UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~October 31, 2009~~January 30, 2010

[ ] 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: 0-23246

DAKTRONICS, INC.

(Exact name of Registrant as specified in its charter)

South Dakota

(State or other jurisdiction of incorporation or organization)

46-0306862

(I.R.S. Employer Identification Number)

201 Daktronics Drive
Brookings, SD		57006
(Address of principal executive offices)		(Zip Code)

(605) 692-0200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes S No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer S

Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No S

The number of shares of the registrant’s common stock outstanding as of ~~November 23, 2009~~February 22, 2010 was ~~41,033,713.~~

41,062,433.

DAKTRONICS, INC. AND SUBSIDIARIES

FORM 10-Q

For the Quarter Ended ~~October 31, 2009~~January 30, 2010

~~TABLE OF CONTENTS~~Table of Contents

						Page


~~PART~~Part I. ~~FINANCIAL INFORMATION~~Financial Information
~~ITEM~~Item 1. ~~FINANCIAL STATEMENTS~~Financial Statements
			~~CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 31, 2009 AND MAY~~Consolidated Balance Sheets as of January 30, 2010 and May 2, 2009			2
			~~CONSOLIDATED STATEMENTS OF INCOME FOR THREE AND SIX MONTHS~~Consolidated Statements of Operations for Three and Nine Months
				~~ENDED OCTOBER~~Ended January 30, 2010 and January 31, 2009 ~~AND NOVEMBER 1, 2008~~		4
			~~CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS~~Consolidated Statements of Cash Flows for the Nine Months
				~~ENDED OCTOBER~~Ended January 30, 2010 and January 31, 2009 ~~AND NOVEMBER 1, 2008~~		5
			~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements			6

~~ITEM~~Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND~~Management’s Discussion and Analysis of Financial Condition and
			~~RESULTS OF OPERATIONS~~Results of Operations			1720
~~ITEM~~Item 3. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Quantitative and Qualitative Disclosures About Market Risk						2831
~~ITEM~~Item 4. ~~CONTROLS AND PROCEDURES~~Controls and Procedures						2932

~~PART~~Part II. ~~OTHER INFORMATION~~Other Information
~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS~~Legal Proceedings						2932
~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors						3032
~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds						3033
~~ITEM~~Item 3. ~~DEFAULTS UPON SENIOR SECURITIES~~Defaults Upon Senior Securities						3033
~~ITEM~~Item 4. ~~SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~Submission of Matters to a Vote of Security Holders						3033
~~ITEM~~Item 5. ~~OTHER INFORMATION~~Other Information						3033
~~ITEM~~Item 6. ~~EXHIBITS~~Exhibits						3033

~~SIGNATURE~~Signature						3135

~~EXHIBIT INDEX:~~Exhibit Index:

	Ex.	10.1			Loan Agreement dated October 14, 1998 between U.S. Bank National Association and Daktronics, Inc.
	Ex.	10.2			Sixth Amendment to Loan Agreement Dated January 23, 2007 by and between Daktronics, Inc. and U.S. Bank National Association
	Ex.	10.3			Eighth Amendment to Loan Agreement Dated November 12, 2009 by and between Daktronics, Inc. and U.S. Bank National Association
	Ex.	10.4			Renewal Revolving Note Dated November 12, 2009 between Daktronics, Inc. and U.S. Bank National Association
	Ex.	31.1			~~CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER REQUIRED BY RULE~~
					Certification of the Chief Executive Officer required by Rule 13a-14(a) ~~OR RULE~~or Rule 15d-14(a) ~~OF THE SECURITIES EXCHANGE ACT OF~~under the Securities Exchange Act of 1934,
					~~AS ADOPTED PURSUANT TO SECTION~~ as adopted pursuant to Section 302 ~~OF THE SARBANES-OXLEY ACT~~
					OFof the Sarbanes-Oxley Act of 2002
	Ex.	31.2			~~CERTIFICATION OF THE CHIEF FINANCIAL OFFICER REQUIRED BY RULE~~
					Certification of the Chief Financial Officer required by Rule 13a-14(a) ~~OR RULE~~or Rule 15d-14(a) ~~OF THE SECURITIES EXCHANGE ACT OF~~under the Securities Exchange Act of 1934,
					~~AS ADOPTED PURSUANT TO SECTION~~ as adopted pursuant to Section 302 ~~OF THE SARBANES-OXLEY ACT~~
					~~OF 2002~~of the Sarbanes-Oxley Act of 2002.
	Ex.	32.1			~~CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO~~
					~~SECTION~~Certification of the Chief Executive Officer pursuant to Section 906 ~~OF THE SARBANES-OXLEY ACT OF~~of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ~~SECTION~~
					Section 1350).
	Ex.	32.2			~~CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO~~
					~~SECTION~~Certification of the Chief Financial Officer pursuant to Section 906 ~~OF THE SARBANES-OXLEY ACT OF~~of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ~~SECTION~~
					Section 1350).

-1-

PPART~~ART~~ I. FINANCIAL INFORMATION

IItem~~tem~~ 1. FINANCIAL STATEMENTS

DDAKTRONICS~~AKTRONICS,~~, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	October 31,		May 2,		January 30,		May 2,
	2009		2009		2010		2009
	(unaudited)		(note 1)		(unaudited)		(note 1)

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	56,363	$	36,501	$	57,306	$	36,501
Restricted cash		1,392		1,083		1,264		1,083
Accounts receivable, less allowance for doubtful accounts		48,517		61,412		40,277		61,412
Inventories		41,946		51,400		37,494		51,400
Costs and estimated earnings in excess of billings		25,525		27,541		24,402		27,541
Current maturities of long-term receivables, less allowance for
doubtful accounts		6,673		7,962		6,973		7,962
Prepaid expenses and other		5,681		5,587		5,296		5,587
Deferred income taxes		15,283		15,017		15,293		15,017
Income tax receivable		324		-		6,223		-
Property and equipment available for sale		250		470		182		470
Total current assets		201,954		206,973		194,710		206,973

Advertising rights, net		1,688		2,392		1,591		2,392
Long-term receivables, less current maturities		14,009		15,879		13,469		15,879
Investments in affiliates		430		2,541		530		2,541
Goodwill		4,658		4,549		3,262		4,549
Intangible and other assets		4,212		2,804		3,920		2,804
Deferred income taxes		391		311		395		311
		25,388		28,476		23,167		28,476

PROPERTY AND EQUIPMENT:
Land		1,204		1,204		1,471		1,204
Buildings		50,918		50,810		54,821		50,810
Machinery and equipment		52,324		50,013		52,837		50,013
Office furniture and equipment		53,266		52,369		53,732		52,369
Equipment held for rental		2,695		2,423		2,353		2,423
Demonstration equipment		8,780		8,021		9,043		8,021
Transportation equipment		4,662		5,115		4,531		5,115
		173,849		169,955		178,788		169,955
Less accumulated depreciation		90,403		80,528		94,883		80,528
		83,446		89,427		83,905		89,427
TOTAL ASSETS	$	310,788	$	324,876	$	301,782	$	324,876

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DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(continued)

(in thousands, except share data)

	January 30,			May 2,
	2010			2009
	(unaudited)			(note 1)

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	19,339		$	30,273
Accrued expenses and warranty obligations		31,155			35,548
Current maturities of long-term debt and marketing obligations		381			367
Billings in excess of costs and estimated earnings		10,079			13,769
Customer deposits		8,964			10,007
Deferred revenue (billed or collected)		6,526			6,669
Income taxes payable		522			2,935
Total current liabilities		76,966			99,568

Long-term debt, less current maturities		13			23
Long-term marketing obligations, less current maturities		550			759
Long-term warranty obligations and other payables		4,583			4,805
Deferred income taxes		4,755			4,948
Long-term deferred revenue (billed or collected)		4,354			2,862
Total long-term liabilities		14,255			13,397
TOTAL LIABILITIES		91,221			112,965


