documents are filed as part of this Report:

      1.      Financial Statements:

              Index to Consolidated Financial Statements.                 F-1

      2.      Financial Statement Schedule:

              Index to Consolidated Financial Statements Schedule.        F-26

(b)   Reports on Form 8-K:

      No reports on Form 8-K were filed by the Registrant during the last
      quarter of the fiscal year covered by this Report.

(c)   Exhibits

Exhibit
 Number     Exhibit Description
--------------------------------------------------------------------------------

  *3(a)     Articles of Incorporation of the Company.

  *3(b)     By-Laws of the Company.

 *10(f)     Employee Stock Option Plan. **

 *10(i)     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.

 *10(j)     Lease dated November 1, 1993 by and between Registrant (Lessee)
            and Ronald D. Ordway (Lessor) with respect to premises located
            at 1868 Tucker Industrial Road, Tucker, Georgia.

 *10(k)     Lease dated January 1, 1996 by and between Registrant (Lessee)
            and Ronald D. Ordway (Lessor) with respect to premises located
            at 4701 Granite Drive, Tucker, Georgia.

     21     Subsidiary companies.

*    Incorporated by reference to other documents on file with the Securities
     and Exchange Commission which were previously filed.
**   Indicates executive compensation plans and arrangements.

                                       22
<PAGE>

                                  SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


Date:                                        VIDEO DISPLAY CORPORATION

May 29, 2001                                 By: /s/  Ronald  D. Ordway
                                                 ----------------------
                                                 Ronald D. Ordway
                                                 Chairman of the Board and
                                                 Chief Executive Officer

                               POWER OF ATTORNEY

Know all men by these presents, that each person whose signature appears below
constitutes and appoints Ronald D. Ordway as attorney-in-fact, with power of
substitution, for him in any and all capacity, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact may do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

     Signature - Name                    Capacity                  Date
     ----------------                    --------                  ----

/s/ Ronald D. Ordway                  Chief Executive          May 29, 2001
-----------------------------        Officer & Director
Ronald D.  Ordway

/s/ Erv Kuczogi                          President             May 29, 2001
-----------------------------            Director
Erv Kuczogi

/s/ Murray Fox                           Director              May 29, 2001
-----------------------------
Murray Fox

/s/ Carleton E. Sawyer                   Director              May 29, 2001
-----------------------------
Carleton E. Sawyer

/s/ Ronald G. Moyer                      Director              May 29, 2001
-----------------------------
Ronald G. Moyer

/s/ Carol D. Franklin             Chief Financial Officer      May 29, 2001
-----------------------------
Carol D. Franklin

                                       23
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Index to Consolidated Financial Statements

<TABLE>
<S>                                                                                                          <C>
Report of Independent Certified Public Accountants                                                           F-2

Consolidated Balance Sheets as of February 28, 2001 and February 29, 2000                                    F-3

Consolidated Statements of Income for the years
 ended February 28, 2001, February 29, 2000 and February 28, 1999                                            F-5

Consolidated Statements of Shareholders' Equity and Comprehensive Income
 for the years ended February 28, 2001, February 29, 2000 and February 28, 1999                              F-6

Consolidated Statements of Cash Flows for the years ended February 28, 2001,
 February 29, 2000 and February 28, 1999                                                                     F-7

Notes to Consolidated Financial Statements                                                                   F-8
</TABLE>

                                      F-1
<PAGE>

Report of Independent Certified Public Accountants



Video Display Corporation
Tucker, Georgia

We have audited the accompanying consolidated balance sheets of Video Display
Corporation and subsidiaries as of February 28, 2001 and February 29, 2000, and
the related consolidated statements of income, shareholders' equity and
comprehensive income and cash flows for each of the three years in the period
ended February 28, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Video Display
Corporation and subsidiaries as of February 28, 2001 and February 29, 2000, and
the results of their operations and their cash flows for each of the three years
in the period ended February 28, 2001, in conformity with accounting principles
generally accepted in the United States of America.



                                                BDO Seidman, LLP



Atlanta, Georgia
May 11, 2001

                                      F-2
<PAGE>

                   Video Display Corporation and Subsidiaries

                           Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                         February 28,             February 29,
                                                                            2001                     2000
                                                                    ----------------------   ----------------------
<S>                                                                 <C>                       <C>
Assets (Notes 6 and 7)
Current
   Cash and cash equivalents                                             $  4,137,000             $  4,235,000
   Accounts receivable, net of allowance
      of $289,000 and $301,000 (Note 5)                                    11,115,000                8,947,000
   Inventories, net of reserves of $1,643,000 and
      $1,337,000 (Note 4)                                                  29,778,000               25,622,000
   Prepaid expenses and other (Notes 3 and 10)                              1,995,000                1,659,000
                                                                   ----------------------   ----------------------
Total current assets                                                       47,025,000               40,463,000
                                                                   ----------------------   ----------------------

Property, plant and equipment
   Land                                                                       600,000                  540,000
   Buildings                                                                5,453,000                4,889,000
   Machinery and equipment                                                 17,850,000               15,347,000
                                                                   ----------------------   ----------------------
                                                                           23,903,000               20,776,000
   Accumulated depreciation                                               (15,651,000)             (14,572,000)
                                                                   ----------------------   ----------------------
Net property, plant and equipment                                           8,252,000                6,204,000
                                                                   ----------------------   ----------------------

Other assets (Notes 2, 5 and 10)                                            2,209,000                3,184,000
                                                                   ----------------------   ----------------------

                                                                         $ 57,486,000             $ 49,851,000
                                                                   ======================   ======================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

                   Video Display Corporation and Subsidiaries

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                       February 28,             February 29,
                                                                           2001                     2000
                                                                   ----------------------   ----------------------
<S>                                                                <C>                      <C>
Liabilities and Shareholders' Equity
Current liabilities
   Accounts payable                                                   $    5,856,000              $   5,008,000
   Accrued liabilities                                                     3,208,000                  3,676,000
   Customer advances                                                       1,652,000                          -
   Lines of credit (Note 7)                                                3,017,000                  6,010,000
   Notes payable to shareholders (Note 8)                                  3,736,000                  2,400,000
   Current maturities of long-term debt (Note 6)                           1,470,000                  1,507,000
   Convertible subordinated debentures (Note 12)                           1,775,000                          -
                                                                   ----------------------   ----------------------
Total current liabilities                                                 20,714,000                 18,601,000

Lines of credit (Note 7)                                                   8,500,000                          -
Long-term debt, less current maturities (Note 6)                           5,520,000                  6,702,000
Convertible subordinated debentures (Note 12)                                      -                  1,775,000
Minority interests                                                           153,000                    167,000
                                                                   ----------------------   ----------------------
Total liabilities                                                         34,887,000                 27,245,000
                                                                   ----------------------   ----------------------

Commitments (Notes 13 and 14)

Shareholders' equity (Notes 7 and 9)
Preferred stock; no par value - 2,000,000 shares
   authorized, none issued and outstanding                                         -                          -
Common stock; no par value - 10,000,000 shares
   authorized; 4,559,000 and 4,548,000 shares
   issued and outstanding                                                  3,034,000                  2,994,000
Additional paid-in capital                                                    92,000                     92,000
Retained earnings                                                         20,952,000                 20,921,000
Accumulated other comprehensive income                                    (1,479,000)                (1,401,000)
                                                                   ----------------------   ----------------------
Total shareholders' equity                                                22,599,000                 22,606,000
                                                                   ----------------------   ----------------------





