UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q VIDEO DISPLAY CORPORATION Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended August 31, 2024

Press release · 10/15 14:31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q VIDEO DISPLAY CORPORATION Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended August 31, 2024

UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q VIDEO DISPLAY CORPORATION Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended August 31, 2024

Video Display Corporation, a smaller reporting company, filed its Quarterly Report on Form 10-Q for the period ended August 31, 2024. The company reported net sales of $0, with no cost of sales, and a net loss of $0. As of August 31, 2024, the company had $0 in cash and cash equivalents, $0 in accounts receivable, and $0 in inventory. The company’s total assets were $0, with total liabilities of $0 and total stockholders’ equity of $0. The company did not have any related party transactions or transactions with unconsolidated entities or non-consolidated subsidiaries. The company’s management’s discussion and analysis (MD&A) section provides an overview of the company’s financial performance and position, but does not provide any significant financial information.

Overview

The Company designs, engineers, manufactures, markets, distributes and installs technologically advanced display products and systems, from basic components to turnkey systems, for government, military, aerospace, medical, industrial, and commercial organizations. The Company is comprised of two interrelated operations aggregated into one reportable segment:

  • Simulation and Training Products – offers a wide range of projection display systems for use in training and simulation, military, medical, entertainment and industrial applications.
  • Cyber Secure Products – offers advanced TEMPEST technology, and EMSEC products, and provides various contract services including the design and testing solutions for defense and niche commercial uses worldwide.

During fiscal 2025, the Company is focusing on strategic efforts to grow its business through internal sales of its more profitable product lines and reduce expenses to align its cost structure with the current size of the business. Key challenges include liquidity issues and inventory valuation.

Liquidity

The Company reported a net loss and a decrease in working capital for the six-month period ending August 31, 2024, primarily due to insufficient revenues. The Company’s working capital and liquid asset position have declined over the past five years due to annual losses from decreasing revenues without a commensurate reduction in expenses.

Table: Working Capital and Liquid Assets (in thousands)

Metric August 31, 2024 February 29, 2024
Working Capital $(1,310) $(1,118)
Liquid Assets $258 $169

To address liquidity, the Company’s CEO has loaned an additional $200,000 to the company. The Company is also focused on increasing revenues through enhanced sales and marketing efforts, targeting repeat business, and hiring an experienced Simulation Business Development Manager.

The ability of the Company to continue as a going concern is dependent on the success of management’s plans to improve revenues, operational effectiveness, and obtain suitable financing. The uncertainty regarding the potential success of these plans creates substantial doubt about the Company’s ability to continue as a going concern.

Results of Operations

Table: Financial Performance (as a percentage of total sales)

| Metric | Three Months Ended August 31 | | Six Months Ended August 31 | | | | 2024 | 2023 | 2024 | 2023 | | Net Sales | | | | | | Simulation and Training (VDC Display Systems) | 86.4% | 87.2% | 93.5% | 91.5% | | Cyber Secure Products (AYON Cyber Security) | 13.6% | 12.8% | 6.5% | 8.5% | | Total Net Sales | 100.0% | 100.0% | 100.0% | 100.0% | | Costs and Expenses | | | | | | Cost of Goods Sold | 62.6% | 60.9% | 64.7% | 64.3% | | Selling and Delivery | 10.7% | 7.8% | 10.3% | 6.1% | | General and Administrative | 37.2% | 33.0% | 35.3% | 34.8% | | Total Costs and Expenses | 110.5% | 101.7% | 110.3% | 105.2% | | Operating Loss | (10.5%) | (1.7%) | (10.3%) | (5.2%) | | Net Income (Loss) from Continuing Operations | (10.5%) | 25.7% | (10.3%) | 8.4% | | Net Loss | (10.5%) | 10.5% | (10.3%) | (1.5%) |

Key points:

  • Consolidated net sales decreased 11.1% for the six months and 17.3% for the three months, primarily due to delays in the Display Systems and Cyber Security divisions.
  • Gross margins decreased as a percentage of sales but decreased in actual dollars due to lower sales.
  • Operating expenses decreased by 1.0% for the six months and 3.0% for the three months.
  • The company had no other income for the current period compared to $524,000 in the prior year period.

Liquidity and Capital Resources

The Company’s working capital and liquid asset position have declined over the past five years due to annual losses. As of August 31, 2024, the Company had:

  • Working Capital: $(1,310,000)
  • Liquid Assets: $258,000

Management continues to implement plans to improve liquidity and increase revenues, but the uncertainty regarding the potential success of these plans creates substantial doubt about the Company’s ability to continue as a going concern.

Cash used in operations for the six months ended August 31, 2024 was $0.1 million, primarily due to the net loss offset by changes in working capital. There were no investing activities, and financing activities provided $200,000 from borrowings from the CEO.

The Company has a stock repurchase program, but did not purchase any shares during the current or prior year periods. As of August 31, 2024, an additional 490,186 shares remain authorized to be repurchased.

Critical Accounting Policies and Estimates

The Company’s critical accounting policies and estimates include:

  • Inventory Valuation: Management regularly reviews inventory for declines in value and writes down the cost when the expected net realizable value falls below the carrying amount.
  • Revenue Recognition: The Company recognizes revenue when control of products or services is transferred to customers, with revenue from custom-built systems recognized over time and revenue from other products recognized at a point in time.
  • Income Taxes: The Company has established a $6.5 million valuation allowance on its deferred tax assets due to its overall and historical net loss position.

Forward-Looking Information and Risk Factors

This report contains forward-looking statements that are subject to risks and uncertainties, including changes in technology, that could cause actual results to differ materially. The Company’s primary market risk is changes in technology, as failure to adapt could have a detrimental effect.