SHAREHOLDERS' EQUITY:
Common stock, no par value, authorized
120,000,000 shares; 41,082,899 and 40,657,552 shares
issued at January 30, 2010 and May 2, 2009, respectively		29,936			27,872
Additional paid-in capital		16,449			13,898
Retained earnings		164,742			170,705
Treasury stock, at cost, 19,680 shares		(9	)		(9	)
Accumulated other comprehensive loss		(557	)		(555	)
TOTAL SHAREHOLDERS' EQUITY		210,561			211,911
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	301,782		$	324,876

October 31, May 2,
2009 2009
(unaudited) (note 1)

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 21,541 $ 30,273
Accrued expenses and warranty obligations 32,023 35,548
Current maturities of long-term debt and marketing obligations 479 367
Billings in excess of costs and estimated earnings 8,537 13,769
Customer deposits 10,427 10,007
Deferred revenue (billed or collected) 7,061 6,669
Income taxes payable 422 2,935
Total current liabilities 80,490 99,568

Long-term debt, less current maturities 13 23
Long-term marketing obligations, less current maturities 538 759
Long-term warranty obligations and other payables 4,324 4,805
Deferred income taxes 4,996 4,948
Long-term deferred revenue (billed or collected) 3,348 2,862
Total long-term liabilities 13,219 13,397
TOTAL LIABILITIES 93,709 112,965

SHAREHOLDERS' EQUITY:
Common stock, no par value, authorized
120,000,000 shares; 40,871,382 and 40,657,552 shares
issued at October 31, 2009 and May 2, 2009, respectively 28,943 27,872
Additional paid-in capital 15,610 13,898
Retained earnings 173,113 170,705
Treasury stock, at cost, 19,680 shares (9 ) (9 )
Accumulated other comprehensive loss (578 ) (555 )
TOTAL SHAREHOLDERS' EQUITY 217,079 211,911
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 310,788 $ 324,876

-3-

DDAKTRONICS~~AKTRONICS,~~, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	October 31,			November 1,			October 31,			November 1,			January 30,			January 31,			January 30,			January 31,
	2009			2008			2009			2008			2010			2009			2010			2009

Net sales	$	115,362		$	169,697		$	228,815		$	330,926		$	72,406		$	128,692		$	301,221		$	459,618
Cost of goods sold		81,800			121,486			165,183			237,367			61,634			94,553			226,817			331,921
Gross profit		33,562			48,211			63,632			93,559			10,772			34,139			74,404			127,697

Operating expenses:
Selling		12,888			15,526			27,255			31,890			13,155			15,513			40,411			47,403
General and administrative		5,959			7,554			12,493			15,236			6,523			6,576			19,016			21,812
Product design and development		5,534			5,286			11,404			11,833			5,155			5,149			16,558			16,981
Gain on insurance proceeds														(1,496	)		-			(1,496	)		-
Goodwill impairment														1,410			-			1,410			-
		24,381			28,366			51,152			58,959			24,747			27,238			75,899			86,196
Operating income		9,181			19,845			12,480			34,600
Operating income (loss)														(13,975	)		6,901			(1,495	)		41,501

Nonoperating income (expense):
Interest income		379			511			753			1,047			376			516			1,129			1,563
Interest expense		(63	)		(57	)		(110	)		(164	)		(38	)		(32	)		(149	)		(196	)
Other income (expense), net		(711	)		(1,334	)		(1,313	)		(1,679	)		(265	)		(699	)		(1,577	)		(2,378	)

Income before income taxes		8,786			18,965			11,810			33,804
Income tax expense		3,937			6,768			5,529			11,881
Net income	$	4,849		$	12,197		$	6,281		$	21,923
Income (loss) before income taxes														(13,902	)		6,686			(2,092	)		40,490
Income tax expense (benefit)														(5,531	)		2,524			(2	)		14,405
Net income (loss)													$	(8,371	)	$	4,162		$	(2,090	)	$	26,085

Weighted average shares outstanding:
Basic		40,831			40,478			40,795			40,440			41,004			40,629			40,862			40,500
Diluted		41,002			41,221			41,106			41,286			41,004			40,953			40,862			41,178

Earnings per share:
Earnings (loss) per share:
Basic	$	0.12		$	0.30		$	0.15		$	0.54		$	(0.20	)	$	0.10		$	(0.05	)	$	0.64
Diluted	$	0.12		$	0.30		$	0.15		$	0.53		$	(0.20	)	$	0.10		$	(0.05	)	$	0.63

Cash dividend paid per share	$	-		$	-		$	0.095		$	0.090		$	-		$	-		$	0.095		$	0.09


See notes to consolidated financial statements.

-4-

~~-4-~~

DDAKTRONICS~~AKTRONICS,~~, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

DDAKTRONICS~~AKTRONICS,~~, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The balance sheet at May 2, 2009 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with our financial statements and notes thereto for the year ended May 2, 2009, which are contained in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission. The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the estimated total costs on long-term construction contracts (“construction-type contracts”), estimated costs to be incurred for product warranties, excess and obsolete inventory, the reserve for doubtful accounts, stock-based compensation, goodwill impairment and income taxes. Changes in estimates are reflected in the periods in which they become known.

Reclassifications: Certain reclassifications have been made to the fiscal year 2009 consolidated financial statements to conform to the presentation used in the fiscal 2010 consolidated financial statements. These reclassifications had no affect on shareholders’ equity or net income as previously reported. We reclassified certain maintenance agreements from deferred revenue (billed or collected) to long-term deferred revenue (billed or collected). and reclassified amounts between net sales and cost of goods sold.

Restricted Cash: Restricted cash consists of deposits to secure bank guarantees issued by our Chinese subsidiary.

Software Costs: We capitalize certain costs incurred in connection with developing or obtaining internal-use software. Capitalized software costs are included in Property and Equipment on our consolidated balance sheets. Software costs that do not meet capitalization criteria are expensed immediately.

Insurance: We are self-insured for certain losses related to health and liability ~~claims~~ and workers’ compensation claims, although we obtain third-party insurance to limit our exposure to these claims. We estimate our self-insured liabilities using a number of factors, including historical claims experience. Our self-insurance liability was ~~$3,046~~$3,281 and $2,506 at ~~October 31, 2009~~January 30, 2010 and May 2, 2009, respectively, and is included in accrued expenses and warranty obligations in our consolidated balance sheets.

~~-6-~~

Foreign currency translation: Our foreign subsidiaries use the local currency of their respective countries as their functional currency. The assets and liabilities of foreign operations are generally translated at the exchange rates in effect at the balance sheet date. The operating results of foreign operations are translated at weighted average exchange rates. The related translation gains or losses are reported as a separate component of shareholders’ equity.

Product design and development: All expenses related to product design and development are charged to operations as incurred. Our product development activities include the enhancement of existing products and the development of new products.

Shipping and handling costs: Shipping and handling costs that are collected from our customers in connection with our sales are recorded as revenue. We record shipping and handling costs as a component of cost of sales at the time the product is shipped.

Receivables: Accounts receivable are reported net of an allowance for doubtful accounts of ~~$1,895~~$1,932 and $2,164 at ~~October 31, 2009~~January 30, 2010 and May 2, 2009, respectively.

We make estimates regarding the collectability of our accounts receivable, long-term receivables, costs and estimated earnings in excess of billings and other receivables. In evaluating the adequacy of our allowance for doubtful accounts, we analyze specific balances, customer creditworthiness, changes in customer payment cycles, and current economic trends. If the financial condition of any customer was to deteriorate, resulting in an impairment of its ability to make payments, additional allowances may be required. We charge off receivables at such time as it is determined that collection will not occur.

In connection with certain sales transactions, we have entered into sales contracts with installment payments exceeding six months and sales type leases. The present value of these contracts and leases is recorded as a receivable upon the installation and acceptance of the equipment, and profit is recognized to the extent that the present value is in excess of cost. We generally retain a security interest in the equipment or in the cash flow generated by the equipment until the contract is paid.

