The Company’s efforts to increase revenues by upgrading its sales and marketing efforts are showing results with an increase in the Company’s backlog, especially in ruggedized products. These efforts have increased revenues from last year and will increase them even more in the upcoming fiscal year as the Company’s business typically has longer lead times from initial contact to a sale and the including the amount of time to develop the products by engineering. The pandemic has also slowed down the process of obtaining new business as many of our customers and potential customers are still working from home. Furthermore, supply chain challenges have slowed down production of certain products due to long lead times on critical items of production, impacting cash flow.
The Company moved the corporate accounting functions to the Cocoa, Florida location which allows the Company to become more efficient and save money on reducing redundant operations. The Company has not automatically replaced employees who have left the Company while it works to increase business. The Company reduced expenses further by closing the Tucker, Georgia facility on March 31, 2022.
If additional and more permanent capital is required to fund the operations of the Company, no assurance can be given that the Company will be able to obtain the capital on terms favorable to the Company, if at all.
Cash used in operations was $0.6 million in fiscal 2023 compared to the use of 0.1 million in fiscal 2022. During fiscal 2023, the net loss from operations was $2.0 million and adjustments to reconcile net loss to net cash were $0.3 million with $0.5 million in inventory related charges, $0.2 million in depreciation and $0.1 million in amortization of intangible assets. Working capital related accounts provided $0.5 million in cash with retention credit receivables providing $0.8 million, contract assets of $0.2 million, reduction in inventories $0.9 million, and accounts payable and accrued liabilities providing $0.4 million, offset by a decrease in contract liabilities of $0.9 million and an increase in an accounts receivable receivables of $0.4 million.
Investing activities used $40 thousand for capital expenditures in fiscal 2023 compared to using $79 thousand in fiscal 2022.
Financing activities provided $0.8 million in fiscal 2023. The Company received $0.9 million in a related party loan and paid $0.1 million in equipment financing. Financing activities provided $0.1 million for the year ended February 28, 2022.
The Company has a stock repurchase program, pursuant to which it has been authorized to repurchase up to 2,632,500 shares of the Company’s common stock in the open market. On January 20, 2014, the Board of Directors of the Company approved a one-time continuation of the stock repurchase program, and authorized the Company to repurchase up to 1,500,000 additional shares of the Company’s common stock, depending on the market price of the shares. There is no minimum number of shares required to be repurchased under the program. During fiscal years 2023 and 2022, the Company did not repurchase any of the Company’s stock. Under this program, an additional 490,186 shares remain authorized to be repurchased by the Company at February 28, 2023.
Transactions with Related Parties and Contractual Obligations
The Company leases a building in Cocoa, Florida, from an entity that is controlled by the Company’s CEO and leased another building for part of the year in Lexington, KY. The building in Lexington, KY serves as the manufacturing operations for the CRT division and the keyboard division. The Company now leases the building from a third party. The building in Cocoa, Florida is the new operational site for both VDC Display Systems, AYON Cyber Security and the corporate office. See Note 10.
The Company borrows money from the Chief Executive Officer from time to time to support operations. In fiscal 2023, the Company borrowed approximately $926 thousand bringing the total of the note payable to $1,384 thousand and owes another $256 thousand in rent, bringing the total rent owed to $616 thousand. There are no repayment terms related to the amounts owed but the Company intends to pay back the CEO when funds are available in fiscal 2024. These amounts are included in the Company’s consolidated balance sheet.
Contractual Obligations
Future contractual maturities due under operating and finance leases and other obligations at February 28, 2023 are as follows (in thousands):
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Payments due by period |
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|
|
Total |
|
|
Less than 1 year |
|
|
1 – 3 years |
|
|
3 – 5 years |
|
|
More than 5 years |
|
Finance lease obligations |
|
$ |
78 |
|
|
$ |
78 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Operating lease obligations |
|
|
511 |
|
|
|
321 |
|
|
|
190 |
|
|
|
— |
|
|
|
— |
|
Note payable -related party |
|
|
1,384 |
|
|
|
1,384 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Warranty reserve obligations |
|
|
18 |
|
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
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|
|
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|
|
|
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|
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|
|
|
|
Total |
|
$ |
1,991 |
|
|
$ |
1,801 |
|
|
$ |
190 |
|
|
$ |
— |
|
|
$ |
— |
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|
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14