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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended February 28, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-13394
 
 VIDEO DISPLAY CORPORATION
  Georgia
    
    58-1217564(State of Incorporation)
    
    (IRS Employer Identification No.)1868 Tucker Industrial Road, Tucker Georgia
    
    30084(Address of principal executive offices)
    
    (Zip code)
 (770) 938-2080
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, no par value
    
    NASDAQ/NMS
 Common stock (no par value)
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



VIDEO DISPLAY CORPORATION
TABLE OF CONTENTS
 ITEM
    
    
    
    PAGENUMBER
    
    
    
    NUMBERPART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    8Item 1B.
    
    Unresolved Staff Comments
    
    
    12Item 2.
    
    Properties
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    13Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    13PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    14Item 6.
    
    Selected Financial Data
    
    
    17Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    18Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 8.
    
    Financial Statements and Supplementary Data
    
    
    30Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    62Item 9A.
    
    Controls and Procedures
    
    
    63Item 9B.
    
    Other Information
    
    
    64PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    64Item 11.
    
    Executive Compensation
    
    
    64Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    65Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    65Item 14.
    
    Principal Accounting Fees and Services
    
    
    65PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    66Signatures
    
    
    67EX-21 SUBSIDIARY COMPANIESEX-23.1 CONSENT OF CARR, RIGGS & INGRAM, LLCEX-23.2 CONSENT OF TAUBER & BALSER, PCEX-23.3 CONSENT OF BDO SEIDMAN, LLPEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATIONS OF THE CEO AND CFO




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




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Principal Products In Display Segment
 Monitors
   ®
   Data
Display and Home Entertainment - Cathode Ray Tubes (CRTs)
 3




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Component Parts
   4




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




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Backlog
  Government Contracts
  Environmental Matters
  Research and Development
  Employees
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Competition
       7




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




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Migration to flat panel and other technology may negatively impact our CRT business.
   Future acquisitions may not provide benefits to the Company.
  Changes in government priorities may impact military spending, and our financial condition and
results of operations could suffer if their purchases decline.
  If we are unable to retain certain key personnel and hire new highly skilled personnel, we may not
be able to execute our business plan.
  Our business operations could be disrupted if our information technology systems fail to perform
adequately.
  Changes to accounting rules or regulations may adversely affect our results of operations.
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The Companys stock price may be negatively affected by a variety of factors.
  Changes to estimates related to long term assets, or operating results that are lower than our
current estimates, may cause us to incur impairment charges.
  International factors could negatively affect our business.
  
    
    Economic downturns;
    
    Currency exchange rate and interest rate fluctuations;
    
    Changes in governmental policy, including, among others, those relating to taxation;
    
    International military, political, diplomatic and terrorist incidents;
    
    Government instability;
    
    Nationalization of foreign assets; and
    
    Tariffs and governmental trade policies.
  The cost and management resources required to implement Section 404 of the Sarbanes-Oxley Act may
adversely affect our results of operations; failure to implement controls timely may adversely
affect our stock price.
  10




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Our level of indebtedness could adversely affect the future operation of our business.
  
    
    making it more difficult for us to make payments on the debt, as our
business may not be able to generate sufficient cash flows from
operating activities to meet our debt service obligations;
    
    increasing our vulnerability to general economic and industry conditions;
    
    requiring a substantial portion of cash flow from operating activities
to be dedicated to the payment of our outstanding lines of credit and
long-term debt, and as a result reducing our ability to use our cash
flow to fund our operations and capital expenditures, capitalize on
future business opportunities and expand our business and execute our
strategy;
    
    exposing us to the risk of increased interest rates since much of our
borrowings are at variable rates of interest;
    
    causing us to make non-strategic divestitures;
    
    limiting our ability to obtain additional financing for working
capital, capital expenditures, debt service requirements and other
general corporate purposes; and
    
    limiting our ability to adjust to changing market conditions and to
react to competitive pressure and placing us at a competitive
disadvantage compared to our competitors who may have lower debt
leverage.
 Our debt agreements contain covenants that limit our flexibility in operating our business.
  
    
    incur additional indebtedness;
    
    make certain investments, loans or advances;
    
    transfer and sell certain assets;
    
    create or permit liens on assets;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
    
    engage in any business activity substantially different from our current businesses;
 11




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
    
    pay dividends; and
    
    cause, permit or suffer a change in capital ownership.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  Location
    
    Square Feet
    
    Lease ExpiresCRT, Monitor and Electron Gun  Manufacturing and Warehouse FacilitiesTucker, Georgia
    
    
    59,000
    
    
    October 31, 2008Stone Mountain, Georgia
    
    
    45,000
    
    
    December 31, 2007White Mills, Pennsylvania
    
    
    110,000
    
    
    Company OwnedBossier City, Louisiana
    
    
    26,000
    
    
    Company OwnedLye, England
    
    
    1,500
    
    
    October 1, 2008
 12




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##### Table of Contents



Location
    
    Square Feet
    
    Lease ExpiresBirdsboro, Pennsylvania
    
    
    40,000
    
    
    Company Owned (a)Phelps, New York
    
    
    32,000
    
    
    Company OwnedCape Canaveral, Florida
    
    
    30,000
    
    
    January 17, 2008Lexington, Kentucky
    
    
    80,000
    
    
    March 31, 2010Wholesale Electronic Parts DistributionBedford Heights, Ohio
    
    
    60,000
    
    
    Company OwnedBedford Heights, Ohio
    
    
    40,000
    
    
    January 31, 2008Beachwood, Ohio
    
    
    16,000
    
    
    July 31, 2010Richardson, Texas
    
    
    13,000
    
    
    April 30, 2007Buffalo, New York
    
    
    30,000
    
    
    November 30, 2009
 
 (a)
    
    The Birdsboro, Pennsylvania property secures mortgage loans from a bank
with a principal balance of $0.5 million as of February 28, 2007. This mortgage
loan bears an interest rate of approximately 7.4%. Monthly principal and
interest payments of approximately $5,000 are payable through October 2021. 
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  13




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
   For Fiscal Years EndedFebruary 28, 2007
    
    February 28, 2006Quarter Ended
    
    High
    
    Low
    
    High
    
    LowMay
    
    $
    9.60
    
    
    $
    8.68
    
    
    $
    14.65
    
    
    $
    11.45August
    
    
    8.90
    
    
    
    7.69
    
    
    
    13.97
    
    
    
    11.00November
    
    
    8.73
    
    
    
    7.41
    
    
    
    14.01
    
    
    
    12.89February
    
    
    8.21
    
    
    
    7.16
    
    
    
    13.82
    
    
    
    8.04
   Comparative Performance Graph
  14




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Symbol
    
    
    Total Returns Index for:
    