Long-Lived Assets: Long-lived assets other than goodwill and indefinite-lived intangible assets, which are separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset's estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset.

Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. We have not made any material changes in the accounting methodology we use to assess impairment loss during the past three fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. We also believe that recent changes in indicators in our business, such as the decline in orders, the losses in the third quarter of fiscal 2010 and the impairment of goodwill, among other things, were an indicator of impairment for our business units. As a result, we tested for recoverability in accordance with ASC 360, Property, Plant, and Equipment, by comparing the undiscounted cash flows expected from the use and eventual disposition of the assets compared to the carrying amount of the assets. We grouped the assets at the lowest level for which there are identifiable cash flows that are independent of the cash flows of other assets and liabilities. Based on this analysis, the undiscounted cash flows significantly exceed the carrying amount of the long-lived assets and therefore it was determined that there was no impairment. If actual results in the future are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to future losses that could be material.

-7-

Note 2. Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (codified as “ASC 105”). ASC 105 establishes the Accounting Standards Codification (“ASC”) as the source of authoritative accounting literature recognized by the FASB to be applied by nongovernmental entities in addition to rules and interpretive releases of the Securities and Exchange Commission (“SEC”), which are sources of authoritative generally accepted accounting principles (“GAAP”) for SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. ASC 105 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of the financial statements. Following this statement, the FASB will issue new standards in the form of Accounting Standards Updates (“ASU”). This standard became effective for financial statements for interim and annual reporting periods ending after September 15, 2009. We began to use the new guidelines and numbering system prescribed by the Codification when referring to GAAP in the second quarter of fiscal 2010. As the Codification was not intended to change or alter existing GAAP, it did not have any impact on our consolidated financial statements.

In September 2006, the FASB issued ASC 820, Fair Value Measurements and Disclosures. ASC 820 establishes a framework for measuring fair value, clarifies the definition of fair value, and requires additional disclosures about fair value measurements that are already required or permitted by other accounting standards (except for measurements of share-based payments) and is expected to increase the consistency of those measurements. ASC 820, as issued, is effective for fiscal years beginning after November 15, 2007. In February 2008, the effective date of ASC 820 was deferred for one year for certain nonfinancial assets and nonfinancial liabilities. Accordingly, we adopted certain parts of ASC 820 at the beginning of fiscal year 2009, and we adopted the remaining parts of ASC 820 ~~were adopted by us~~ at the beginning of fiscal year 2010. The implementation of ASC 820 did not have a material impact on our consolidated financial statements at either date.

In December 2007, the FASB issued ASC 805 Business Combinations. ASC 805 provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. Some of the revised guidance of ASC 805 includes initial capitalization of acquired in-process research and development, expensing transaction and acquired restructuring costs and recording contingent consideration payments at fair value, with subsequent adjustments recorded to net earnings. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. We adopted ASC 805 on May 3, 2009, and any acquisitions we make in fiscal 2010 and future periods will be subject to this new accounting guidance.

~~-7-~~

In December 2007, the FASB issued ASC 810, Noncontrolling Interests in Consolidated Financial Statements. ASC 810 establishes new standards that will govern the accounting for and reporting of noncontrolling interests in partially owned subsidiaries. ASC 810 is effective for fiscal years beginning on or after December 15, 2008 and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements ~~shall~~must be applied prospectively. We adopted ASC 810 on May 3, 2009. As of that date, we did not have any partially owned consolidated subsidiaries and, therefore, the adoption of this accounting standard had no effect on our consolidated financial statements.

In March 2008, the FASB issued ASC 815, Derivatives and Hedging, which changes the disclosure requirements for derivative instruments and hedging activities. ASC 815 requires companies to provide enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative instruments, and disclosures about contingent features related to credit risk in derivative agreements. We adopted ASC 815 on May 3, 2009. The adoption of ASC 815 had no effect on our consolidated financial statements.

In April 2008, the FASB issued ASC 350, Intangibles – Goodwill and Other. ASC 350 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. ASC 350 is effective for fiscal years beginning after December 15, 2008. We adopted ASC 350 on May 3, 2009. The adoption of ASC 350 had no effect on our consolidated financial statements.

In June 2008, the FASB issued ASC Subtopic 260-10-45, Earnings Per Share – Other Presentation Matters. ASC 260-10-45 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share (“EPS”) pursuant to the two-class method. ASC Subtopic 260-10-45 is effective for fiscal years beginning after December 15, 2008. Upon adoption, all prior-period EPS data is required to be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform to the provisions of ASC Subtopic 260-10-45. We adopted ASC Subtopic 260-10-45 on May 3, 2009. Because we do not have any share-based payments that would be considered to be participating securities under these provisions, the implementation will not have any impact on our computation of EPS unless we issue such securities in the future.

-8-

In November 2008, the FASB ratified ASC Subtopic 323-10-65-1, Equity Method Investment Accounting Considerations. ASC Subtopic 323-10-65-1 applies to all investments accounted for under the equity method and clarifies the accounting for certain transactions and impairment considerations involving equity method investments. We adopted ASC 323-10-65-1 on May 3, 2009. The adoption of ASC Subtopic 323-10-65-1 did not have a material impact on our consolidated financial statements.

In November 2008, the FASB ratified ASC Subtopic 350-30-35-5A, Accounting for Defensive Intangible Assets. ASC Subtopic 350-30-35-5A applies to defensive intangible assets, which are acquired intangible assets that an entity does not intend to actively use but does intend to prevent others from obtaining access to the asset. ASC 350-30-35-5A requires an entity to account for defensive intangible assets as a separate unit of accounting. Defensive intangible assets should not be included as part of the cost of an entity’s existing intangible assets because the defensive intangible assets are separately identifiable. Defensive intangible assets must be recognized at fair value in accordance with ASC 805 Business Combinations and ASC 820 Fair Value Measurement and Disclosure. ASC 350-30-35-5A is effective for intangible assets acquired for fiscal years beginning after December 15, 2008. We adopted ASC 350-30-35-5A on May 3, 2009, and any intangible asset acquired after that date will be subject to this new accounting guidance.

In April 2009, the FASB issued three ASC Topics intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. ASC Subtopic 820-10-65-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, provides additional guidelines for estimating fair value in accordance with ASC Subtopic 820-10-50, Fair Value Measurements. ASC 320, Debt and Equity Securities, provides additional guidance related to the disclosure of impairment losses on securities and the accounting for impairment losses on debt securities. ASC 320 does not amend existing guidance related to other-than-temporary impairments of equity securities. ASC Topic 825 and 270, Interim Disclosures about Fair Value of Financial Instruments, increases the frequency of fair value disclosures. These ASC topics and subtopics are effective for fiscal years and interim periods ending after June 15, 2009. We adopted these ASC topics and subtopics on May 3, 2009. The adoption of these ASC topics and subtopics did not have a material impact on our consolidated financial statements.

In May 2009, the FASB issued ASC 855, Subsequent Events. ASC 855 is intended to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, ASC 855 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855 is effective for fiscal years and interim periods ending after June 15, 2009. We adopted ASC 855 on May 3, 2009. The adoption of ASC 855 did not have a material impact on our consolidated financial statements.

~~-8-~~

In October 2009, the FASB issued ASC Subtopic 605-25, Revenue Recognition-Multiple-Element Arrangements. ASC Subtopic 605-25 provides principles for allocation of consideration among its ~~multiple-elements,~~multiple elements, allowing more flexibility in identifying and accounting for separate deliverables under an arrangement. ASC Subtopic ~~6005-25~~605-25 introduces an estimated selling price method for allocating revenue to the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available, and significantly expands related disclosure requirements. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We are currently assessing the impact of ASC Subtopic 605-25 on our consolidated financial statements.