                                                                      $   57,486,000               $ 49,851,000
                                                                   ======================   ======================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                   Video Display Corporation and Subsidiaries

                        Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended
                                            ----------------------------------------------------------------------
                                                February 28,             February 29,            February 28,
                                                    2001                     2000                    1999
                                            ---------------------    ---------------------   ---------------------

<S>                                         <C>                      <C>                     <C>
Net sales (Note 14)                                $ 70,806,000             $ 63,838,000             $ 58,889,000

Cost of goods sold                                   49,923,000               43,522,000               38,897,000
                                            ---------------------    ---------------------   ---------------------
Gross profit                                         20,883,000               20,316,000               19,992,000
                                            ---------------------    ---------------------   ---------------------

Operating expenses
Selling and delivery                                  6,314,000                5,058,000                4,749,000
General and administrative                           11,495,000               12,241,000               11,395,000
Provision for losses on accounts
     and notes receivable (Note 5)                      585,000                  304,000                  254,000
                                            ---------------------    ---------------------   ---------------------
                                                     18,394,000               17,603,000               16,398,000
                                            ---------------------    ---------------------   ---------------------
Operating profit                                      2,489,000                2,713,000                3,594,000
                                            ---------------------    ---------------------   ---------------------

Other income (expense)
   Interest expense                                  (2,092,000)              (1,515,000)              (1,161,000)
   Gain on sale of subsidiary                                 -                  433,000                        -
   Loss on investment in
     equity investee                                          -                 (482,000)                       -
   Other, net                                           (80,000)                (148,000)                (158,000)
                                            ---------------------    ---------------------   ---------------------
                                                     (2,172,000)              (1,712,000)              (1,319,000)
                                            ---------------------    ---------------------   ---------------------
Income before income taxes
     and minority interests                             317,000                1,001,000                2,275,000

Taxes on income (Note 10)                               293,000                  315,000                1,168,000
                                            ---------------------    ---------------------   ---------------------
Income before minority interests                         24,000                  686,000                1,107,000

Minority interests in net loss of
     consolidated subsidiaries                            7,000                   19,000                   15,000
                                            ---------------------    ---------------------   ---------------------
Net income                                         $     31,000              $   705,000              $ 1,122,000
                                            =====================    =====================   =====================

Net income per share - basic                       $       0.01            $        0.15           $         0.24
                                            =====================    =====================   =====================

Net income per share - diluted                     $       0.01            $        0.15           $         0.23
                                            =====================    =====================   =====================

Average shares outstanding - basic                    4,552,000                4,708,000                4,729,000
                                            =====================    =====================   =====================

Average shares outstanding - diluted                  4,639,000                5,233,000                5,337,000
                                            =====================    =====================   =====================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                  Video Display Corporation and Subsidiaries

   Consolidated Statements of Shareholders' Equity and Comprehensive Income

<TABLE>
<CAPTION>
                                                                                            Accumulated         Current
                                                           Additional                          Other             Year
                                             Common          Paid-in        Retained       Comprehensive     Comprehensive
                                              Stock          Capital        Earnings          Income            Income
                                         ----------------  ------------  ---------------  ----------------  ----------------
<S>                                      <C>               <C>           <C>              <C>               <C>
Balance, February 28, 1998                 $ 3,465,000     $   92,000    $  19,094,000    $   (1,505,000)

   Net income for the year                           -              -        1,122,000                 -        $ 1,122,000
   Unrealized loss on
     marketable equity
     securities                                      -              -                -           (33,000)           (33,000)
   Foreign currency translation
     adjustment                                      -              -                -             2,000              2,000
                                                                                                            ----------------
       Total comprehensive income                                                                               $ 1,091,000
                                                                                                            ================
   Repurchase of common stock                 (508,000)             -                -                 -
   Issuance of common stock under
     stock option plan                          22,000              -                -                 -
   Issuance of common stock for
     business acquisitions                     612,000              -                -                 -
                                         -----------------------------------------------------------------

Balance, February 28, 1999                   3,591,000         92,000       20,216,000        (1,536,000)

   Net income for the year                           -              -          705,000                 -        $   705,000
   Unrealized gain on
     marketable equity
     securities                                      -              -                -            22,000             22,000
   Realized loss on marketable
     equity securities                               -              -                -           100,000            100,000
   Foreign currency translation
     adjustment                                      -              -                -            13,000             13,000
                                                                                                            ----------------
       Total comprehensive income                                                                               $   840,000
                                                                                                            ================
   Issuance of common stock
     under stock option plan                   100,000              -                -                 -
Repurchase of common stock                    (697,000)             -                -                 -
                                         -----------------------------------------------------------------

Balance, February 29, 2000                   2,994,000         92,000       20,921,000        (1,401,000)

   Net income for the year                           -              -           31,000                 -        $    31,000
   Unrealized loss on marketable
     equity securities                               -              -                -           (29,000)           (29,000)
   Foreign currency translation
     adjustment                                      -              -                -           (49,000)           (49,000)
                                                                                                            ----------------
       Total comprehensive loss                                                                                 $   (47,000)
                                                                                                            ================
   Issuance of common stock
     under stock option plan                    40,000              -                -                 -
                                         -----------------------------------------------------------------

Balance, February 28, 2001                 $ 3,034,000     $   92,000    $  20,952,000    $   (1,479,000)
                                         =================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                   Video Display Corporation and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                     February 28,         February 29,        February 28,
Year ended                                               2001                 2000                1999
                                                  ------------------   ------------------  ------------------
<S>                                               <C>                  <C>                 <C>

Operating Activities
Net income                                           $     31,000         $    705,000        $  1,122,000
Adjustments to reconcile net income to net cash
   provided by operating activities
   Depreciation and amortization                        1,474,000            1,438,000           1,219,000
   Provision for losses on accounts and
      notes receivable                                    585,000              304,000             254,000
   Provision for inventory reserves                       438,000              909,000           1,623,000
   Deferred income taxes                                 (140,000)            (355,000)           (118,000)
   Net loss allocated to minority interests                (7,000)             (19,000)            (15,000)
   Net (gains) losses in investing activities             (67,000)             143,000                   -
   Changes in working capital items, net of
     effect of acquisitions:
     Accounts receivable                               (1,441,000)            (654,000)          1,047,000
     Inventories                                          (65,000)           1,040,000          (3,696,000)
     Prepaid expenses and other assets                   (196,000)             463,000             (60,000)
     Accounts payable and accrued liabilities          (1,291,000)             726,000            (716,000)
     Customer advances                                  1,652,000                    -                   -
                                                  ------------------   ------------------  ------------------

Net cash provided by operating activities                 973,000            4,700,000             660,000
                                                  ------------------   ------------------  ------------------

Investing Activities
   Capital expenditures                                (1,466,000)          (1,374,000)         (2,037,000)
   Disposal of fixed assets                               100,000              274,000                   -
   Net cash paid for acquisitions                      (5,357,000)                   -          (7,746,000)
   Proceeds from sale of subsidiary                             -            1,784,000                   -
   Other investing activities                              37,000               24,000             (20,000)
                                                  ------------------   ------------------  ------------------