    
    02/28/02
    
    
    02/28/03
    
    
    02/28/04
    
    
    02/28/05
    
    
    02/28/06
    
    
    02/28/073⁄43⁄43⁄4
    
    
    Video Display Corporation
    
    
    
    100.0
    
    
    
    
    117.04
    
    
    
    
    263.61
    
    
    
    
    540.46
    
    
    
    
    318.15
    
    
    
    
    253.103⁄43⁄43⁄4
    
    
    NASDAQ Stock Market (US Companies)
    
    
    
    100.0
    
    
    
    
    77.02
    
    
    
    
    118.84
    
    
    
    
    121.36
    
    
    
    
    136.96
    
    
    
    
    147.313⁄43⁄43⁄4
    
    
    NASDAQ Electronic Components Stocks
SIC 3670-3679 US & Foreign
    
    
    
    100.0
    
    
    
    
    61.33
    
    
    
    
    106.49
    
    
    
    
    86.18
    
    
    
    
    92.45
    
    
    
    
    85.19
 
 Notes:A.
    
    The lines represent monthly index levels derived form compounded daily returns that include all dividends.B.
    
    The indexes are reweighted daily, using the market capitalization on the previous trading day.C.
    
    If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.D.
    
    The index level for all series was set to $100.00 on 02/28/02. 15




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Securities Authorized for Issuance Under Equity Compensation Plans
  Number of securitiesNumber of
    
    
    
    
    
    
    remaining available forsecurities to be
    
    
    
    
    
    
    future issuance underissued upon exercise
    
    
    Weighted-average
    
    
    equity compensationof outstanding
    
    
    exercise price of
    
    
    plans (excludingoptions, warrants
    
    
    outstanding options,
    
    
    securities reflected inStock Option Plan
    
    and rights
    
    
    warrants and rights
    
    
    first column)Equity compensation plans
approved by security holders
    
    
    234,000
    
    
    $
    5.52
    
    
    
    600,000
 Recent Sales of Unregistered Securities
   Issuer Purchases of Equity Securities
  16




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##### Table of Contents



Maximum NumberTotal
    
    
    
    
    
    
    Total Number of
    
    
    of Shares thatNumber
    
    
    Average
    
    
    Shares Purchased
    
    
    May Yet Beof
    
    
    Price
    
    
    as Part of Publicly
    
    
    Purchased UnderShares
    
    
    Paid Per
    
    
    Announced Plans
    
    
    the Plans orFiscal Period
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    ProgramsDecember 1, 2006 through
December 31, 2006
    
    
    38,017
    
    
    $
    7.40
    
    
    
    38,017
    
    
    
    631,027January 1, 2007 through
January 31, 2007
    
    
    28,027
    
    
    
    7.41
    
    
    
    28,027
    
    
    
    593,010February 1, 2007 through
February 28, 2007
    
    
    13,400
    
    
    
    7.66
    
    
    
    13,400
    
    
    
    564,983Total Fourth Quarter
Fiscal 2007
    
    
    79,444
    
    
    $
    7.45
    
    
    
    79,444
    
    
    
    551,583
 
 Item 6. Selected Financial Data.
   For Fiscal Years EndedFeb. 28,
    
    
    Feb. 28,
    
    
    Feb. 28,
    
    
    Feb. 29,
    
    
    Feb. 28,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(b)(In Thousands, Except Per Share Data)Statement of Operations DataNet sales
    
    $
    81,939
    
    
    $
    83,878
    
    
    $
    82,740
    
    
    $
    76,592
    
    
    $
    76,582Gross profit
    
    
    27,592
    
    
    
    24,502
    
    
    
    27,011
    
    
    
    24,988
    
    
    
    19,540Goodwill amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating profit (loss)
    
    
    4,852
    
    
    
    2,142
    
    
    
    6,653
    
    
    
    6,184
    
    
    
    (2,684
    )Net income (loss)
    
    
    1,623
    
    
    
    445
    
    
    
    3,507
    
    
    
    3,112
    
    
    
    (3,333
    )Net income (loss) per share  basic (a)
    
    $
    0.17
    
    
    $
    0.05
    
    
    $
    0.36
    
    
    $
    0.33
    
    
    $
    (0.35
    )Net income (loss) per share  diluted (a)
    
    $
    0.16
    
    
    $
    0.04
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    (0.35
    )Average shares
outstanding  basic (a)
    
    
    9,648
    
    
    
    9,684
    
    
    
    9,673
    
    
    
    9,348
    
    
    
    9,516Average shares
outstanding  diluted (a)
    
    
    9,838
    
    
    
    9,964
    
    
    
    9,903
    
    
    
    9,800
    
    
    
    9,516Cash dividends per share
    
    $
    
    
    
    $
    
    
    
    $
    0.04
    
    
    $
    0.03
    
    
    $
    Balance Sheet Data (at year end)Total assets
    
    $
    65,087
    
    
    $
    65,438
    
    
    $
    62,184
    
    
    $
    54,234
    
    
    $
    57,350Working capital
    
    
    38,988
    
    
    
    16,330
    
    
    
    37,175
    
    
    
    31,767
    
    
    
    26,754Long-term obligations
    
    
    22,654
    
    
    
    1,506
    
    
    
    20,571
    
    
    
    16,489
    
    
    
    14,466Redeemable common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
 17




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(a)
    
    Includes the effects of a 2 for 1 stock split effected in the form of a 100% stock
dividend in November 2004.(b)
    
    In connection with the winding up of its manufacturing operations in Mexico and three
domestic facilities, the Company recorded impairment charges of $7,163,000, including the
write-off of its related foreign currency cumulative translation account balance of
$1,296,000. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
 Disclosures about Segments of an
Enterprise and Related Information.
 
    
    Monitor offers a wide range of CRT, flat panel and projection display systems for use
in training and simulation, military, medical and industrial applications.
    
    Data Display CRT offers a wide range of CRTs for use in data display screens,
including computer terminal monitors and medical monitoring equipment.
    
    Entertainment CRT offers a wide range of CRTs and projection tubes for television and
home theater equipment.
    