In August 2009, the FASB issued ASU 2009-05, which amends ASC 820, Fair Value Measurements and Disclosures. ASU 2009-05 provides amendments for fair value measurements of liabilities. It provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more techniques. ASU 2009-05 also clarifies that when estimating fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. ASU 2009-05 is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of ASU 2009-05 did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, which amends ASC 820 Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to add new requirements for disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in level 3 fair value measurements, and (4) the transfers between levels 1, 2, and 3 fair value measurements. ASU 2010-06 is effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. However, those disclosures are required for periods ending after initial adoption. Early adoption is permitted. We are currently ~~assessing~~evaluating the impact of ASU ~~2009-05~~2010-06 on our consolidated financial statements.

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Note 3. Revenue Recognition

Multiple-element arrangements: We generate revenue from the sale of equipment and related services, including customization, installation and maintenance services. In some instances, we provide some or all of such equipment and services to our customers under the terms of a single multiple-element sales arrangement. These arrangements typically involve the sale of equipment bundled with some or all of these services, but may also involve instances in which we have contracted to deliver multiple pieces of equipment over time, rather than at a single point in time.

When a sales arrangement involves multiple elements, the items included in the arrangement (deliverables) are evaluated pursuant to ASC Subtopic 605-25-25, Revenue Arrangements with Multiple Deliverables, to determine whether they represent separate units of accounting. We perform this evaluation at the inception of an arrangement and as we deliver each item in the arrangement. Generally, we account for a deliverable (or a group of deliverables) separately if the delivered item(s) has standalone value to the customer, there is objective and reliable evidence of the fair value of the undelivered items included in the arrangement, and, if we have given the customer a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) or service(s) is probable and substantially in our control.

When items included in a multiple-element arrangement represent separate units of accounting and there is objective and reliable evidence of fair value for all items included in the arrangement, we allocate the arrangement consideration to the individual items based on their relative fair values. If there is objective and reliable evidence of the fair value(s) of the undelivered item(s) in an arrangement, but no such evidence for the delivered item(s), we use the residual method to allocate the arrangement consideration. In either case, the amount of arrangement consideration allocated to the delivered item(s) is limited to the amount that is not contingent on us delivering additional products or services. Once we have determined the amount, if any, of arrangement consideration allocable to the delivered item(s), we apply the applicable revenue recognition policy, as described elsewhere herein, to determine when such amount may be recognized as revenue.

We generally determine if objective and reliable evidence of fair value for the items included in a multiple-element arrangement exists based on whether we have vendor-specific objective evidence (VSOE) of the price for which we sell an item on a standalone basis. If we do not have VSOE for the item, we will use the price charged by a competitor selling a comparable product or service on a standalone basis to similarly situated customers, if available.

If we cannot account for the items included in a multiple-element arrangement as separate units of accounting, they are combined and accounted for as a single unit of accounting, generally resulting in a delay in the recognition of revenue for the delivered item(s) until we have provided the undelivered item(s) or service(s) to the customer.

Construction-type contracts: Earnings on construction-type contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Operating expenses are charged to operations as incurred and are not allocated to contract costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are probable and estimable.

Equipment other than construction-type contracts: We recognize revenue on equipment sales, other than construction-type contracts, when title passes, which is usually upon shipment and then only if the terms of the arrangement are fixed and determinable and collectability is reasonably assured. We record estimated sales returns and discounts as a reduction of net sales in the same period revenue is recognized.

Long-term receivables and advertising rights: We occasionally sell and install our products at facilities in exchange for the rights to sell or to retain future advertising revenues. For these transactions, we recognize revenue for the amount of the present value of the future advertising payments if enough advertising is sold to obtain normal margins on the contract, and we record the related receivable in long-term receivables. On those transactions where we have not sold the advertising for the full value of the equipment at normal margins, we record the related cost of equipment as advertising rights. Revenue to the extent of the present value of the advertising payments is recognized in long-term receivables when it becomes fixed and determinable under the provisions of the applicable advertising contracts. At the time the revenue is recognized, costs of the equipment are recognized based on an estimate of overall margin expected.

~~-9-~~

In cases where we receive advertising rights as opposed to only cash payments in exchange for the equipment, revenue is recognized as it becomes earned and the related costs of the equipment are amortized over the term of the advertising rights, which are owned by us. On these transactions, advance collections of advertising revenues are recorded as deferred revenue.

The cost of advertising rights, net of amortization, was ~~$1,688~~$1,591 as of ~~October 31, 2009~~January 30, 2010 and $2,392 as of May 2, 2009.

Product maintenance: In connection with the sale of our products, we also occasionally sell separately priced extended warranties and product maintenance contracts. The revenue related to such contracts is deferred and recognized ratably as net sales over the terms of the contracts, which vary up to 10 years. We record unrealized revenue in the deferred revenue (billed or collected) in the liability section of the balance sheet. Deferred revenue (billed or collected) excludes unrealized revenue from contractual obligations that will be billed by us in future periods.

-10-

Software: We typically sell our proprietary software bundled with video displays and certain other products, but we also sell our software separately. Pursuant to ASC 985-605, Software/Revenue Recognition, revenues from software license fees on sales, other than construction-type contracts, are recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed and determinable and collection is probable. For sales of software included in construction-type contracts, the revenue is recognized under the percentage-of-completion method starting when all of ~~the above-mentioned~~these criteria have been met.

Services: Revenues generated by us for services such as event support, control room design, on-site training, equipment service and technical support for our equipment are recognized as net sales when the services are performed. Net sales from services offerings which are not included in construction-type contracts approximated ~~8.0%~~9.1% and ~~4.9%~~5.5% of net sales for the ~~six~~nine months ended ~~October~~January 30, 2010 and January 31, 2009, ~~and November 1, 2008,~~ respectively.

Rentals: We rent display equipment to our customers under short-term rental agreements, generally for periods no longer than 12 months. Revenues generated by us for equipment rentals are recognized over the period of the rental agreement.

Derivatives: We utilize derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates on those transactions that are denominated in currency other than our functional currency, which is the U.S. dollar. We enter into currency forward contracts to manage these economic risks. ASC 815, Accounting for Derivative Instruments and Hedging Activities, as amended, requires us to recognize all derivatives on the balance sheet at fair value. Derivatives that do not qualify for hedge accounting must be adjusted to fair value through earnings. If a derivative qualifies for hedge accounting, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in the fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in accumulated other comprehensive gain (loss) until the hedged item is recognized in earnings.

To protect against the reduction in value of forecasted foreign currency cash flows resulting from export sales over the next year, we have instituted a foreign currency cash flow hedging program which requires us to hedge currency risk whenever funds are expected to be converted to USU.S. Dollars. Actual forward contracts that satisfy this requirement occur infrequently. We hedge portions of our forecasted revenue denominated in foreign currencies with forward contracts. When the dollar strengthens significantly against the foreign currencies, the decline in value of future foreign currency revenue is partially offset by gains in the value of the forward contracts. Conversely, when the dollar weakens, the increase in the value of future foreign currency cash flows is partially offset by losses in the value of the forward contracts.

There were no derivatives outstanding as of ~~October 31, 2009.~~January 30, 2010.

Note 4. Earnings Per Share (“EPS”)

Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other obligations to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings.

~~-10-~~

-11-

A reconciliation of the income and common share amounts used in the calculation of basic and diluted EPS for the three and ~~six~~nine months ended ~~October~~January 30, 2010 and January 31, 2009 follows:

	Net Income		Shares	Per Share Amount
For the three months ended January 30, 2010 :
Basic earnings per share	$	(8,371)	41,004	$	(0.20)
Dilution associated with stock compensation plans		-	-		-
Diluted earnings per share	$	(8,371)	41,004	$	(0.20)

For the three months ended January 31, 2009:
Basic earnings per share	$	4,162	40,629	$	0.10
Dilution associated with stock compensation plans		-	324		-
Diluted earnings per share	$	4,162	40,953	$	0.10

For the nine months ended January 30, 2010 :
Basic earnings per share	$	(2,090)	40,862	$	(0.05)
Dilution associated with stock compensation plans		-	-		-
Diluted earnings per share	$	(2,090)	40,862	$	(0.05)

For the nine months ended January 31, 2009:
Basic earnings per share	$	26,085	40,500	$	0.64
Dilution associated with stock compensation plans		-	678		(0.01)
Diluted earnings per share	$	26,085	41,178	$	0.63

Options outstanding to purchase 3,464 shares of common stock with a weighted average exercise price of $12.89 during the three and nine months ended January 30, 2010 were not included in the computation of diluted earnings per share because the weighted average exercise price of those instruments exceeded the average market price of the common shares during the year and because of the loss recorded for the periods.

