Video Display Corporation Letter to Shareholders

The following letter is being released by Video Display Corporation (Nasdaq: VIDE) to its shareholders:

Fellow Shareholders:

My purpose in writing today is to provide you with a review of fiscal 2/28/2009 as well as to update you on our plans going into fiscal 2010. In looking back at the last year, I see a year of meaningful accomplishments which put Video Display in an enviable position, and among a very select group of companies that have built a strong base for growth in the year ahead with blockbuster potential ready to go into production.

Key Company highlights of 2009:

• Our Lexel Imaging Division announced and will begin deliveries of its new phosphor coated infrared target components under an initial contract valued in excess of one million dollars with the realistic potential of expanding the product line to several other interested customers. This division is currently operating at full capacity in meeting the requirements for its simulation projection tube product line.
• Our Z-AXIS Inc subsidiary succeeded in signing numerous new customer contracts with new product innovations. The Company achieved record levels in revenues and strong profitability and has forecast additional growth for fiscal 2010 in the range of 25% to 30% in both revenues and earnings.
• Our Aydin Displays Inc. subsidiary has been selected in several long term contracts for flat panel military displays, a portion of which have begun shipments late in fiscal 2009 and others which are expected to be delivered in significant volume during its fiscal 2010 year and for several years thereafter.
• Our VDC Display Systems division ended fiscal 2009 with record yearend backlog of business to be delivered during this fiscal year. Contract awards and new product developments, along with strong relationships with both suppliers and customers, have helped turn the division’s projected future revenues strongly upward for fiscal 2010.
• Video Display Corporation, as a whole, has instituted a cost reduction plan which is expected to reduce overall operational expenses by as much as $2.5 million for fiscal 2010 versus fiscal 2009.
• The Company, under its share repurchase program, has been able to repurchase in excess of 830,000 common shares for the Company treasury or nearly ten percent of its total outstanding shares. The share buy-back program has been continued subsequent to year end.

While we are pleased by these accomplishments, we also recognize that there are major challenges ahead of us in turning three of our losing divisions around. This downturn has affected all of us, but we have taken immediate action and very quickly reduced our expenditures. We expect that these actions, along with our increased backlog, to result in much stronger results for fiscal 2010. Preliminary results for fiscal 2009 did not reach levels anticipated earlier in the year primarily due to the weakness in the 3^rd and 4^th quarters and overall losses from the Fox International and Clinton Displays divisions. However, both of these divisions are forecast to be profitable for fiscal 2010 with a projected turn around of nearly $2 million in pretax earnings versus results of fiscal 2009. Our only remaining unprofitable division will be dissolved mid-year.

This has been a very difficult year all around for many companies, but we are seeing new strength in the niche markets served by your company and expect that strength to be reflected in our 2010 results. Initial analysis of order backlog, production and shipping schedules along with gross margin expectations project revenues for the fiscal year ended 2/28/2010 to be in the range of $82 million to $88 million. After-tax earnings are expected to be in the range of $2.5 million to $3.0 million with resultant earnings per share of $0.30 to $0.36 on an average of approximately 8.5 million shares outstanding.

We cannot change the economic climate or the damage that the financial crisis has caused to the countless stocks, us included, but we are attempting to structure our future business to create the greatest value for VIDE shareholders. We see our current market capitalization and our common share price, selling at 4 to 5 times projected earnings and in the range of 1.25 times projected 2010 EBITDA to be totally at odds with the prospects of the future growth potential of your company. We aspire for future performance and financial results that will bring some semblance of sanity and order to the market price of your common share holdings.

We thank you for your continued support.

Sincerely,

Ronald D Ordway

Chief Executive Officer

When used in this report, the words "intends," "believes," "projects", "forecasts” and "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected. Factors that could cause or contribute to such differences include, an inability to deliver products, timely development of any potential products, inability to raise the necessary capital or finalize necessary agreements and the risk factors set forth from time to time in Video Display Corporation's SEC filings, including but not limited to its report on Form 10-K for the year ended February 28, 2008. The Company undertakes no obligation to publicly release the result of any revision to these forward-looking statements which may be made to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.