    Component Parts provides replacement electron guns and other components for CRTs
primarily for servicing the Companys internal needs.
  Inventory management
  18




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Interest rate exposure
 Operations
   2007
    
    
    2006
    
    
    2005Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Net SalesDisplay SegmentMonitors
    
    $
    45,072
    
    
    
    55.0
    %
    
    $
    49,868
    
    
    
    59.5
    %
    
    $
    50,806
    
    
    
    61.4
    %Data Display CRTs
    
    
    9,839
    
    
    
    12.0
    
    
    
    10,820
    
    
    
    12.8
    
    
    
    8,509
    
    
    
    10.3Entertainment CRTs
    
    
    2,578
    
    
    
    3.2
    
    
    
    3,661
    
    
    
    4.4
    
    
    
    4,282
    
    
    
    5.2Component Parts
    
    
    397
    
    
    
    0.5
    
    
    
    730
    
    
    
    0.9
    
    
    
    813
    
    
    
    1.0Total
Display Segment
    
    
    57,886
    
    
    
    70.7
    
    
    
    65,079
    
    
    
    77.6
    
    
    
    64,410
    
    
    
    77.9Wholesale Distribution
Segment
    
    
    24,053
    
    
    
    29.3
    
    
    
    18,799
    
    
    
    22.4
    
    
    
    18,330
    
    
    
    22.1$
    81,939
    
    
    
    100.0
    %
    
    $
    83,878
    
    
    
    100.0
    %
    
    $
    82,740
    
    
    
    100.0
    %Costs and expensesCost of goods sold
    
    $
    54,347
    
    
    
    66.3
    %
    
    $
    59,376
    
    
    
    70.8
    %
    
    $
    55,729
    
    
    
    67.4
    %Selling and delivery
    
    
    7,880
    
    
    
    9.6
    
    
    
    7,235
    
    
    
    8.6
    
    
    
    7,035
    
    
    
    8.5General and
administrative
    
    
    14,860
    
    
    
    18.1
    
    
    
    15,125
    
    
    
    18.0
    
    
    
    13,323
    
    
    
    16.177,087
    
    
    
    94.0
    
    
    
    81,736
    
    
    
    97.4
    
    
    
    76,087
    
    
    
    92.0Income from operations
    
    
    4,852
    
    
    
    5.9
    
    
    
    2,142
    
    
    
    2.6
    
    
    
    6,653
    
    
    
    8.0Interest expense
    
    
    (2,086
    )
    
    
    (2.5
    )
    
    
    (1,474
    )
    
    
    (1.8
    )
    
    
    (1,060
    )
    
    
    (1.3
    )Other income, net
    
    
    17
    
    
    
    0.0
    
    
    
    82
    
    
    
    0.1
    
    
    
    176
    
    
    
    0.2Income before income taxes
    
    
    2,783
    
    
    
    3.4
    
    
    
    750
    
    
    
    0.9
    
    
    
    5,769
    
    
    
    6.9Provision for income taxes
    
    
    1,160
    
    
    
    1.4
    
    
    
    305
    
    
    
    0.4
    
    
    
    2,262
    
    
    
    2.7Net income
    
    $
    1,623
    
    
    
    2.0
    %
    
    $
    445
    
    
    
    0.5
    %
    
    $
    3,507
    
    
    
    4.2
    %
 Fiscal 2007 Compared to Fiscal 2006
 19




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Fiscal 2006 Compared to Fiscal 2005
     21




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22




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Managements Discussion of Liquidity and Capital Resources
  23




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®
  24




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Transactions with Related Parties, Contractual Obligations and Commitments
  1 4
   26




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Contractual Obligations
  Payments due by periodLess than
    
    
    1  3
    
    
    3  5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsLong-term debt obligations
    
    $
    24,019
    
    
    $
    2,257
    
    
    $
    16,738
    
    
    $
    1,282
    
    
    $
    3,742Capital lease obligations
    
    
    358
    
    
    
    89
    
    
    
    198
    
    
    
    71
    
    
    
    Interest obligations on
long-term debt and capital
lease obligations (a)
    
    
    6,115
    
    
    
    1,831
    
    
    
    1,580
    
    
    
    1,194
    
    
    
    1,510Operating lease obligations
    
    
    4,079
    
    
    
    1,980
    
    
    
    1,834
    
    
    
    252
    
    
    
    13Purchase obligations
    
    
    6,215
    
    
    
    6,215
    
    
    
    
    
    
    
    
    
    
    
    Warranty reserve obligations
    
    
    363
    
    
    
    363
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    41,149
    
    
    $
    12,735
    
    
    $
    20,350
    
    
    $
    2,799
    
    
    $
    5,265
 
 (a)
    
    This line item was calculated by utilizing the effective rate on outstanding debt as of
February 28, 2007. Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Reserves on inventories
  27




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Revenue and profit or loss recognition
     Allowance for bad debts
  Warranty reserves
  28




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Other loss contingencies
  Recent Accounting Pronouncements
 How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That is, Gross versus Net Presentation)
 Accounting for Uncertainty in Income
Taxes
 Fair Value Measurements
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and
132(R)
 29




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##### Table of Contents



Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
  Impact of Inflation
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
   
 Item 8. Financial Statements and Supplementary Data.
  30




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Reports of Independent Registered Public Accounting Firms
    
    
    32Consolidated Balance Sheets as of February 28, 2007 and February 28, 2006
    
    
    35Consolidated Statements of Operations for the years ended
February 28, 2007 and February 28, 2006 and February 28, 2005
    
    
    37Consolidated Statements of Shareholders Equity and Comprehensive Income for the
Years ended February 28, 2007 and February 28, 2006 and February 28, 2005
    
    
    38Consolidated Statements of Cash Flows for the years ended
February 28, 2007 and February 28, 2006 and February 28, 2005
    
    
    39Notes to Consolidated Financial Statements
    
    
    40
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Report of Independent Registered Public Accounting Firm
 
     
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Report of Independent Registered Public Accounting Firm
 
    
 33




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Report of Independent Registered Public Accounting Firm
 
    Atlanta, Georgia
    
    /s/ BDO Seidman, LLPJune 14, 2005, except for theeffect of the matters described inNote 2, Prior Period Restatement, to theconsolidated financial statements includedin the Annual Report (Form10-K) for theyear ended February 28, 2006 (not presentedherein), as to which the date is June 8, 2006
 34




---



##### Table of Contents



February 28,
    
    
    February 28,2007
    
    
    2006AssetsCurrent AssetsCash
    
    $
    1,226
    
    
    $
    1,577Accounts
receivable, less allowance for doubtful accounts of $458 and $381, respectively
    
    
    10,497
    
    
    
    9,483Inventories, net
    
    
    33,344
    
    
    
    34,645Cost and estimated earnings in excess of
billings on uncompleted contracts
    
    
    2,963
    
    
    
    968Deferred income taxes
    
    
    3,042
    
    
    
    3,279Prepaid expenses and other current assets
    
    
    737
    
    
    
    1,720Total current assets
    
    
    51,809
    
    
    
    51,672Property, plant and equipment:Land
    
    
    585
    
    
    
    605Buildings
    
    
    8,223
    
    
    
    8,454Machinery and equipment
    
    
    20,196
    
    
    
    19,97029,004
    
    
    
    29,029Accumulated depreciation
    
    
    (21,084
    )
    