Options outstanding to purchase 1,859 shares of common stock with a weighted average exercise price of $17.98 during the quarter ended January 31, 2009 and ~~November 1, 2008 follows:~~820 shares of common stock with a weighted average exercise price of $25.82 for the nine months ended January 31, 2009 were not included in the computation of diluted earnings per share because the weighted average exercise price of those instruments exceeded the average market price of the common shares during the year.

Net Income Shares Per Share Amount
For the three months ended October 31, 2009:
Basic earnings per share $ 4,849 40,831 $ 0.12
Dilution associated with stock compensation plans - 171 -
Diluted earnings per share $ 4,849 41,002 $ 0.12

For the three months ended November 1, 2008:
Basic earnings per share $ 12,197 40,478 $ 0.30
Dilution associated with stock compensation plans - 743 -
Diluted earnings per share $ 12,197 41,221 $ 0.30

For the six months ended October 31, 2009:
Basic earnings per share $ 6,281 40,795 $ 0.15
Dilution associated with stock compensation plans - 311 -
Diluted earnings per share $ 6,281 41,106 $ 0.15

For the six months ended November 1, 2008:
Basic earnings per share $ 21,923 40,440 $ 0.54
Dilution associated with stock compensation plans - 846 (0.01)
Diluted earnings per share $ 21,923 41,286 $ 0.53

Note 5. Goodwill and Other Intangible Assets

We account for goodwill and ~~other~~ intangible assets in accordance with ASC 350, Goodwill and Other Intangible ~~Assets~~Assets.~~, and we complete an~~ Under these provisions, goodwill is not amortized but is tested for impairment ~~analysis~~ on at least an annual ~~basis and~~basis. Impairment testing is required more ~~frequently~~often than annually if ~~circumstances warrant.~~

~~Goodwill was $4,658 at October 31, 2009 and $4,549 at May 2, 2009. We perform~~an event or circumstance indicates that an impairment ~~test~~or a decline in value may have occurred. In conducting our impairment testing, we compare the fair value of each of our business units (reporting unit) to the related carrying value. If the fair value of a reporting unit exceeds its carrying value, goodwill ~~annually~~is not impaired. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is measured and recognized. We conduct our impairment testing as of the first business day of the third ~~quarter.~~quarter each year.

We utilize an income approach to estimate the fair value of each reporting unit. We selected this method because we believe that it most appropriately measures our income producing assets. We considered using the market approach and cost approach, but concluded they were not appropriate in valuing our reporting units given the lack of relevant and available market comparisons. The income approach is based on the projected cash flows which are discounted to their present value using discount factors that consider the timing and risk of the forecasted cash flows. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting units’ expected long-term operating cash performance. This approach also mitigates the impact of the cyclical trends that occur in the industry. Fair value is estimated using internally-developed forecasts and assumptions. The discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Other significant assumptions include terminal value margin rates, future capital expenditures, and changes in future working capital requirements. We also compare and reconcile our overall fair value to our market capitalization. While there are inherent uncertainties related to the assumptions used and to our application of these assumptions to this analysis, we believe that the income approach provides a reasonable estimate of the fair value of our reporting units. The foregoing assumptions to a large degree were consistent with our long-term performance with limited exceptions. We believe that our future investments for capital expenditures as a percent of revenue will decline in future years due to our improved utilization resulting from lean initiatives, and we believe that long-term receivables will decrease as we grow. We also have assumed that through this economic downturn, our markets have not contracted for the long term; however it may be a number of years before they fully recover. These assumptions could deviate materially from actual results.

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We performed an analysis of goodwill as of the first business day of our third quarter in fiscal 2010. In addition, due to revisions in our forward-looking 12 month forecast during the ~~then current economic conditions,~~month of January 2010, resulting from lower than expected order bookings and increased near-term uncertainty, primarily in our Live Events business unit, the ~~effects~~significance of ~~the recession on our markets~~orders being delayed in all business units and the decline in our stock price, we ~~performed~~believed that an additional goodwill impairment test was required as of January 31, 2010. Based on our test, we determined that the goodwill associated with the Schools and Theatres business unit, totaling $685 was impaired and that the goodwill associated with our International business unit of $725 was impaired. Because step two of the goodwill impairment testing is not complete, an estimated impairment charge of $1,410 was recorded as of January 30, 2010. Given the timing of the circumstances which led to the impairment we were unable to complete the step two fair value computations as this requires us to obtain appraisals of various assets. The impairment testing will be complete by the end of the fourth quarter of fiscal 2010 at which time any adjustments to the estimate will be recorded.

Goodwill was $3,262 at January 30, 2010, and $4,549 at May 2, 2009. ~~The~~Of the total of goodwill as of January 30, 2010, $2,388 related to the Live Events business unit, $716 related to the Commercial business unit and $158 related to the Transportation business unit. Goodwill increased $123 during fiscal 2010 as a result of the ~~test at~~impact of foreign currency translation on goodwill denominated in functional currencies other than the U.S. dollar. The fair value, carrying value after impairment and the percentage in excess of carrying value of each ~~time indicated that no goodwill impairment existed~~business unit as of ~~those dates.~~January 30, 2010 is as follows:

	Estimated Fair Value	Carrying Value	Percentage of Fair Value in Excess of Carrying Value
Live Events	187,000	92,024	51%
Schools & Theatre	31,000	31,593	(2%)
Commercial	121,000	45,985	62%
Transportation	66,000	26,183	60%
International	9,000	10,803	(20%)

We face a number of risks to our business which can adversely impact cash flows in each of our business units and cause a significant decline in fair values of each business unit. This decline could lead to an impairment of goodwill to some or all of our business units. Since the fair values of the business units are based in part on the market price of our common stock, a significant decline in the market price of our stock may offset the benefits of the foregoing efforts and lead to an impairment. Notwithstanding the foregoing, events could cause an impairment in goodwill in other business units if the trend of orders and sales worsens and we are unable to respond in ways that preserve future cash flows or if our stock price declines significantly.

As required by ASC 350, intangibles with finite lives are amortized. Included in intangible assets are non-compete agreements and various patents and trademarks. The net value of intangible assets is included as a component of intangible and other assets in the accompanying consolidated balance sheets. Estimated amortization expense based on intangibles as of ~~October 31, 2009~~January 30, 2010 is $315, $288, $245, $228 and $228 for the fiscal years ending 2010, 2011, 2012, 2013 and 2014, respectively, and $552 thereafter. The following table sets forth the gross carrying amount and accumulated amortization of intangible assets by major intangible class as of ~~October 31, 2009:~~January 30, 2010:

	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Value		Amount		Amortization		Value
Patents	$	2,282	$	704	$	1,578	$	2,282	$	761	$	1,521
Non-compete agreements		348		245		103		348		262		86
Registered trademarks		401		-		401		401		-		401
Other		87		71		16		87		75		12
	$	3,118	$	1,020	$	2,098	$	3,118	$	1,098	$	2,020

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~~-11-~~

Note 6. Inventories

Inventories consist of the following:

	October 31,		May 2,
	2009		2009		January 30,		May 2,
					2010		2009
Raw materials	$	14,269	$	20,644	$	13,499	$	20,644
Work-in-process		6,717		7,561		5,570		7,561
Finished goods		19,450		23,195		16,934		23,195
Finished goods subject to
deferred revenue arrangements		1,510		-		1,491		-
	$	41,946	$	51,400	$	37,494	$	51,400

We have five ~~markets~~business units which meet the definition of reportable segments under ASC 280, Segment Reporting: Commercial, Live Events, Schools and Theatres, Transportation and International.

