Video Display Corporation and Subsidiaries
August 31, 2020
Two of the four divisions (Display and Keyboard divisions) saw increases in gross margin
percentages and gross margin dollars for the six months ended August 31, 2020 compared to the same period last year. The Cyber Security division saw an increase in gross margin dollars due to higher sales volume but had a lower gross margin
percentage as much of their revenue was from a competitive bid contract. The only division with a lower gross margin percentage and dollars was the Data Displays CRT division.
For the three months ended August 31, 2020 compared to the same period last year, three of the four divisions made less gross margin
dollars than last year. The cyber division did slightly better than last year. Overall gross margins for the quarter were down to the low sales volume as the display and cyber divisions had higher gross margin percentages than last year.
Operating expenses
Operating expenses
increased $394 thousand for the six months ended August 31, 2020 compared to the six months ended August 31, 2019. The increase was due primarily to the addition of certain expenses associated with the acquisition of Jaco Displays in
January, 2020 and commission expense at the Lexel Imaging (CRT) operation on the sales of the specialty direct view storage tubes.
Operating expenses increased by 21.7% or $226 thousand for the three months ended August 31, 2020 compared to the three months ended
August 31, 2019. The increase was due primarily to the increased costs of three employees that joined the Company resulting from the acquisition of the display company in January of this year, two in engineering, one in sales and the
amortization costs of the intangibles ($30k) related to this acquisition. The Company expects to continue to control costs while increasing revenues with the completion of the new tempest testing chamber and new revenue streams of tempest services,
specialized displays and ruggedized displays.
Interest income (expense), net
Interest expense was $31 thousand for the six months ending August 31, 2020. The interest expense was $1 thousand for the six
months ending August 31, 2019. There was $16 thousand for the three months ending August 31, 2020 and was negligible for the three months ending August 31, 2019. The interest expense is on the note payable to the CEO and the PPP
loan. These notes payable are discussed in Notes 6 and 8 of the financial statements.
Other income (expense), net
For the six months ended August 31, 2020, the Company had $148 thousand in royalty income, $181 thousand in rental income,
$6 thousand in discontinued scrap items, and $6 thousand in investment losses. For the six months ended August 31, 2019, the Company earned $191 thousand in royalty income, $183 in rental income, $15 thousand in scrap sales,
and $1 thousand investment income.
For the three months ended August 31, 2020 the Company had $91 thousand in rental
income, $1 thousand in scrap items, and $4 thousand in investment gains. For the three months ended August 31, 2019, the Company earned $93 thousand in rental income, $15 thousand in scrap income and a $1 thousand loss
in investment income.
Income taxes
Due to the Companys overall and historical net loss position, no income tax expense was reported for the six month period ending
August 31, 2020 and August 31, 2019. Due to continued losses reported by the Company, a full valuation allowance was allocated to the deferred tax asset created by these losses.
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