    
    (20,270
    )Net property, plant and equipment
    
    
    7,920
    
    
    
    8,759Goodwill
    
    
    1,343
    
    
    
    1,318Intangible assets, net
    
    
    3,894
    
    
    
    3,591Other assets
    
    
    121
    
    
    
    98Total assets
    
    $
    65,087
    
    
    $
    65,438
  35




---



##### Table of Contents



February 28,
    
    
    February 28,2007
    
    
    2006Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    6,325
    
    
    $
    6,889Accrued liabilities
    
    
    4,054
    
    
    
    2,833Billings in excess of cost and estimated
earnings on uncompleted contracts
    
    
    34
    
    
    
    965Line of credit
    
    
    
    
    
    
    17,567Current maturities of notes payable to
officers and directors
    
    
    446
    
    
    
    6,948Convertible notes payable, net of discount
of $75
    
    
    1,175
    
    
    
    Income taxes payable
    
    
    61
    
    
    
    Current maturities of long-term debt
and financing lease obligations
    
    
    726
    
    
    
    140Total current liabilities
    
    
    12,821
    
    
    
    35,342Lines of credit
    
    
    13,593
    
    
    
    Long-term debt, less current maturities
    
    
    2,550
    
    
    
    808Financing lease obligations, less current maturities
    
    
    269
    
    
    
    363Notes payable to officers and directors,
less current maturities
    
    
    5,619
    
    
    
    Convertible notes payable, net of discount
of $38
    
    
    
    
    
    
    212Other long-term liabilities
    
    
    623
    
    
    
    123Deferred income taxes
    
    
    71
    
    
    
    560Total liabilities
    
    
    35,546
    
    
    
    37,408Commitments and contingencies (See Note 15)
    
    
    
    
    
    
    Shareholders EquityPreferred stock, no par value  10,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, no par value  50,000 shares
authorized; 9,707 issued and 9,600 outstanding
at February 28, 2007, and 9,707 issued and 9,628
outstanding at February 28, 2006
    
    
    7,284
    
    
    
    7,198Additional paid-in capital
    
    
    171
    
    
    
    92Retained earnings
    
    
    23,376
    
    
    
    21,771Accumulated other comprehensive income (loss)
    
    
    95
    
    
    
    (172
    )Treasury stock, 166 shares at February 28, 2007
and 86 shares at February 28, 2006 at cost
    
    
    (1385
    )
    
    
    (859
    )Total shareholders equity
    
    
    29,541
    
    
    
    28,030Total liabilities and shareholders equity
    
    $
    65,087
    
    
    $
    65,438
  36




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##### Table of Contents



Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005Net sales
    
    $
    81,939
    
    
    $
    83,878
    
    
    $
    82,740Cost of goods sold
    
    
    54,347
    
    
    
    59,376
    
    
    
    55,729Gross profit
    
    
    27,592
    
    
    
    24,502
    
    
    
    27,011Operating expensesSelling and delivery
    
    
    7,880
    
    
    
    7,235
    
    
    
    7,035General and administrative
    
    
    14,860
    
    
    
    15,125
    
    
    
    13,32322,740
    
    
    
    22,360
    
    
    
    20,358Operating income
    
    
    4,852
    
    
    
    2,142
    
    
    
    6,653Other income (expense)Interest expense
    
    
    (2,086
    )
    
    
    (1,474
    )
    
    
    (1,060
    )Other, net
    
    
    17
    
    
    
    82
    
    
    
    176(2,069
    )
    
    
    (1,392
    )
    
    
    (884
    )Income before income taxes
    
    
    2,783
    
    
    
    750
    
    
    
    5,769Provision for income taxes
    
    
    1,160
    
    
    
    305
    
    
    
    2,262Net income
    
    $
    1,623
    
    
    $
    445
    
    
    $
    3,507Net income per share  basic
    
    $
    0.17
    
    
    $
    0.05
    
    
    $
    0.36Net income per share  diluted
    
    $
    0.16
    
    
    $
    0.04
    
    
    $
    0.36Average shares outstanding  basic
    
    
    9,648
    
    
    
    9,684
    
    
    
    9,673Average shares outstanding  diluted
    
    
    9,838
    
    
    
    9,964
    
    
    
    9,903
  37




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##### Table of Contents



Accumulated
    
    
    
    
    
    
    CurrentAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    YearCommon
    
    
    Share
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Stock
    
    
    IncomeBalance, February 29, 2004
    
    
    4,792
    
    
    $
    6,318
    
    
    $
    92
    
    
    $
    18,509
    
    
    $
    (20
    )
    
    $
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,507
    
    
    
    
    
    
    
    
    
    
    $
    3,507Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    (49
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,458Issuance of common stock
under stock option plan
    
    
    28
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    33
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of 100% stock
dividend
    
    
    4,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of debt to
common stock
    
    
    10
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividend paid on common
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (392
    )
    
    
    
    
    
    
    Balance, February 28, 2005
    
    
    9,704
    
    
    
    7,026
    
    
    
    92
    
    
    
    21,624
    
    
    
    (69
    )
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    445
    
    
    
    
    
    
    
    
    
    
    $
    445Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103
    )
    
    
    
    
    
    
    (103
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    342Issuance of common stock
under stock option plan
    
    
    26
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (26
    )
    
    
    (19
    )
    
    
    
    
    
    
    (298
    )
    
    
    
    
    
    
    Repurchase of treasury stock
    
    
    (86
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (859
    )Conversion of debt to
common stock
    
    
    10
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, February 28, 2006
    
    
    9,628
    
    
    
    7,198
    
    
    
    92
    
    
    
    21,771
    
    
    
    (172
    )
    
    
    (859
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,623
    
    
    
    
    
    
    
    
    
    
    $
    1,623Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    267Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,890Issuance of common stock
under stock option plan
    
    
    52
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
from treasury
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    268Repurchase of treasury stock
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (794
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    Balance, February 28, 2007
    
    
    9,600
    
    
    $
    7,284
    
    
    $
    171
    
    
    $
    23,376
    
    
    $
    95
    
    
    $
    (1,385
    )
  38




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##### Table of Contents



Fiscal year endedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005Operating ActivitiesNet income
    
    $
    1,623
    
    
    $
    445
    
    
    $
    3,507Adjustments to reconcile net income to net
cash provided by operating activitiesDepreciation and amortization
    
    
    2,250
    
    
    
    1,929
    
    
    
    1,449Allowance for doubtful accounts
    
    
    98
    
    
    
    216
    
    
    
    186Reserves on inventories
    
    
    1,748
    
    
    
    1,900
    
    
    
    1,386Non-cash charge for share based compensation
    
    
    79
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (252
    )
    