The following table sets forth certain financial information for each of our five functional operating segments:

~~-12-~~


	Three Months Ended						Nine Months Ended
	January 30,			January 31,			January 30,			January 31,
	2010			2009			2010			2009
Net sales
Commercial	$	20,903		$	35,436		$	69,011		$	131,619
Live Events		22,773			63,281			125,617			204,772
Schools & Theatres		12,325			12,490			49,526			52,151
Transportation		8,087			5,002			31,307			23,301
International		8,318			12,483			25,760			47,775
Net Sales		72,406			128,692			301,221			459,618

Contribution margin
Commercial		80			3,781			4,448			21,293
Live Events		(2,186	)		14,645			18,046			51,141
Schools & Theatres		(1,044	)		(1,828	)		3,612			1,996
Transportation		964			240			7,213			1,658
International		(111	)		1,787			760			4,206
Total Contribution Margin		(2,297	)		18,625			34,079			80,294

Non-allocated operating expenses
General & Administrative		6,523			6,576			19,016			21,812
Product Development		5,155			5,148			16,558			16,981
Operating income (loss)		(13,975	)		6,901			(1,495	)		41,501

Nonoperating income (expense):
Interest income		376			516			1,129			1,563
Interest expense		(38	)		(32	)		(149	)		(196	)
Other income (expense), net		(265	)		(699	)		(1,577	)		(2,378	)

Income (loss) before income taxes		(13,902	)		6,686			(2,092	)		40,490
Income tax expense (benefit)		(5,531	)		2,524			(2	)		14,405
Net income (loss)	$	(8,371	)	$	4,162		$	(2,090	)	$	26,085

Depreciation and amortization
Commercial	$	1,794		$	2,015		$	5,443		$	5,953
Live Events		1,905			2,340			5,641			6,685
Schools & Theatres		713			799			2,163			2,440
Transportation		449			460			1,360			1,441
International		325			189			765			508
Unallocated corporate depreciation		1,217			430			1,626			1,235
	$	6,403		$	6,233		$	16,998		$	18,262

-15-

Three Months Ended Six Months Ended
October 31, November 1, October 31, November 1,
2009 2008 2009 2008
Net sales
Commercial $ 24,873 $ 47,794 $ 48,108 $ 96,184
Live Events 48,949 78,403 102,844 141,491
Schools & Theatres 18,766 22,680 37,200 39,661
Transportation 10,590 8,727 23,220 18,299
International 12,184 12,093 17,443 35,291
Net Sales 115,362 169,697 228,815 330,926
��
Contribution margin
Commercial 3,470 8,770 4,369 17,512
Live Events 10,358 21,992 20,232 36,495
Schools & Theatres 2,193 3,040 4,656 3,824
Transportation 2,764 545 6,249 1,419
International 1,889 (1,661 ) 871 2,419
Total Contribution Margin 20,674 32,686 36,377 61,669

Non-allocated operating expenses
General & Administrative 5,959 7,555 12,493 15,236
Product Development 5,534 5,286 11,404 11,833
Operating income 9,181 19,845 12,480 34,600

Nonoperating income (expense):
Interest income 379 511 753 1,047
Interest expense (63 ) (57 ) (110 ) (164 )
Other income (expense), net (711 ) (1,334 ) (1,313 ) (1,679 )

Income before income taxes 8,786 18,965 11,810 33,804
Income tax expense 3,937 6,768 5,529 11,881
Net income $ 4,849 $ 12,197 $ 6,281 $ 21,923

Depreciation and amortization
Commercial $ 1,779 $ 1,976 $ 3,650 $ 3,938
Live Events 1,901 2,215 3,736 4,345
Schools & Theatres 714 822 1,450 1,641
Transportation 419 475 909 981
International 230 156 440 319
Unallocated corporate depreciation 521 422 1,095 805
$ 5,564 $ 6,066 $ 11,280 $ 12,029

No single geographic area comprises a material amount of net sales or long-lived assets other than the United States. The following table presents information about us in the United States and elsewhere:

United States Others Total
Net sales for three months ended:
October 31, 2009 $ 101,017 $ 14,345 $ 115,362
November 1, 2008 151,092 18,605 169,697

Net sales for six months ended:
October 31, 2009 $ 207,619 $ 21,196 $ 228,815
November 1, 2008 285,922 45,004 330,926

Long-lived assets at:
October 31, 2009 $ 82,317 $ 1,301 $ 83,618
May 2, 2009 88,302 1,125 89,427

	United States		Others		Total
Net sales for three months ended:
January 30, 2010	$	62,902	$	9,504	$	72,406
January 31, 2009		114,577		14,115		128,692

Net sales for nine months ended:
January 30, 2010	$	270,521	$	30,700	$	301,221
January 31, 2009		400,691		58,927		459,618

Long-lived assets at:
January 30, 2010	$	82,863	$	1,042	$	83,905
May 2, 2009		88,302		1,125		89,427

~~-13-~~

Note 8. Share-Based Compensation

Stock incentive plans: During fiscal 2008, we established the 2007 Stock Incentive Plan (“2007 Plan”) and ceased granting options under the 2001 Incentive Stock Option Plan, the 2001 Outside Directors Option Plan (“2001 Plans”), the 1993 Incentive Stock Option Plan, as amended, and the 1993 Outside Directors Option Plan, as amended (“1993 Plans”). The 2007 Plan provides for the issuance of stock-based awards, including stock options, restricted stock, restricted stock units and deferred stock, to employees, directors and consultants. Stock options issued to employees under the plans generally have a ten-year life, an exercise price equal to the fair market value on the grant date and a five-year vesting period. Stock options granted to outside directors under these plans have a seven-year life, an exercise price equal to the fair market value on the date of grant and a three-year vesting period, provided that they remain on the Board. The restricted stock granted to members of the Board of Directors vests in one year, provided that they remain on the Board. The restricted stock units granted to employees vest over five years provided that they remain employed with the company. As with stock options, restricted stock cannot be transferred during the vesting period.

The total number of shares of stock reserved and available for distribution under the 2007 Plan is 4,000 shares.

We also have an employee stock purchase plan (“ESPP”), which enables employees to contribute up to 10% of their compensation toward the purchase of our common stock at the end of the participation period at a purchase price equal to 85% of the lower of the fair market value of the common stock on the first or last day of the participation period.

A summary of the share-based compensation expense for stock options, restricted stock and our ESPP that we recorded in accordance with ASC 718 Compensation-Stock Compensation is as follows:

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	October 31,			November 1,			October 31,			November 1,			January 30,			January 31,			January 30,			January 31,
	2009			2008			2009			2008			2010			2009			2010			2009
Cost of sales		$	120		$	83		$	251		$	201		$	112		$	106		$	363		$	307
Selling			263			244			533			535			248			261			781			796
General and administrative			297			306			614			579			276			273			890			852
Product development and design			152			124			314			279			143			133			457			412
		$	832		$	757		$	1,712		$	1,594		$	779		$	773		$	2,491		$	2,367

We follow the provisions of ASC 220, Reporting Comprehensive Income, which establishes standards for reporting and displaying comprehensive income and its components. Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For us, comprehensive income represents net income adjusted for foreign currency translation adjustments and net unrealized gains and losses on derivative instruments, as applicable. The foreign currency translation adjustment included in comprehensive income has not been tax affected, as the investments in foreign affiliates are deemed to be permanent.