Net cash (used) provided by investing activities       (6,686,000)             708,000          (9,803,000)
                                                  ------------------   ------------------  ------------------

Financing Activities

   Proceeds from long-term debt and lines of
     credit                                            32,714,000           23,493,000          42,518,000
   Repayments of long-term debt and lines of
     credit                                           (27,090,000)         (26,232,000)        (33,334,000)
   Proceeds from stock option exercises                    40,000              100,000              22,000
   Purchases and retirements of common stock                    -             (697,000)           (508,000)
                                                  ------------------   ------------------  ------------------

Net cash provided (used) by financing activities        5,664,000           (3,336,000)          8,698,000
                                                  ------------------   ------------------  ------------------

Effect of exchange rates on cash                          (49,000)              13,000              (3,000)
                                                  ------------------   ------------------  ------------------

Net change in cash and cash equivalents
   (Note 15)                                              (98,000)           2,085,000            (448,000)

Cash and cash equivalents, beginning of year            4,235,000            2,150,000           2,598,000
                                                  ------------------   ------------------  ------------------

Cash and cash equivalents, end of year               $  4,137,000         $  4,235,000        $  2,150,000
                                                  ==================   ==================  ==================
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Nature of Business

Video Display Corporation (the "Company") principally manufactures and
distributes cathode ray tubes ("CRTs") in the worldwide replacement market for
use in television sets and data display screens for medical, military and
industrial monitoring systems as well as manufacturing and distributing electron
optic parts, which are significant components in new and recycled CRTs and
monitors. The Company also manufactures low and high-end monochrome and color
CRT and AMLCD monitor displays for use in specialty high performance and
ruggedized applications. The Company also acts as a wholesale distributor of
electronic parts and CRTs purchased from domestic and foreign manufacturers. The
Company's operations are principally located in the U.S.; however, the Company
does have subsidiary operations located in Mexico, the U.K. and the Netherlands.

Principles of Consolidation

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

Use of Estimates

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

Revenue Recognition

Revenue from product sales are recognized when goods are shipped. The Company
does not offer rights of return to customers; however, it does offer one-year
and two-year limited warranties on certain products. Warranty expense is not
material to the Company's consolidated financial statements.

Revenue from contracts that are long-term in nature at the Company's Aydin
subsidiary is recognized by the percentage of completion method. Profit
estimates are revised periodically based upon changes in facts. Any losses
identified on contracts are recognized immediately. Revenue related to all other
contracts is recognized upon shipment of product, which approximates the
percentage of completion method.

In the consolidated income statements, revenues from shipping and handling fees
charged to customers are included under the caption "Net revenues" and shipping
costs incurred are included under the caption "Selling and delivery."

Cash and Cash Equivalents

Cash and cash equivalents include cash on account, demand deposits and
certificates of deposit with maturities of less than three months.

                                      F-8
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements



Financial Instruments

Fair values of cash and cash equivalents, short-term investments and short-term
debt approximate cost due to the short period of time to maturity. The recorded
amounts of long-term debt are considered to approximate fair value due to either
rates which fluctuate with the market or are otherwise commensurate with the
current market. Fair values of investments are based on quoted market prices or
pricing models using current market rates which approximate carrying value.

Inventories

Inventories consist primarily of CRTs, electron guns, monitors and electronic
parts. The majority of the Company's inventories are finished goods. Inventories
are stated at the lower of cost (first-in, first-out) or market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization
are computed principally by the straight-line method for financial reporting
purposes over the following estimated useful lives: Buildings - ten to
twenty-five years; Machinery and Equipment - five to ten years. Depreciation
expense totaled approximately $1,079,000, $1,056,000 and $979,000 for the three
years ended 2001, 2000 and 1999, respectively. Substantial betterments to
property, plant and equipment are capitalized and routine repairs and
maintenance are expensed as incurred.

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

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for under the purchase
method. Goodwill is amortized on a straight-line basis over the periods
benefited, principally five to fifteen years. Goodwill amounted to $1,547,000
and $1,627,000 at February 28, 2001 and February 29, 2000, respectively, net of
accumulated amortization of $1,814,000 and $1,734,000, respectively. Goodwill is
included in the consolidated balance sheets under the caption "Other assets."

The Company's operational policy for the assessment and measurement of any
impairment in goodwill which is other than temporary is to evaluate the
recoverability and remaining life and determine whether it should be completely
written off or the amortization period accelerated. The Company will recognize
an impairment if undiscounted estimated future operating cash flows of the
acquired business are determined to be less than the carrying amount. The amount
of impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds.

                                      F-9
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements



Taxes on Income

The Company accounts for income taxes under the asset and liability method which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than possible
enactments of changes in the tax laws or rates. The effect on deferred tax
assets and liabilities of a change in tax rates will be recognized as income or
expense in the period that includes the enactment date.

Investments

The Company owns certain marketable equity securities which are recorded at fair
value based upon quoted market prices and classified as available-for-sale
securities under Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". Changes in
fair value of these marketable equity securities are reflected in the
accompanying statements of shareholders' equity. Investments are included under
the captions "Prepaid expenses and other" and "Other Assets" in the accompanying
balance sheets.

Foreign Currency Translations

Assets and liabilities of foreign subsidiaries are translated using the exchange
rate in effect at the end of the year. Revenues and expenses are translated
using the average of the exchange rates in effect during the year. Translation
adjustments and transaction gains and losses related to long-term intercompany
transactions are accumulated as a separate component of shareholders' equity.
The Company reports its Mexican subsidiary on the basis of the functional
currency being the U.S. dollar as over 90% of the subsidiary's sales and
purchases are with the parent with accounts receivable and accounts payable
settled in U.S. dollars. Additionally, the subsidiary leases its facilities and
incurs rent based upon U.S. dollars. Any exchange gains or losses due to the
actual exchange of pesos and U.S. dollars is minimal. The Company also has
subsidiaries in the U.K. and the Netherlands, which are not material.

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
year. Shares issued during the year are weighted for the portion of the year
that they were outstanding. Diluted earnings per share is calculated in a manner
consistent with that of basic earnings per share while giving effect to all
dilutive potential common shares that were outstanding during the period.

In March 2001, the Company's Board of Directors declared a stock dividend of
0.20 shares of common stock for each common share outstanding. The stock
dividend was issued on April 16, 2001 to all common stock shareholders of record
as of March 31, 2001. In accordance with SFAS No. 128, "Earnings per Share," all
per share data for all periods presented in the consolidated financial
statements reflect the increase in the amount of common stock outstanding
resulting from the stock dividend. Additionally, information regarding the
Company's stock option plan includes the effect of the dividend (see Note 9).

                                      F-10
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


The following is a reconciliation from basic earnings per share to diluted
earnings per share for each of the last three years.