    
    (298
    )
    
    
    (752
    )Interest on convertible note
    
    
    38
    
    
    
    56
    
    
    
    56Loss on disposal of fixed assets
    
    
    9
    
    
    
    9
    
    
    
    Changes in working capital items, net of effect of
acquisitions:Accounts receivable
    
    
    (992
    )
    
    
    2,230
    
    
    
    (1,205
    )Inventories
    
    
    2,120
    
    
    
    (3,666
    )
    
    
    (4,693
    )Cost, estimated earnings and billings, net
on uncompleted contracts
    
    
    (2,926
    )
    
    
    281
    
    
    
    127Prepaid expenses and other assets
    
    
    848
    
    
    
    (1,356
    )
    
    
    796Accounts payable and accrued liabilities
    
    
    (417
    )
    
    
    1,106
    
    
    
    1,493Net cash provided by operating activities
    
    
    4,226
    
    
    
    2,852
    
    
    
    2,350Investing ActivitiesCapital expenditures
    
    
    (445
    )
    
    
    (1,928
    )
    
    
    (769
    )Cash paid for acquisition
    
    
    (550
    )
    
    
    (1,377
    )
    
    
    (150
    )Cash paid for product acquisition and other assets
    
    
    
    
    
    
    
    
    
    
    (5,250
    )Cash received from sale of PPE
    
    
    159
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (836
    )
    
    
    (3,305
    )
    
    
    (6,169
    )Financing ActivitiesProceeds from long-term debt, lines of credit
and financing lease obligations
    
    
    48,773
    
    
    
    29,651
    
    
    
    48,173Repayments of long-term debt, lines of credit
and financing lease obligations
    
    
    (51,191
    )
    
    
    (34,632
    )
    
    
    (37,550
    )Proceeds from loans from related parties
    
    
    3,220
    
    
    
    7,971
    
    
    
    3,240Repayments of loans from related parties
    
    
    (4,102
    )
    
    
    (1,218
    )
    
    
    (11,336
    )Proceeds from stock option exercises
    
    
    86
    
    
    
    66
    
    
    
    183Dividend paid on common stock
    
    
    
    
    
    
    
    
    
    
    (392
    )Purchases and retirements of common stock and
purchases of treasury stock
    
    
    (794
    )
    
    
    (1,176
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (4,008
    )
    
    
    662
    
    
    
    2,318Effect of exchange rates on cash
    
    
    267
    
    
    
    (103
    )
    
    
    (49
    )Net change in cash
    
    
    (351
    )
    
    
    106
    
    
    
    (1,550
    )Cash, beginning of year
    
    
    1,577
    
    
    
    1,471
    
    
    
    3,021Cash, end of year
    
    $
    1,226
    
    
    $
    1,577
    
    
    $
    1,471
 
 39




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##### Table of Contents



Note 1. Summary of Significant Accounting Policies
 Fiscal Year
  Nature of Business
  Principles of Consolidation
  Reclassifications
  Use of Estimates
  Revenue Recognition
  40




---



##### Table of Contents



Research and Development
  Financial Instruments
  Accounts Receivable and Allowance for Doubtful Accounts
  41




---



##### Table of Contents



Warranty Reserves
  Inventories
   Property, Plant and Equipment
   Goodwill and Other Intangibles
   42




---



##### Table of Contents



Stock-Based Compensation Plans
 Share-Based Payment Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation,
   Comprehensive Income
  Stock Repurchase Program
  43




---



##### Table of Contents



Taxes on Income
 Accounting for Income Taxes,
 Foreign Currency Translations
  Earnings Per Share
   AverageShares
    
    
    Net IncomeNet Income
    
    
    Outstanding
    
    
    Per Share2007Basic
    
    $
    1,623
    
    
    
    9,648
    
    
    $
    0.17Effect of dilution:Options
    
    
    
    
    
    
    190Diluted
    
    $
    1,623
    
    
    
    9,838
    
    
    $
    0.162006Basic
    
    $
    445
    
    
    
    9,684
    
    
    $
    0.05Effect of dilution:Options
    
    
    
    
    
    
    280Diluted
    
    $
    445
    
    
    
    9,964
    
    
    $
    0.042005Basic
    
    $
    3,507
    
    
    
    9,673
    
    
    $
    0.36Effect of dilution:Options
    
    
    
    
    
    
    200Convertible debt
    
    
    35
    
    
    
    30Diluted
    
    $
    3,542
    
    
    
    9,903
    
    
    $
    0.36
 44




---



##### Table of Contents



Segment Reporting
  Recent Accounting Pronouncements
 How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That is, Gross versus Net Presentation)
 Accounting for Uncertainty in Income
Taxes
 Fair Value Measurements
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and
132(R)
 45




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##### Table of Contents



Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
  Note 2. Costs and Estimated Earnings Related to Billings on Uncompleted Contracts
  February 28,
    
    
    February 28,2007
    
    
    2006Costs incurred to date on uncompleted contracts
    
    $
    4,127
    
    
    $
    4,528Estimated earnings recognized to date on these contracts
    
    
    1,203
    
    
    
    2,5855,330
    
    
    
    7,113Billings to date
    
    
    (2,401
    )
    
    
    (7,110
    )Costs and estimated earnings in excess of billings, net
    
    $
    2,929
    
    
    $
    3Costs and estimated earnings in excess of billings
    
    $
    2,963
    
    
    $
    968Billings in excess of costs and estimated earnings
    
    
    (34
    )
    
    
    (965
    )$
    2,929
    
    
    $
    3
  46




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##### Table of Contents



Note 3. Intangible Assets
  February 28, 2007
    
    
    February 28, 2006Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationCustomer lists
    
    $
    3,611
    
    
    $
    1,089
    
    
    $
    2,968
    
    
    $
    658Non-compete agreements
    
    
    1,245
    
    
    
    552
    
    
    
    1,230
    
    
    
    301Patents/designs
    
    
    765
    
    
    
    154
    
    
    
    335
    
    
    
    78Other intangibles
    
    
    149
    
    
    
    81
    
    
    
    119
    
    
    
    24$
    5,770
    
    
    $
    1,876
    
    
    $
    4,652
    
    
    $
    1,061
  47




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##### Table of Contents



Year
    
    Amort. Exp.2008
    
    $
    9402009
    
    $
    8832010
    
    $
    6642011
    
    $
    2382012
    
    $
    182Thereafter
    
    $
    987
 Note 4. Business Acquisitions
    48




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##### Table of Contents



Inventories
    
    $
    773Machinery & equipment
    
    
    74Product designs, customer lists and other assets
    
    
    530$
    1,377
 Note 5. Inventories
  February 28,
    
    
    February 28,2007
    
    
    2006Raw materials
    
    $
    19,540
    
    
    $
    18,618Work-in-process
    
    
    4,210
    
    
    
    3,772Finished goods
    
    
    14,980
    
    
    
    16,68838,730
    
    
    
    39,078Reserves for obsolescence
    
    
    (5,386
    )
    
    
    (4,433
    )$
    33,344
    
    
    $
    34,645
 49




---



##### Table of Contents



Note 6. Long-Term Debt
  February 28,
    
    
    February 28,2007
    
    
    2006Note payable to bank syndicate (RBC
Centura and Regions Bank); interest
rate at LIBOR plus applicable margin as
defined per the loan agreement, (7.40%
combined rate as of February 28, 2007);
monthly principal payments of $50 plus
accrued interest, payable through July
2011; collateralized by all assets of
the Company.
    