Six Months Ended
October 31, November 1,
2009 2008
Net income $ 6,281 $ 21,923
Net foreign currency translation adjustment (23 ) (100 )
Total comprehensive income $ 6,258 $ 21,823

	Three Months Ended						Nine Months Ended
	January 30,			January 31,			January 30,			January 31,
	2010			2009			2010			2009
Net income (loss)	$	(8,371	)	$	(4,162	)	$	(2,090	)	$	26,085
Net foreign currency translation adjustment		22			(97	)		(2	)		(197	)
Net unrealized gain on derivatives		-			10			-			10
Total comprehensive income (loss)	$	(8,349	)	$	(4,075	)	$	(2,092	)	$	25,898

Note 10. Commitments and Contingencies

Securities litigation: Our company and two of our executive officers are named as defendants in a consolidated class action filed in the U.S. District Court for the District of South Dakota in November 2008 on behalf of a class of investors who purchased our stock in the open market between November 15, 2006 and April 5, 2007. In an Amended Consolidated Complaint filed on April 13, 2009 (“Complaint”), the plaintiffs allege that the defendants made false and misleading statements of material facts about our business and expected financial performance in the company’s press releases, its filings with the Securities and Exchange Commission, and conference calls, thereby inflating the price of the company’s common stock. The Complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Complaint seeks compensatory damages on behalf of the alleged class in an unspecified amount, reasonable fees and costs of litigation, and such other and further relief as the Court may deem just and proper. On June 5, 2009, we filed a motion to dismiss the Complaint. In July 2009, the plaintiffs filed a memorandum of law in opposition to our motion to dismiss. In September 2009, we filed a reply memorandum in support of the notice to dismiss. Briefing on the motion is underway.

Other litigation: We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, based upon consultation with legal counsel, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial statements.

Guarantees: In connection with the sale of equipment to a financial institution, we entered into a contractual arrangement whereby we agreed to repurchase equipment at the end of the lease term at a fixed price of approximately $1,100. We have recognized a guarantee liability in the amount of $200 under the provisions of ASC 460, Guarantees, in the accompanying financial statements.

Warranties: We offer a standard parts coverage warranty for periods varying from one to five years for all of our products. We also offer additional types of warranties that include on-site labor, routine maintenance and event support. In addition, the ~~length~~term of warranty on some installations can vary from one to 10 years. The specific terms and conditions of these warranties vary primarily depending on the type of the product sold. We estimate the costs that may be incurred under the warranty and record a liability in the amount of such costs at the time the product revenue is recognized. Factors that affect our warranty liability include historical and anticipated claims costs. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.

Leases: We lease office space for sales and service locations, vehicles and equipment, primarily office equipment. Rental expense for operating leases was ~~$1,473~~$2,470 and ~~$1,608~~$2,527 for the ~~six~~nine months ended ~~October~~January 30, 2010 and January 31, 2009, ~~and November 1, 2008,~~ respectively. Future minimum payments under noncancelable operating leases, excluding executory costs such as management and maintenance fees, with initial or remaining terms of one year or more consisted of the following at ~~October 31, 2009:~~January 30, 2010:

Purchase commitments: From time to time, we commit to purchase inventory and advertising rights over periods that extend beyond a year. As of ~~October 31, 2009,~~January 30, 2010, we were obligated to purchase inventory and advertising rights through fiscal 2013 as follows:

Fiscal years ending Amount
2010 $ 850
2011 1,288
2012 1,119
2013 985
2014 336
Total $ 4,578

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During the third quarter, we have received or settled on $2.5 million in insurance proceeds related to this incident. Additional recoveries may result related to business interruption claims to be settled in the fourth quarter of fiscal 2010. Due to the fire, gross assets were written down by approximately $713, along with the associated accumulated depreciation on those assets in the amount of $379, resulting in a net book value decrease in assets of about $333. As of January 30, 2010, we had invested $555 to replace the manufacturing equipment and had incurred $710 in cleaning the damaged facility and replacing destroyed operating assets. In addition, we decided to move this operation to a newly-acquired facility adjacent to our main campus. We had committed to purchasing this new facility in fiscal 2007. We have invested $3.2 million in the building and will invest approximately $700 in building improvements for the new location. Insurance proceeds received to reimburse costs to reconstruct the facility, replace manufacturing equipment, supplies and contents resulted in gains of $1,496 for the quarter ended January 30, 2010, or $0.04 per share, net of taxes. Additionally, we recorded $512 in business interruption reimbursements for extra expenses incurred during the non-operating period. At January 30, 2010, approximately $2,351 was included in accounts receivable for insurance reimbursements. Subsequent to January 30, 2010, we received $1,840 of this receivable.

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Our financial assets as of ~~October 31, 2009~~January 30, 2010 measured at fair value on a recurring basis were ~~$50,300,~~$52,023, which consisted of money market funds. We used level 1 inputs to determine the fair value of our financial assets. We ~~have~~had no other significant measurements of assets ~~and~~or liabilities ~~measured~~ at fair value on a ~~recurring~~nonrecurring basis ~~that used level 2 or level 3 inputs.~~subsequent to this initial recognition except as discussed in Note 5 and Note 1 as it relates to goodwill and long-lived assets.

Revenue recognition on long-term construction-type contracts. Earnings on construction-type contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are capable of being estimated. Generally, construction-type contracts we enter into have fixed prices established, and to the extent the actual costs to complete construction-type contracts are higher than the amounts estimated as of the date of the financial statements, the resulting gross margin would be negatively affected in future quarters when we revise our estimates. Our practice is to revise estimates as soon as such changes in estimates are known. We do not believe there is a reasonable likelihood that there will be a material change in future estimates or assumptions we use to determine these estimates.

Allowance for doubtful accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To identify impairment in customers’ ability to pay, we review aging reports, contact customers in connection with collection efforts and review other available information. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine the allowance for doubtful accounts. As of ~~October 31, 2009~~January 30, 2010 and May 2, 2009, we had an allowance for doubtful accounts balance of approximately $1.9 million and $2.2 million, respectively.

Warranties. We have recognized a reserve for warranties on our products equal to our estimate of the actual costs to be incurred in connection with our performance under the warranties. Generally, estimates are based on historical experience taking into account known or expected changes. If we would become aware of an increase in our estimated warranty costs, additional reserves may become necessary, resulting in an increase in costs of goods sold. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine our reserve for warranties. As of ~~October 31, 2009~~January 30, 2010 and May 2, 2009, we had approximately ~~$18.2~~$17.1 million and $19.8 million reserved for these costs, respectively.

Extended warranty and product maintenance. We recognize deferred revenue related to separately priced extended warranty and product maintenance agreements. The deferred revenue is recognized ratably over the contractual term. If we would become aware of an increase in our estimated costs under these agreements in excess of our deferred revenue, additional reserves may be necessary, resulting in an increase in costs of goods sold. In determining if additional reserves are necessary, we examine cost trends on the contracts and other information and compare that to the deferred revenue. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine estimated costs under these agreements. As of ~~October 31, 2009~~January 30, 2010 and May 2, 2009, we had ~~$10.0~~$10.9 million and $9.5 million of deferred revenue related to separately priced extended warranty and product maintenance agreements, respectively.

Inventory. Inventories are stated at the lower of cost or market. Market refers to the current replacement cost, except that market may not exceed the net realizable value (that is, estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal), and market is not less than the net realizable value reduced by an allowance for normal profit margins. In valuing inventory, we estimate market value where it is believed to be the lower of cost or market, and any necessary changes are charged to costs of goods sold in the period in which they occur. In determining market value, we review various factors such as current inventory levels, forecasted demand and technological obsolescence. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate the estimated market value of inventory. However, if market conditions change, including changes in technology, components used in our products or in expected sales, we may be exposed to unforeseen losses that could be material.

Income taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax expense as well as assessing temporary differences in the treatment of items for tax and financial reporting purposes. These timing differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income in each jurisdiction, and to the extent we believe that recovery is not likely, a valuation allowance must be established. We review deferred tax assets, including net operating losses, and for those not expecting to be realized, we have recognized a valuation allowance. If our estimates of future taxable income are not met, a valuation allowance for some of these deferred tax assets would be required.