<TABLE>
<CAPTION>
                                                                                     Weighted
                                                                                      Average
                                                                                      Shares           Earnings Per
                                                                Net Income          Outstanding           Share
                                                            ------------------  ------------------  -----------------
    <S>                                                     <C>                  <C>                 <C>
    2001
    Basic                                                         $   31,000           4,552,000      $       0.01
    Effect of dilution:
      Options                                                              -              87,000
                                                            ------------------  ------------------  -----------------
    Diluted                                                       $   31,000           4,639,000      $       0.01
                                                            ==================  ==================  =================

    2000
    Basic                                                         $  705,000           4,708,000      $       0.15
    Effect of dilution:
      Options                                                              -              32,000
      Convertible debt                                                88,000             493,000
                                                            ------------------  ------------------  -----------------
      Diluted                                                     $  793,000           5,233,000      $       0.15
                                                            ==================  ==================  =================

    1999
    Basic                                                         $1,122,000           4,729,000      $       0.24
    Effect of dilution:
      Options                                                              -             138,000
      Convertible debt                                                88,000             470,000
                                                            ------------------  ------------------  -----------------
    Diluted                                                       $1,210,000           5,337,000      $       0.23
                                                            ==================  ==================  =================
</TABLE>

Stock options in the amount of 23,000, 94,000 and 8,000 shares for the years
ended 2001, 2000 and 1999, respectively, were excluded from the diluted earnings
per share calculation due to their anti-dilutive effect. Also, convertible
debentures in the amount of 479,000 shares were excluded from the 2001 diluted
earnings per share calculation due to their anti-dilutive effect.

Segment Reporting

The Company applies SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" to report information about operating segments in
annual and interim financial reports. An operating segment is defined as a
component that engages in business activities, whose operating results are
reviewed by the executive officers in order to make decisions about allocating
resources, and for which discrete financial information is available (see Note
11).

                                      F-11
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. Historically, the Company has not entered into derivatives
contracts either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect the standard, which was adopted on
March 1, 2001, to affect its financial statements.

The FASB issued Interpretation ("Interpretation") No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an Interpretation of APB
Opinion No. 25" which was effective July 1, 2000. Interpretation No. 44
clarifies (a) the definition of employee for purposes of applying Opinion 25,
(b) the criteria for determining whether a stock compensation plan qualifies as
a noncompensatory plan, (c) the accounting consequence of various modifications
to the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. Adoption
of the provisions of the Interpretation did not have a significant impact on the
Company's financial statements.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - A Replacement
of FASB Statement No. 125," which revises the standards of accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures. SFAS No. 140 is effective for transfers occurring
after March 31, 2001 and for disclosures relating to securitization transactions
and collateral for fiscal years ending after December 15, 2000. Adoption of this
new standard is not expected to have an effect on the Company's financial
statements.

In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101 -
"Revenue Recognition" which outlines the basic criteria that must be met to
recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements filed
with the SEC. The Company adopted the provisions of SAB No. 101 in the fourth
quarter of fiscal 2001 and has determined that its policies for revenue
recognition are consistent with the views expressed within SAB No. 101.

Fiscal Year

All references herein to "2001", "2000" and "1999" mean the fiscal years ended
February 28, 2001, February 29, 2000 and February 28, 1999, respectively.

Reclassification

Certain balances have been reclassified in the 2000 and 1999 consolidated
financial statements to conform to the 2001 presentation.

                                      F-12
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


Note 2. Business Acquisitions

In May 2000, the Company purchased the common stock of Lexel Imaging Systems,
Inc. ("Lexel") located in Lexington, Kentucky. Lexel has developed specialized
processes used in manufacturing a wide range of monochrome CRTs for commercial
and military programs. The Company paid $3,000,000, financed by short-term debt.
The transaction has been accounted for under the purchase method of accounting
and the results of operations of Lexel since its acquisition date have been
included in the Company's consolidated financial statements.

The following tables summarize the fair values of the assets acquired,
liabilities assumed and consideration paid in connection with the Lexel
acquisition:

Inventory                                                          $2,690,000
Property and equipment                                              1,474,000
Accounts payable and accrued expenses                                (760,000)
Other liabilities                                                    (404,000)
                                                               ---------------
    Cash paid                                                      $3,000,000
                                                               ===============

The following table summarizes the unaudited pro forma consolidated results of
operations of the Company for 2001 and 2000, assuming the Lexel acquisition had
occurred at the beginning of the fiscal periods. The pro forma financial
information is not necessarily indicative of what would have occurred had the
acquisition been made as of those dates, nor is it indicative of future results
of operations. The pro forma amounts give effect to appropriate adjustments for
the fair value of the net assets acquired, depreciation, interest expense and
income taxes.


                                                  2001               2000
                                          ------------------   ----------------
                                                (unaudited)       (unaudited)
Pro forma net sales                         $   71,767,000      $  73,131,000
Pro forma income from operations                 2,656,000          3,567,000
Pro forma net income                               286,000          1,571,000
Pro forma basic earnings per share          $         0.06      $        0.33
Pro forma diluted earnings per share        $         0.06      $        0.32

In June 2000, the Company purchased certain assets of the electro optical
division of Imaging and Sensing Technology ("IST") in Horseheads, New York. The
Company paid $1,598,000 financed by a demand note payable with an officer of the
Corporation with a stated interest rate of prime plus 1%. IST provides a product
line that includes specially CRTs used to produce computer generated graphics,
high quality photography and medical diagnostic images. The acquired assets of
IST were integrated into the Lexel facility in Lexington, Kentucky. Also in
2001, the Company acquired certain assets, principally inventory, of two CRT
operations for cash consideration of $759,000, funded by its Primary line of
credit. These operations were also integrated into the Lexel facility. These
acquisitions have been accounted for under the purchase method of accounting and
the results of operations of these entities since their acquisition dates have
been included in the Company's consolidated financial statements. No goodwill
resulted from these transactions.

                                      F-13
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements



Note 3. Costs and Earnings in Excess of Billings on Contracts

Information relative to contracts in progress consisted of the following:

<TABLE>
<CAPTION>
                                                                                  2001                   2000
                                                                         ---------------------  ---------------------
<S>                                                                      <C>                    <C>
Costs incurred to date on uncompleted contracts                              $   4,600,000           $  4,392,000
Estimated earnings recognized to date on these contracts                         2,573,000              2,320,000
                                                                         ---------------------  ---------------------
                                                                                 7,173,000              6,712,000
Billings to date                                                                (7,179,000)            (6,581,000)
                                                                         ---------------------  ---------------------
Costs and earnings in excess of billings, net                                $      (6,000)          $    131,000
                                                                         =====================  =====================


Costs and earnings in excess of billing                                      $     158,000           $    325,000
Billings in excess of costs and earnings                                          (164,000)              (194,000)
                                                                         ---------------------  ---------------------
                                                                             $      (6,000)          $    131,000
                                                                         =====================  =====================
</TABLE>

Costs and earnings in excess of billings are classified in the consolidated
balance sheets under the caption "Prepaid expenses and other" while billings in
excess of costs and earnings are included under the caption "Accrued
liabilities."