    $
    2,650
    
    
    $
    Mortgage payable to bank; interest rate
at Federal Home Loan Bank Board Index
rate plus 1.95% (7.35% as of February
28, 2007); monthly principal and
interest payments of $5 payable through
October 2021; collateralized by land
and building of Teltron Technologies,
Inc.
    
    
    521
    
    
    
    540Mortgage payable to Pennsylvania
Industrial Development Authority;
interest rate at 4.25%; monthly
principal and interest payments of $2.8
payable through October 2017;
collateralized by a second priority
lien on land and building of Teltron
Technologies, Inc.
    
    
    
    
    
    
    308Other
    
    
    16
    
    
    
    143,187
    
    
    
    862Financing lease obligations
    
    
    358
    
    
    
    4493,545
    
    
    
    1,311Less current maturities
    
    
    (726
    )
    
    
    (140
    )$
    2,819
    
    
    $
    1,171
  Year
    
    Amount2008
    
    $
    7262009
    
    
    7182010
    
    
    7262011
    
    
    6962012
    
    
    277Thereafter
    
    
    402$
    3,545
 Note 7. Lines of Credit
 50




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##### Table of Contents



Note 8. Notes Payable to Officers and Directors
  1 4
 51




---



##### Table of Contents



Note 9. Convertible Notes Payable
   Note 10. Accrued Expenses and Warranty Obligations
  Fiscal Year Ended(in thousands)2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    510
    
    
    $
    710
    
    
    $
    821Provision for current year sales
    
    
    769
    
    
    
    1,269
    
    
    
    1,021Warranty costs incurred
    
    
    (916
    )
    
    
    (1,469
    )
    
    
    (1,132
    )Balance at end of year
    
    $
    363
    
    
    $
    510
    
    
    $
    710
  February 28,
    
    
    February 28,2007
    
    
    2006Accrued compensation and benefits
    
    $
    1,261
    
    
    $
    1,362Accrued liability to issue stock
    
    
    1,125
    
    
    
    Accrued warranty
    
    
    363
    
    
    
    510Accrued customer advances
    
    
    338
    
    
    
    Accrued other
    
    
    967
    
    
    
    961$
    4,054
    
    
    $
    2,833
 52




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##### Table of Contents



Note 11. Stock Options
    Number of
    
    Average ExerciseShares
    
    Price(in thousands)
    
    Per ShareOutstanding at February 29, 2004
    
    
    302
    
    
    $
    2.20Granted
    
    
    18
    
    
    
    13.30Exercised
    
    
    (43
    )
    
    
    6.55Outstanding at February 28, 2005
    
    
    277
    
    
    $
    2.42Granted
    
    
    59
    
    
    
    12.85Exercised
    
    
    (26
    )
    
    
    2.53Outstanding at February 28, 2006
    
    
    310
    
    
    $
    4.57Granted
    
    
    
    
    
    
    Exercised
    
    
    (52
    )
    
    
    1.67Forfeited or expired
    
    
    (24
    )
    
    
    3.13Outstanding at February 28, 2007
    
    
    234
    
    
    $
    5.52Options exercisableFebruary 28, 2007
    
    
    184
    
    
    $
    3.53February 28, 2006
    
    
    260
    
    
    
    2.98February 28, 2005
    
    
    272
    
    
    
    2.42
 53




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##### Table of Contents



Options Outstanding
    
    Options ExercisableNumber
    
    Weighted Average
    
    
    
    
    
    NumberOutstanding at
    
    Remaining
    
    Weighted
    
    Exercisable at
    
    WeightedRange
    
    February 28, 2007
    
    Contractual Life
    
    Average
    
    February 28, 2007
    
    Averageof Exercise Prices
    
    (in thousands)
    
    (in years)
    
    Exercise Price
    
    (in thousands)
    
    Exercise Price$1.15  1.98
    
    
    80
    
    
    
    0.2
    
    
    $
    1.52
    
    
    
    80
    
    
    $
    1.522.20  3.25
    
    
    56
    
    
    
    4.7
    
    
    
    2.67
    
    
    
    56
    
    
    
    2.673.38  4.22
    
    
    27
    
    
    
    2.7
    
    
    
    3.80
    
    
    
    27
    
    
    
    3.8012.85  13.30
    
    
    71
    
    
    
    8.6
    
    
    
    12.93
    
    
    
    21
    
    
    
    13.12234
    
    
    
    4.1
    
    
    $
    5.52
    
    
    
    184
    
    
    $
    3.53
    Fiscal Year EndedFebruary 28,
    
    
    February 28,2006
    
    
    2005Net income, as reported
    
    $
    445
    
    
    $
    3,507Stock-based employee compensation expense,
as reported
    
    
    
    
    
    
    Stock-based employee compensation expense
determined under fair value basis, net of tax
    
    
    (87
    )
    
    
    (49
    )Pro forma net income
    
    $
    358
    
    
    $
    3,458Net income per share:Basic as reported
    
    $
    0.05
    
    
    $
    0.36Basic pro forma
    
    $
    0.04
    
    
    $
    0.36Diluted as reported
    
    $
    0.04
    
    
    $
    0.36Diluted pro forma
    
    $
    0.04
    
    
    $
    0.35
 54




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##### Table of Contents



Note 12. Taxes on Income
  Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    1,230
    
    
    $
    569
    
    
    $
    2,533State
    
    
    151
    
    
    
    109
    
    
    
    482Foreign
    
    
    31
    
    
    
    (75
    )
    
    
    1,412
    
    
    
    603
    
    
    
    3,015Deferred:Federal
    
    
    (207
    )
    
    
    (250
    )
    
    
    (633
    )State
    
    
    (45
    )
    
    
    (48
    )
    
    
    (120
    )(252
    )
    
    
    (298
    )
    
    
    (753
    )Total
    
    $
    1,160
    
    
    $
    305
    
    
    $
    2,262
  Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005U.S. operations
    