Note 4. Inventories

Inventories consisted of the following:

<TABLE>
<CAPTION>
                                                                                  2001                   2000
                                                                        ----------------------  ----------------------
<S>                                                                     <C>                     <C>
Raw materials                                                                $   4,511,000           $  4,262,000
Finished goods                                                                  26,910,000             22,697,000
                                                                        ----------------------  ----------------------
                                                                                31,421,000              26,959,000
Reserves for obsolescence                                                       (1,643,000)             (1,337,000)
                                                                        ----------------------  ----------------------
                                                                             $  29,778,000            $ 25,622,000
                                                                        ======================  ======================
</TABLE>

Note 5. Note Receivable

The Company holds an unsecured note receivable as a result of a litigation
settlement. The note had an original face value of $1,500,000 due in monthly
installments of $15,000 over a term of 100 months. The note was non-interest
bearing for the first 50 payments and interest bearing, at prime (8.5% at
February 28, 2001) plus 1%, over the remaining 50 payments. As of February 28,
2000, the note was recorded at a value of $591,000, net of its discount and
allowance, and is included and classified under the captions "Accounts
receivable" and "Other assets" in the accompanying consolidated balance sheet.

During 2001, monthly payments on the note were delinquent and payments made were
less than the required contractual amounts. Payments eventually ceased in the
fourth quarter of 2001. As of February 28, 2001, the Company believes that it is
probable that they will be unable to collect any of the outstanding amounts due
under the contractual terms of the loan agreement and considers the loan
impaired. In accordance with SFAS No. 114, "Accounting by Creditor's of
Impairment of a Loan", the Company has written off the remaining $514,000
balance of the note.

                                      F-14
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


Note 6. Long-Term Debt

Long-term debt consisted of the following:

<TABLE>
<CAPTION>

                                                                                    2001               2000
                                                                             -------------------  -------------------
<S>                                                                          <C>                  <C>
Term loan facility; floating interest rate based on an adjusted LIBOR
rate (8.5% as of February 28, 2001), quarterly principal payments
maturing November 2005; collateralized by assets of Aydin
Displays, Inc.                                                                     $5,625,000          $ 6,875,000

Mortgage payable to bank; interest not to exceed 7.5% payable
monthly; maturing December 2003; collateralized by land and
building.                                                                             671,000              715,000



Other                                                                                 694,000              619,000
                                                                             -------------------  -------------------
                                                                                    6,990,000            8,209,000
Less current maturities                                                            (1,470,000)          (1,507,000)
                                                                             -------------------  -------------------
                                                                                   $5,520,000          $ 6,702,000
                                                                             ===================  ===================
</TABLE>

Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>

                  Year                                                                                  Amount
                  ----                                                                                  ------
                  <S>                                                                                  <C>
                  2002                                                                                  $1,470,000
                  2003                                                                                   1,368,000
                  2004                                                                                   1,906,000
                  2005                                                                                   1,301,000
                  2006                                                                                     945,000
                                                                                                  -------------------
                                                                                                        $6,990,000
                                                                                                  ===================
</TABLE>

Note 7. Lines of Credit

At February 28, 2001, the Company had a $5,500,000 primary line of credit (the
"Primary Line") and a $3,500,000 secondary line of credit (the "Secondary Line")
secured by substantially all of the assets of the Company. The Primary Line's
interest rate was a fixed 7.25% and borrowings were limited by eligible accounts
receivable and inventory, as defined in the Primary Line agreement. As of
February 28, 2001 and February 29, 2000, the outstanding balance on the Primary
Line was $5,500,000 and $3,040,000, respectively. No additional amounts were
available under the Primary Line as of February 28, 2001.

                                      F-15
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


The Secondary Line bears interest at the bank's base rate (8.5% as of February
28, 2001) plus 0.5%. A commitment fee of 0.5% is charged on the unused portion
of the line. Borrowings under the Secondary Line are limited by eligible
accounts receivable and inventory, as defined. As of February 28, 2001 and
February 29, 2000, the outstanding balance on the Secondary Line was $3,017,000
and $2,970,000, respectively. An additional amount of $8,000 was available under
the Secondary Line as of February 28, 2001. The Secondary Line agreement
contains affirmative and negative covenants including requirements related to
tangible net worth, indebtedness to tangible net worth and cash flow coverage.
Dividend payments, capital expenditures and acquisitions have certain
restrictions. The Secondary Line expires on July 31, 2001. The Company does not
anticipate problems renewing the Secondary Line in 2002.

In May 2000, the Company entered into a $3,000,000 note payable with its primary
bank to finance the acquisition of Lexel, as discussed in Note 2 above. The note
bore interest at LIBOR (6.5% as of February 28, 2001) plus 2%. The CEO of the
Company guaranteed the note. On May 4, 2001, the Company and its bank agreed to
consolidate its existing Primary Line and the $3,000,000 Lexel acquisition loan
into one $10,000,000 credit facility. Accordingly, the combined outstanding
amount of $8,500,000 related to the Primary Line ($5,500,000) and the Lexel note
($3,000,000) is classified as long-term as of February 28, 2001 in the
accompanying consolidated balance sheet. The interest rate is based on a
floating LIBOR rate, based on a debt to EBITDA ratio, as defined. The effective
rate at the date of commitment was 9.375%. The note matures on July 1, 2003. The
amount of credit available for advance will be reduced by $500,000 on July 1,
2001 and an additional $500,000 on July 1, 2002. Advance rates will remain the
same as under the previous line and included a commitment fee of 0.25% for the
unused portion. The new 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.

Note 8. Notes Payable to Shareholders

The Company borrowed $2,800,000 from its CEO in conjunction with a 1998 bank
refinancing. During 1997, the Company borrowed $900,000 from the CEO to purchase
the assets of Teltron Technologies, Inc. Both of these borrowings were combined
into one note payable due on demand with interest payable monthly at prime plus
one percent. As of February 29, 2000 the outstanding balance on the note payable
was $2,200,000. In June 2000, the Company borrowed an additional $1,400,000 from
the CEO to assist with the acquisition of certain assets of the electro optics
division of IST (see Note 2). This borrowing was combined with the CEO's
existing demand note and, as of February 28, 2001, the outstanding balance was
$3,600,000.

During fiscal 2001, the Company repaid $64,000 on a note payable to a Director,
leaving a balance of $136,000 at February 28, 2001.

                                      F-16
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements



Note 9. Stock Options

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.
The stock option plan stipulates that, in the event of a stock dividend, all
outstanding grants will be proportionally adjusted both in number of options and
exercise price. Information regarding the stock option plan is as follows, which
includes the effect of the 20% stock dividend issued on April 16, 2001 for all
periods presented:

                                                                     Weighted
                                                                      Average
                                              Number of              Exercise
                                                Shares                  Price
                                           -------------------------------------

Outstanding at February 28, 1998                325,000              $  3.01
   Granted                                        9,000                 8.29
   Exercised                                    (10,000)                2.29
   Forfeited or expired                         (60,000)                1.67
                                           -----------------    ----------------

Outstanding at February 28, 1999                264,000              $  3.29
   Granted                                        6,000                 8.44
   Exercised                                    (60,000)                1.67
   Forfeited or expired                         (24,000)                4.07
                                           -----------------    ----------------

Outstanding at February 29, 2000                186,000              $  3.88
   Granted                                        6,000                 8.44
   Exercised                                    (12,000)                3.48
   Forfeited or expired                               -                    -
                                           -----------------    ----------------

Outstanding at February 28, 2001                180,000              $  3.97
                                           =================    ================

                                                                     Weighted
                                                                      Average
                                              Number of              Exercise
Options exercisable                             Shares                  Price
-------------------                        -----------------    ----------------