    $
    2,706
    
    
    $
    668
    
    
    $
    6,108Foreign operations
    
    
    77
    
    
    
    82
    
    
    
    (339
    )$
    2,783
    
    
    $
    750
    
    
    $
    5,769
  Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005Statutory U.S. federal income tax rate
    
    $
    936
    
    
    $
    255
    
    
    $
    1,961State income taxes, net of federal benefit
    
    
    106
    
    
    
    65
    
    
    
    239Foreign operating income (loss)
    
    
    36
    
    
    
    (29
    )
    
    
    Non-deductible expenses
    
    
    37
    
    
    
    35
    
    
    
    62Other
    
    
    45
    
    
    
    (21
    )
    
    
    Taxes at effective income tax rate
    
    $
    1,160
    
    
    $
    305
    
    
    $
    2,262
 55




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##### Table of Contents



February 28,
    
    
    February 28,2007
    
    
    2006Deferred tax assets:Investment capital loss carryforwards
    
    $
    41
    
    
    $
    226Uniform capitalization costs
    
    
    446
    
    
    
    452Inventory reserves
    
    
    2,047
    
    
    
    1,707Accrued liabilities
    
    
    420
    
    
    
    463Allowance for doubtful accounts
    
    
    174
    
    
    
    147Amortization of intangibles
    
    
    554
    
    
    
    377Other
    
    
    9
    
    
    
    1473,691
    
    
    
    3,519Valuation allowance
    
    
    (38
    )
    
    
    (240
    )Deferred tax liabilities:Basis difference of property, plant and equipment
    
    
    (630
    )
    
    
    (522
    )Other
    
    
    (52
    )
    
    
    (38
    )Net deferred tax assets
    
    $
    2,971
    
    
    $
    2,719Current asset
    
    $
    3,042
    
    
    $
    3,279Non-current liability
    
    
    (71
    )
    
    
    (560
    )$
    2,971
    
    
    $
    2,719
   Note 13. Segment Information
 56




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##### Table of Contents



Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005(In thousands)Net SalesDisplay SegmentMonitors
    
    $
    45,072
    
    
    $
    49,868
    
    
    $
    50,806Data display CRTs
    
    
    9,839
    
    
    
    10,820
    
    
    
    8,509Entertainment CRTs
    
    
    2,578
    
    
    
    3,661
    
    
    
    4,282Component parts
    
    
    397
    
    
    
    730
    
    
    
    81357,886
    
    
    
    65,079
    
    
    
    64,410Wholesale Distribution Segment
    
    
    24,053
    
    
    
    18,799
    
    
    
    18,330$
    81,939
    
    
    $
    83,878
    
    
    $
    82,740Income before income taxesDisplay SegmentMonitors
    
    $
    4,847
    
    
    $
    4,003
    
    
    $
    7,228Data display CRTs
    
    
    (16
    )
    
    
    (1,943
    )
    
    
    (1,097
    )Entertainment CRTs
    
    
    155
    
    
    
    510
    
    
    
    730
 57




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##### Table of Contents



Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005(In thousands)Component parts
    
    
    (130
    )
    
    
    (685
    )
    
    
    (223
    )4,856
    
    
    
    1,885
    
    
    
    6,638Wholesale Distribution Segment
    
    
    (4
    )
    
    
    257
    
    
    
    154,852
    
    
    
    2,142
    
    
    
    6,653Other income ( expense)Interest expense
    
    
    (2,086
    )
    
    
    (1,474
    )
    
    
    (1,060
    )Other, net
    
    
    17
    
    
    
    82
    
    
    
    176$
    2,783
    
    
    $
    750
    
    
    $
    5,769Depreciation & AmortizationDisplay SegmentMonitors
    
    $
    1,798
    
    
    $
    1,583
    
    
    $
    1,148Data display CRTs
    
    
    77
    
    
    
    43
    
    
    
    45Entertainment CRTs
    
    
    35
    
    
    
    41
    
    
    
    96Component parts
    
    
    13
    
    
    
    46
    
    
    
    491,923
    
    
    
    1,713
    
    
    
    1,338Wholesale Distribution Segment
    
    
    327
    
    
    
    216
    
    
    
    111$
    2,250
    
    
    $
    1,929
    
    
    $
    1,449
 58




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##### Table of Contents



Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005(In thousands)Capital Expenditures**Display SegmentMonitors
    
    $
    344
    
    
    $
    1,417
    
    
    $
    399Data display CRTs
    
    
    271
    
    
    
    5
    
    
    
    10Entertainment CRTs
    
    
    
    
    
    
    3
    
    
    
    1Component parts
    
    
    12
    
    
    
    
    
    
    
    7627
    
    
    
    1,425
    
    
    
    417Wholesale Distribution Segment
    
    
    136
    
    
    
    1,026
    
    
    
    352$
    763
    
    
    $
    2,451
    
    
    $
    769
 
 **
    
    Includes non-cash additions and additions to fixed assets through business
acquisitions. February 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005(In thousands)Identifiable AssetsDisplay SegmentMonitors
    
    $
    44,066
    
    
    $
    40,404
    
    
    $
    38,264Data display CRTs
    
    
    9,559
    
    
    
    14,005
    
    
    
    12,390Entertainment CRTs
    
    
    1,900
    
    
    
    1,917
    
    
    
    2,121Component parts
    
    
    482
    
    
    
    1,045
    
    
    
    2,22456,007
    
    
    
    57,371
    
    
    
    54,999Wholesale Distribution Segment
    
    
    9,080
    
    
    
    8,067
    
    
    
    7,185$
    65,087
    
    
    $
    65,438
    
    
    $
    62,184
 Fiscal Year EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005(In thousands)Geographic sales informationUnited States
    
    $
    71,641
    
    
    $
    72,343
    
    
    $
    73,639All other
    
    
    10,298
    
    
    
    11,535
    
    
    
    9,101$
    81,939
    
    
    $
    83,878
    
    
    $
    82,740
 Note 14. Benefit Plan
  59




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Note 15. Commitments
 Operating Leases
   Fiscal Year
    
    Amount2008
    
    $
    1,9802009
    
    
    1,1082010
    
    
    7262011
    
    
    1722012
    
    
    80Thereafter
    
    
    13$
    4,079
 Related Party Leases
   Fiscal Year
    
    Amount2008
    
    $
    2942009
    
    
    129$
    423
 Note 16. Concentrations of Risk and Major Customers
   60




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Note 17. Supplemental Cash Flow Information
 Fiscal Year Ended(in thousands)February 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2005Cash paid for:Interest
    