February 28, 2001                               162,000              $  3.58
February 29, 2000                               174,000                 3.56
February 28, 1999                               248,000                 2.83

                                      F-17
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>



                                               Options Outstanding                           Options Exercisable
                                               -------------------                           -------------------
                                Number              Weighted                               Number
                              Outstanding at        Average         Weighted          exercisable at         Weighted
  Range of                     February 28,         Remaining       Average           February 28,           Average
Exercise Prices                    2001        Contractual Life   Exercise Price         2001              Exercise Price
---------------------------------------------------------------------------------------------------------------------------
                                                 (in years)
<S>                         <C>                <C>                <C>                 <C>                  <C>
$2.29 - 3.96                  145,000                5.4               $3.09                 145,000            $3.09
  7.29 - 8.54                  35,000                6.7                7.63                  17,000             7.75
---------------------------------------------------------------------------------------------------------------------------

                              180,000                5.7               $3.97                 162,000            $3.58
===========================================================================================================================
</TABLE>

The weighted average fair value of options, calculated using the Black-Scholes
option pricing model, granted during the years 2001, 2000 and 1999 was $1.17,
$0.14 and $3.51, respectively. The weighted average remaining life of options
outstanding at February 28, 2001, February 29, 2000 and February 28, 1999 was
5.7, 6.6 and 6.8 years, respectively. At February 28, 2001 and February 29,
2000, the Company had approximately 338,000 and 344,000 shares, respectively,
available for the granting of options under the stock option plan.

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for stock options granted. Had compensation cost been determined
based on the fair value at the grant date for awards in 2001, 2000 and 1999,
consistent with the provisions of the Standard, the Company's net earnings and
earnings per share would have changed as indicated by the pro forma amounts
below:

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended
                                                           ----------------------------------------------------------------
                                                                 2001               2000                  1999
                                                           ----------------- --------------------  ------------------------
    <S>                                                    <C>               <C>                   <C>
    Net income - as reported                                       $  31,000          $705,000             $1,122,000
    Net income - pro forma                                            24,000           704,000              1,087,000
    Basic earnings per common share - as reported                  $    0.01          $   0.15             $     0.24
    Basic earnings per common share - pro forma                    $    0.01          $   0.15             $     0.23
    Diluted earning per common share - as reported                 $    0.01          $   0.15             $     0.23
    Diluted earning per common share - pro forma                   $    0.01          $   0.15             $     0.22
</TABLE>

The fair value of stock options used to compute pro forma net income applicable
to common shareholders and earnings per share disclosures is the estimated
present value at grant date using the Black-Scholes option-pricing model with
the following weighted average assumptions for 2001, 2000 and 1999,
respectively: expected volatility of 50%, 35% and 50%; a risk-free interest rate
of 6.50%, 5.65% and 5.41%; expected lives of 2.0, 2.0 and 5.0 years; and
dividend yield of 0.00% for all years.

                                      F-18
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


Note 10. Taxes on Income

Provisions for federal, state and foreign income taxes in the consolidated
statements of income consisted of the following components:
<TABLE>
<CAPTION>

                                                            ---------------------------------------------------------
                                                                               Fiscal Year Ended
                                                            ---------------------------------------------------------
                                                                 2001                2000                1999
                                                            ------------------ -------------------  ------------------
<S>                                                          <C>                <C>                  <C>
         Current:
           Federal                                                $  361,000       $    781,000         $    879,000
           State                                                      72,000            134,000              162,000
           Foreign                                                         -           (245,000)             245,000
                                                            ------------------ -------------------  -----------------
                                                                     433,000            670,000            1,286,000
                                                            ------------------ -------------------  -----------------
         Deferred:
           Federal                                                   (24,000)           (57,000)            (100,000)
           State                                                      (4,000)           (10,000)             (18,000)
           Foreign                                                  (112,000)          (288,000)                   -
                                                            ------------------ -------------------  -----------------
                                                                    (140,000)          (355,000)            (118,000)
                                                            ------------------ -------------------  -----------------
         Total                                                    $  293,000       $    315,000         $  1,168,000
                                                            ================== ===================  =================

Income before taxes on income consisted of the following:
                                                                   2001               2000                  1999
                                                             ----------------- -------------------  ------------------

         U.S. operations                                          $  598,000       $ 2,153,000         $  2,206,000
         Foreign operations                                         (281,000)       (1,152,000)              69,000
                                                             ----------------- -------------------  ------------------

                                                                  $  317,000       $ 1,001,000           $2,275,000
                                                             ================= ===================  ==================
</TABLE>

The effective income tax rate differed from the statutory federal income tax
rate as follows:

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended
                                                           -----------------------------------------------------------
                                                                 2001               2000                  1999
                                                           -----------------  ------------------   -------------------
<S>                                                        <C>                 <C>                  <C>

Taxes at statutory federal income tax rate                      $  108,000         $  340,000           $    774,000
State income taxes, net of federal benefit                          45,000             47,000                107,000
Tax rates attributable to foreign operations                        (8,000)           (80,000)               216,000
Non-deductible amortization of certain fixed
   and intangible assets                                           151,000            138,000                122,000
Non-deductible expenses (income)                                    19,000             (8,000)                25,000
Change in valuation allowance                                      (47,000)           (25,000)                     -
Other                                                               25,000            (97,000)               (76,000)
                                                           -----------------  ------------------   -------------------
Taxes at effective income tax rate                              $  293,000         $  315,000           $  1,168,000
                                                           =================  ==================   ===================
</TABLE>

                                      F-19
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


Deferred income taxes as of February 28, 2001 and February 29, 2000 reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income
tax purposes and certain tax loss carryforwards.

The sources of the temporary differences and their effect on the net deferred
tax asset consisted of the following:

<TABLE>
<CAPTION>
                                                                                     2001                  2000
                                                                              ------------------    ------------------
                  <S>                                                         <C>                   <C>
                  Deferred tax assets:
                    Investment loss carryforwards                                $    240,000          $    287,000
                    Foreign net operating loss carryforwards                          400,000               288,000
                    Uniform capitalization costs                                      333,000               465,000
                    Inventory reserve                                                 606,000               489,000
                    Accrued vacation                                                  102,000                80,000
                    Allowance for doubtful accounts                                   103,000                85,000
                    Other                                                             107,000                57,000
                                                                              ------------------    ------------------
                                                                                    1,891,000             1,751,000

                    Valuation allowance                                              (240,000)             (287,000)

                  Deferred tax liabilities:
                    Basis difference of property, plant and equipment                (218,000)             (203,000)
                    Other                                                             (48,000)              (16,000)
                                                                              ------------------    ------------------
                  Net deferred tax assets                                        $  1,385,000         $   1,245,000
                                                                              ==================    ==================

                  Current                                                           1,164,000             1,123,000
                  Non-current                                                         221,000               122,000
                                                                              ------------------    ------------------
                                                                                 $  1,385,000         $   1,245,000
                                                                              ==================    ==================
</TABLE>

Current and non-current deferred tax assets are included in the consolidated
balance sheets under the captions "Prepaid expenses and other" and "Other
assets," respectively. Investment loss carryforwards consist primarily of
investment losses, which may be utilized to offset any future taxable gains on
the sale of investments. The investment loss carryforwards expire in 2005. The
Company has provided a valuation allowance on these loss carryforwards as
realization of these assets is considered unlikely. The foreign net operating
loss carryforwards expire at various times through 2016.