    $
    2,098
    
    
    $
    1,515
    
    
    $
    967Income taxes, net of refunds
    
    $
    109
    
    
    $
    3,445
    
    
    $
    1,363
 Non-cash investing and financing activities:
      61




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##### Table of Contents



Note 18. Selected Quarterly Financial Data (unaudited)
  2007First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(in thousands, except per share amounts)Net Sales
    
    $
    18,598
    
    
    $
    19,832
    
    
    $
    22,298
    
    
    $
    21,211Gross profit
    
    
    5,564
    
    
    
    6,810
    
    
    
    7,985
    
    
    
    7,233Net income (loss)
    
    
    (235
    )
    
    
    385
    
    
    
    1,016
    
    
    
    457Basic net income
(loss) per share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    0.11
    
    
    $
    0.05Diluted net
income (loss)
per share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    0.04
 2006First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(in thousands, except per share amounts)Net Sales
    
    $
    20,442
    
    
    $
    23,332
    
    
    $
    19,676
    
    
    $
    20,428Gross profit
    
    
    6,536
    
    
    
    7,604
    
    
    
    6,445
    
    
    
    3,917Net income (loss) (a)
    
    
    606
    
    
    
    1,116
    
    
    
    255
    
    
    
    (1,532
    )Basic net income
(loss) per share
    
    $
    0.06
    
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    (0.16
    )Diluted net income
(loss) per share
    
    $
    0.06
    
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    (0.15
    )
 
 (a)
    
    Fourth quarter adjustments consisted of $626,000, net of tax, inventory adjustments
related to perpetual to physical inventory and pricing adjustments. 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
   62




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Item9A. Controls and Procedures.
 Evaluation of disclosure controls and procedures.
    Changes in internal controls
  63




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Limitations on the effectiveness of controls.
  
 Item 9B. Other Information.
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
 64




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accounting Fees and Services.
  65




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PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
 (a)
    
    The following documents are filed as part of this Report:
 1.
    
    Financial Statements:
  Reports of Independent Registered Public Accounting FirmsConsolidated Balance Sheets as of February 28, 2007 and February 28, 2006Consolidated Statements of Operations  Fiscal Years Ended
February 28, 2007, February 28, 2006 and February 28, 2005Consolidated Statements of Shareholders Equity and Comprehensive Income 
Fiscal Years Ended February 28, 2007, February 28, 2006 and February 28, 2005Consolidated Statements of Cash Flows  Fiscal Years Ended February 28, 2007, February 28,
2006 and February 28, 2005Notes to Consolidated Financial Statements
 2.
    
    Financial Statement Schedules
  (b)
    
    Exhibits
 ExhibitNumber
    
    Exhibit Description3(a)
    
    Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3A to the Companys Registration Statement on Form S-18 filed
January 15, 1985).3(b)
    
    By-Laws of the Company (incorporated by reference to Exhibit 3B to the
Companys Registration Statement on Form S-18 filed January 15, 1985).10(b)
    
    Lease dated January 1, 1992 by and between Registrant (Lessee) and
Ronald D. Ordway (Lessor) with respect to premises located at 4601
Lewis Road, Stone Mountain, Georgia (incorporated by reference to
Exhibit 10(i) to the Companys 1995 Annual Report on Form 10-K).10(c)
    
    Lease dated November 1, 2003 by and between Registrant (Lessee) and
Ronald D. Ordway (Lessor) with respect to premises located at 1868
Tucker Industrial Road, Tucker, Georgia (incorporated by reference to
Exhibit 10(c) to the Companys 2004 Annual Report on Form 10-K).10(h)
    
    Loan and Security Agreement and related documents, dated June 14, 2006,
among Video Display Corporation and Subsidiaries and RBC Centura Bank
and Regions Bank as lenders and RBC Centura Bank as collateral agent
(incorporated by reference to Exhibit 10(h) to the Companys Current
Report on Form 8-K dated June 29, 2006).10(i)
    
    $6,000,000 Subordinated Note, dated June 29, 2006, between Video
Display Corporation and Ronald D. Ordway (holder) (incorporated by
reference to Exhibit 10(i) to the Companys Current Report on Form 8-K
dated June 29, 2006).10(j)
    
    Video Display Corporation 2006 Stock Incentive Plan (incorporated by
reference to Appendix A to the Companys 2006 Proxy Statement on
Schedule 14A).21
    
    Subsidiary companies23.1
    
    Consent of Carr, Riggs & Ingram, LLC23.2
    
    Consent of Tauber & Balser, PC23.3
    
    Consent of BDO Seidman, LLP31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 66




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##### Table of Contents



SIGNATURES
  Date:  June 12, 2007
    VIDEO DISPLAY CORPORATIONBy:
    /s/ Ronald D. OrdwayRonald D. OrdwayChairman of the Board and
Chief Executive Officer POWER OF ATTORNEY
   Signature -Name
    
    Capacity
    
    Date/s/ Ronald D. Ordway

Ronald D. Ordway
    
    Chief Executive Officer, Treasurer
and Director
    
    June 12, 2007/s/ Erv Kuczogi

Erv Kuczogi
    
    President and Director
    
    June 12, 2007/s/ Carolyn Howard

Carolyn Howard
    
    Director
    
    June 12, 2007/s/ Peter Frend

Peter Frend
    
    Director
    
    June 12, 2007/s/ Ernest J. Thibeault, III

Ernest J. Thibeault, III
    
    Director
    
    June 12, 2007/s/ Thomas D. Clinton

Thomas D Clinton
    
    Director
    
    June 12, 2007




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Report of Independent Registered Public Accounting Firm




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Report of Independent Registered Public Accounting Firm




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   Atlanta, Georgia
    
    /s/ BDO Seidman, LLPJune 14, 2005, except for theeffect of the matters described inNote 2, Prior Period Restatement, to theconsolidated financial statements includedin the Annual Report (Form10-K) for theyear ended February 28, 2006 (not presentedherein), as to which the date is June 8, 2006




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Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    End ofDescription
    
    of Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    PeriodAllowance for
doubtful accounts:February 28, 2007
    
    $
    381
    
    
    $
    96
    
    
    $
    
    
    
    $
    19
    
    
    $
    458February 28, 2006
    
    
    339
    
    
    
    216
    
    
    
    
    
    
    
    174
    
    
    
    381February 28, 2005
    
    
    251
    
    
    
    186
    
    
    
    
    
    
    
    98
    
    
    
    339Reserves for
inventory:February 28, 2007
    
    $
    4,433
    
    
    $
    1,748
    
    
    $
    
    
    
    $
    795
    
    
    $
    5,386February 28, 2006
    
    
    3,057
    
    
    
    1,900
    
    
    
    
    
    
    
    524
    
    
    
    4,433February 28, 2005
    
    
    2,506
    
    
    
    1,386
    
    
    
    
    
    
    
    835
    
    
    
    3,057