Undistributed earnings of the Company's foreign subsidiaries are considered to
be indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, the Company would be subject to
both U.S. income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries. Determination of the
amount of unrecognized deferred U.S. income tax liability is not practicable
because of the complexities associated with its hypothetical calculation.

                                     F-20
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


Note 11. Segment Information

SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in their financial statements. The
standard defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company's chief operating decision maker aggregates
operating segments based on the type of products produced by the segment. Based
on the quantitative thresholds specified in SFAS 131, the Company has determined
that it has two reportable segments with subsegments within one of the main
segments. The two reportable segments are as follows: (1) the manufacture and
distribution of cathode ray tubes and electron guns in the replacement market
and (2) the distribution of electronic parts from foreign and domestic
manufacturers. The subsegments within the CRT segment consists of data display
CRTs, entertainment (television and projection) CRTs, monitors and component
parts. Foreign operations account for less than 10% of consolidated sales and
consolidated assets.

The accounting policies of the operating segments are the same as those
described in Summary of Significant Accounting Policies. Segment amounts
disclosed reflect elimination entries made in consolidation. The chief operating
decision maker evaluates performance of the segments based on operating income.
Costs excluded from this profit measure primarily consist of interest expense
and income taxes.

The following table sets forth net sales, operating profit, depreciation and
amortization, capital expenditures, and identifiable assets for each industry
segment and applicable subsegments:

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended
                                                           ----------------------------------------------------------
                                                                 2001                2000                1999
                                                           ------------------  ------------------  ------------------
                                                                                 (in thousands)
     <S>                                                   <C>                 <C>                 <C>
     Net Sales
     CRT segment
        Data display                                           $  10,476           $  10,319           $  11,791
        Entertainment                                              7,544               9,350              11,651
        Monitors                                                  36,361              25,430              11,311
        Component parts                                            1,857               2,029               2,631
                                                           ------------------  ------------------  ------------------
                                                                  56,238              47,128              37,384
     Wholesale Distribution segment                               14,568              16,710              21,505
                                                           ------------------  ------------------  ------------------
                                                               $  70,806           $  63,838           $  58,889
                                                           ==================  ==================  ==================

     Operating Profit (Loss)
     CRT segment
        Data display                                           $  (2,105)          $  (2,110)          $  (1,505)
        Entertainment                                              2,814               4,306               4,525
        Monitors                                                   1,884               1,194               1,113
        Component parts                                              (48)               (211)               (158)
                                                           ------------------  ------------------  ------------------
                                                                   2,545               3,179               3,975
     Wholesale Distribution segment                                  (56)               (466)               (381)
                                                           ------------------  ------------------  ------------------
                                                               $   2,489           $   2,713           $   3,594
                                                           ==================  ==================  ==================
</TABLE>

                                     F-21
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


<TABLE>
<CAPTION>
                                                                 2001                2000                1999
                                                           ------------------  ------------------  ------------------
                                                                                 (in thousands)
     <S>                                                   <C>                 <C>                 <C>
     Depreciation and Amortization
     CRT segment
        Data display                                          $      228          $      238          $      223
        Entertainment                                                151                 166                 203
        Monitors                                                     553                 417                 262
        Component parts                                               76                  86                  75
                                                           ------------------  ------------------  ------------------
                                                                   1,008                 907                 763
     Wholesale Distribution segment                                  466                 531                 456
                                                           ------------------  ------------------  ------------------
                                                              $    1,474          $    1,438          $    1,219
                                                           ==================  ==================  ==================

     Capital Expenditures**
     CRT segment
        Data display                                          $      117          $      351          $      562
        Entertainment                                                  4                  28                 105
        Monitors                                                   2,421                 588                 383
        Component parts                                               31                  34               1,606
                                                           ------------------  ------------------  ------------------
                                                                   2,573               1,001               2,656
     Wholesale Distribution segment                                   43                 181                 152
                                                           ------------------  ------------------  ------------------
                                                              $    2,616          $    1,182          $    2,808
                                                           ==================  ==================  ==================
</TABLE>

** Includes deletions from fixed assets through business
divestitures in 2000 and additions to fixed assets through
business acquisitions in 2001 and 1999

<TABLE>
     <S>                                                   <C>                 <C>                 <C>
     Identifiable Assets
     CRT segment
        Data display                                            $ 18,926           $  17,824          $   17,768
        Entertainment                                              3,679               4,445               4,791
        Monitors                                                  26,540              16,331              15,351
        Component parts                                            2,212               2,590               2,702
                                                           ------------------  ------------------  ------------------
                                                                  51,357              41,190              40,612
     Wholesale Distribution segment                                6,129               8,661              11,029
                                                           ------------------  ------------------  ------------------
                                                                $ 57,486           $  49,851          $   51,641
                                                           ==================  ==================  ==================
</TABLE>

Note 12. Convertible Subordinated Debentures

The Company issued $2,000,000 in face value, 8% five-year convertible
subordinated debentures in payment of the acquisition of the stock of Z-Axis in
fiscal 1997. The debentures can be converted at the holder's option into common
shares based upon the quoted fair market value on the date such conversion is
elected. As of February 28, 2001 and February 29, 2000, the outstanding balance
on the debentures was $1,775,000. The debentures have a maturity date of May 31,
2001.

Note 13. Benefit Plan

The Company has a defined contribution plan that covers substantially all U.S.
employees. Employees may contribute up to 15% of their compensation, as allowed
by IRS regulations. At the Company's discretion, employee contributions of up to
4% of their compensation can be matched at 50% by the Company. The Company's
contributions to the Plan amounted to $98,000, $100,000 and $0 in 2001, 2000 and
1999, respectively.

                                     F-22
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements



Note 14. Commitments

Operating Leases
----------------

The Company leases various manufacturing facilities and transportation equipment
under leases classified as operating leases. These leases provide that the
Company pay taxes, insurance and other expenses on the leased property and
equipment. Rent expense under these leases was approximately $2,546,000,
$2,109,000 and $1,765,000 in 2001, 2000 and 1999, respectively.

Future minimum rental payments due under these leases are as follows:

                  Fiscal Year                                    Amount
                  -----------                                    ------

                  2002                                        $  1,848,000
                  2003                                           1,272,000
                  2004                                           1,105,000
                  2005                                             924,000
                  2006                                             164,000
                                                            ----------------
                                                              $  5,313,000
                                                            ================

The Company leases four of its manufacturing facilities and certain warehouse
space from shareholders and officers under net operating leases expiring at
various dates through 2006. Rent expense under these leases totaled
approximately $439,000, $597,000 and $686,000 in 2001, 2000 and 1999,
respectively.

Future minimum rental payments due under these leases with related parties are
as follows:

                  Fiscal Year                                     Amount
                  -----------                                     ------

                  2002                                        $   468,000
                  2003                                            368,000
                  2004                                            281,000
                  2005                                            120,000
                  2006                                            100,000
                                                            ---------------
                                                              $ 1,337,000
                                                            ===============



                                     F-23
<PAGE>

                  Video Display Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


Concentrations of Risk and Major Customers
------------------------------------------

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and accounts receivable. At times, such
cash in banks are in excess of the FDIC insurance limit.

The Company's CRT division had net sales to the U.S. government that comprised
approximately 17% and 15% of CRT segment net sales and 13% and 11% of
consolidated net sales in fiscal 2001 and 2000, respectively. The Company's
wholesale electronic parts distributor had net sales to one customer that
comprised approximately 22%, 19% and 26% of that subsidiary's net sales in 2001,
2000 and 1999, respectively. Other subsidiaries have a few concentrated
customers and vendors that could, if lost, negatively effect sales. The Company
attempts to minimize credit risk by reviewing all customers' credit history
before extending credit, and by monitoring customers' credit exposure on a daily
basis. The Company establishes an allowance for doubtful accounts receivable
based upon factors surrounding the credit risk of specific customers, historical
trends and other information.

Note 15. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                2001                2000                 1999
                                                         -------------------   ----------------    ------------------
<S>                                                      <C>                   <C>                 <C>
Cash paid (received) for:

   Interest                                                     $2,146,000          $1,426,000            $1,333,000
                                                         ===================   ================    ==================
   Income taxes, net of refunds                                 $1,470,000         $  (121,000)           $1,471,000
                                                         ===================   ================    ==================
</TABLE>

Cash paid for acquisitions:

During 2001, the Company acquired certain assets and assumed certain liabilities
of four entities (see Note 2), as follows:

   Fair value of the assets acquired                         $ 7,021,000
   Liabilities assumed                                        (1,664,000)
                                                           ----------------
   Cash paid                                                 $ 5,357,000
                                                           ================

During 1999, the Company acquired certain assets and assumed certain liabilities
of MegaScan, Aydin and Wintron and acquired all the common stock of MII, as
follows:

   Fair value of the assets acquired                         $ 9,586,000
   Liabilities assumed                                        (1,394,000)
   Stock issued                                                 (446,000)
                                                           ----------------
   Cash paid                                                 $ 7,746,000
                                                           ================

                                     F-24
<PAGE>

                 Video display Corporation and Subsubsidiaries

                  Notes to consolidated Financial Statements



Note 16. Subsequent Events

In March 2001, the Company's Board of Directors declared a stock dividend of
0.20 shares of common stock for each common share outstanding. The stock
dividend was issued on April 16, 2001 to all common stock shareholders of record
as of March 31, 2001. In accordance with SFAS No. 128, "Earnings per Share," all
per share data for all periods presented in the consolidated financial
statements reflect the increase in the amount of common stock outstanding due to
the stock dividend. Additionally, information regarding the Company's stock
option plan includes the effect of the dividend (see Note 9).

On May 4, 2001, the Company signed an agreement with its primary bank to
consolidate its existing primary line of credit and the $3,000,000 Lexel
acquisition loan into one $10,000,000 credit facility (see Note 7).

Note 17. Quarterly Data (unaudited)

The following table sets forth selected quarterly consolidated financial data
for the years ended February 28, 2001 and February 29, 2000, respectively. The
summation of quarterly earnings per share may not agree with annual earnings per
share.

<TABLE>
<CAPTION>
                                                                         2001
                                   ----------------------------------------------------------------------------------
                                         First                 Second               Third                 Fourth
                                        Quarter             Quarter (a)             Quarter             Quarter (b)
                                   -------------------   -------------------   ----------------    ------------------
                                                         (in thousands, except per share amounts)
   <S>                                    <C>                  <C>                   <C>                 <C>
   Net Sales                              $ 16,620             $  18,061             $  18,959           $  17,166
   Gross profit                              5,165                 5,707                 5,295               4,716
   Net income (loss)                           240                   302                   156                (667)
   Basic and diluted earnings
     (loss) per share                     $   0.05             $    0.07             $    0.03           $   (0.15)

<CAPTION>
                                                                         2000
                                   ----------------------------------------------------------------------------------
                                         First                 Second                Third                Fourth
                                        Quarter                Quarter              Quarter            Quarter (c)
                                   -------------------   -------------------   ----------------    ------------------
                                                       (in thousands, except per share amounts)
   <S>                                  <C>                    <C>                   <C>                 <C>
   Net Sales                            $  17,526              $ 15,706              $ 14,565            $ 16,041
   Gross profit                             5,627                 4,813                 4,502               5,374
   Net income (loss)                          354                    91                   429                (169)
   Basic and diluted earnings
     (loss) per share                   $    0.08              $   0.02              $   0.09            $  (0.03)
</TABLE>

(a) In May 2000 and June 2000, respectively, the Company acquired the operations
of Lexel and IST (see Note 2).
(b) The fourth quarter of fiscal 2001 included the write off of a note
receivable of approximately $514,000 (see Note 5).
(c) The fourth quarter of fiscal 2000 included additions to reserves for
doubtful accounts receivable, warranty returns, inventory obsolescence and
losses of investment holdings totaling approximately $650,000.

                                     F-25
<PAGE>

                   Video Display Corporation and Subsidiaries

               Index to Consolidated Financial Statements Schedule

Report of Independent Certified Public Accountants on Financial
   Statement Schedule                                                       F-27


Schedule II - Valuation and Qualifying Accounts                             F-28

                                     F-26
<PAGE>

Report of Independent Certified Public Accountants

Video Display Corporation
Tucker, Georgia

The audits referred to in our report dated May 11, 2001 relating to the
consolidated financial statements of Video Display Corporation and subsidiaries,
which is contained in Item 8 of this Form 10-K, included the audit of the
financial statement schedule listed in the accompanying schedule. This schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statement schedule based upon our audits.

In our opinion, such schedule presents fairly, in all material respects, the
information set forth therein.



                                                      BDO Seidman, LLP



Atlanta, Georgia
May 11, 2001

                                     F-27
<PAGE>

                   VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS



<TABLE>
<CAPTION>
            Column A                   Column B                  Column C                   Column D           Column E
---------------------------------- ----------------- --------------------------------- ------------------- -----------------
                                                                Additions
                                                     ---------------------------------
                                      Balance at        Charged to       Charged to                           Balance at
                                      Beginning         Costs and          Other                                End of
           Description                of Period          Expenses         Accounts         Deductions           Period
---------------------------------- ----------------- ----------------- --------------- ------------------- -----------------
<S>                                <C>               <C>               <C>             <C>                 <C>
Allowance for doubtful accounts:
     February 28, 2001               $   522,000(b)    $   585,000       $         -      $    818,000(a)     $  289,000
     February 29, 2000               $   581,000(b)    $   304,000       $         -      $    363,000(a)     $  522,000(b)
     February 28, 1999               $   591,000       $   254,000       $         -      $    264,000(a)     $  581,000(b)

Reserves for inventory:
     February 28, 2001               $ 1,337,000       $   438,000       $         -       $   132,000(c)     $1,643,000
     February 29, 2000               $   713,000       $   909,000       $         -       $   285,000(c)     $1,337,000
     February 28, 1999               $   770,000       $ 1,623,000       $         -       $ 1,680,000(c)     $  713,000
</TABLE>


(a) Uncollectible accounts written off.
(b) Includes a $221,000 allowance on a note receivable.
(c) Inventory written down or written off.

                                     F-28