We record our income tax provision based on our knowledge of all relevant facts and circumstances, including the existing tax laws, the status of current examinations and our understanding of how the tax authorities view certain relevant industry and commercial matters. In evaluating the exposures associated with our various tax filing positions, we record reserves for probable exposures, consistent with ASC 740 Income Taxes. A number of years may elapse before a particular matter for which we have established a reserve is audited and fully resolved or clarified. We adjust our income tax provision in the period in which actual results of a settlement with tax authorities differs from our established reserve, when the statute of limitations expires for the relevant taxing authority to examine the tax position, or when more information becomes available. Our tax contingencies reserve contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposure associated with our various filing positions. We believe that any potential tax assessments from various tax authorities that are not covered by our income tax provision will not have a material adverse impact on our consolidated financial position, results of operations or cash flow.

Stock-based compensation: We use the Black-Scholes standard option pricing model (“Black-Scholes model”) to determine the fair value of stock options and stock purchase rights. The determination of the fair value of the awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding other variables, including projected employee stock option exercise behaviors, risk-free interest rate, expected volatility of our stock price in future periods and expected dividend yield.

Commercial Market. ~~Net sales in the Commercial market declined during the second quarter and first six months of fiscal year 2010 as compared to the same periods of fiscal year 2009.~~ For the ~~second~~third quarter of fiscal year 2010, net sales decreased ~~48.0%~~41.0%, and for the first ~~six~~nine months of fiscal year 2010, net sales decreased ~~50.0%~~47.6% as compared to the same periods of last fiscal year. For the ~~second~~third quarter of fiscal 2010, net sales in all areas of this market decreased. Net sales to outdoor advertising (digital billboard) customers decreased by approximately ~~$21.9~~$6.8 million or approximately ~~82.3%~~59.1% as compared to the ~~second~~third quarter of fiscal 2009, and for the first ~~six~~nine months of fiscal year 2010, net sales declined ~~$43.7~~$50.4 million or approximately ~~81.7%~~77.5% as compared to the first ~~six~~nine months of fiscal 2009. Net sales in our reseller niche, which includes primarily sales of our Galaxy® products and sales for large custom contracts, declined by approximately ~~$1.7~~$5.4 million or approximately ~~11.5%~~31.4% for the ~~second~~third quarter of fiscal year 2010 and ~~$3.4~~$8.8 million or approximately ~~11.6%~~18.9% for the first ~~six~~nine months of fiscal 2010.

Live Events Market. Net sales in the Live Events market decreased by approximately ~~37.6%~~64.0% in the ~~second~~third quarter of fiscal 2010 as compared to the same quarter of fiscal 2009 and on a year-to-date basis ~~are~~were down approximately ~~27.3%~~38.7%. The decrease in net sales for the ~~second~~third quarter and ~~year to date~~year-to-date for fiscal 2010 as compared to the same periods in fiscal 2009 was the result of a decline in revenues from large new construction contracts exceeding $5 million as explained in prior filings, which led to the significant growth during fiscal year 2009. These large contracts ~~each of which exceeded $5 million,~~ contributed ~~more than $11.2~~approximately $4.3 million and ~~$28.2~~$29.9 million in net sales during the ~~second~~third quarter and first ~~six~~nine months of fiscal year 2010 compared to approximately ~~$20.7~~$32.3 million and ~~$49.2~~$116.8 million for the same periods in fiscal 2009. In addition, orders and net sales were less than expected as a result of expected orders related to professional baseball facilities being delayed for the season. We believe this was due to economic concerns and various other factors. Overall, we believe that these orders are not lost but only delayed until the period preceding the next baseball season or until approximately December 2010 through March 2011. This dynamic is causing us to increase our uncertainty as to what the ramifications will be for the fall sports season which we expect to become apparent in the first quarter of fiscal 2011.

Schools and Theatres Market. Net sales in the Schools and Theatres market decreased ~~17.3%~~1.3% in the ~~second~~third quarter of fiscal 2010 as compared to the same quarter in fiscal 2009 and on a year-to-date basis ~~are~~were down approximately ~~6.2%~~5.0% compared to the same period one year ago. Orders for the market ~~have increased 31.7%~~decreased 1.3% for the ~~second~~third quarter of fiscal 2010 as compared to the ~~second~~third quarter of fiscal 2009 ~~and~~but, on a year-to-date basis, ~~are~~were up approximately ~~3.1%~~2.2%. ~~Sales decreased principally as a result of~~We are seeing more sales opportunities for the ~~timing of orders~~next three quarters in video systems in this business unit, however, like the Live Events business unit, there is some uncertainty over how the economy will impact this business unit. It is possible that we could experience growth in fiscal ~~2010~~2011 as compared to 2010, if the ~~same periods of fiscal 2009. During the first quarter of fiscal 2009, many~~ orders were delayed due to execution issues within manufacturing, which caused orders to be cancelled or pushed out into the second quarter of fiscal 2009. These execution issues did not occur in the first half of fiscal 2010 and therefore we did not have the unusually large backlog at the beginning of the second quarter of fiscal 2010 that we had at the same time in fiscal 2009, which led to greater sales in the second quarter of fiscal 2009. As a result, we saw lower sales in the second quarter of fiscal 2010 as compared to the second quarter of fiscal 2009. Although it appears that we are ~~seeing improvement in orders and sales in this market, it is generally too early to conclude that this market has begun to rebound from the downturn in the economy.~~pursuing develop. For the long-term, we believe that this business presents growth opportunities. Based on the ~~forgoing,~~results year-to-date, we expect that orders and net sales for this market will ~~be less in~~end fiscal 2010 ~~as compared to~~near the levels of fiscal ~~2009 within this market.~~2009.

Transportation Market. Net sales in the Transportation market increased approximately ~~21.3%~~61.7% in the ~~second~~third quarter of fiscal 2010 as compared to the same period in fiscal 2009 and on a year-to-date basis ~~are~~were up approximately ~~26.9%~~34.4% compared to the same period one year ago. Orders for the ~~second~~third quarter of fiscal 2010 ~~are up~~were down approximately ~~6.1%~~13.7% over the same period in fiscal 2009 ~~and~~but, on a year-to-date basis, ~~are down~~were up approximately ~~10.3%~~11.6% over the same period in fiscal 2009. The decrease in orders ~~on a year-to-date basis~~in the third quarter of fiscal 2010 does not appear to be a reflection of the current poor economic conditions in the United States. Rather, we believe it is more a reflection of timing differences on when the orders have been or are expected to be booked and competitive changes in the marketplace. The increase in net sales is the result of the factors impacting orders and timing as driven by our customers and our larger backlog going into fiscal 2010 as compared to fiscal year 2009. ~~Similar~~In January 2010, we received a notice of award of a contract from a customer for up to approximately $25 million over a five-year period. This award requires a minimum commitment of approximately $9 million, which we expect to deliver over 24 months beginning in mid to late fiscal 2011. The award is subject to final contract execution. Based on this award, we believe that we will continue seeing growth in this business unit in fiscal 2011. However, similar to the other ~~markets,~~business units, it appears that the competitive environment has become more intense as a limited number of competitors have become more aggressive in pricing. Although we ~~do not~~ expect that this pricing pressure is not sustainable, it is likely to have an adverse impact on our net sales and gross profit margins in the current fiscal year. Notwithstanding the foregoing, we expect that net sales and orders in the Transportation market will grow in fiscal 2010 as compared to fiscal ~~2009; however, orders may not increase, depending on the effects of federal stimulus spending, the competitive environment and our ability to earn that business as it occurs.~~2009.

International Market. Net sales in the International market in the ~~second~~third quarter of fiscal 2010 as compared to the ~~second~~third quarter of fiscal 2009 were updown approximately ~~0.8%~~33.4% and, on a year-to-date basis, ~~are~~were down approximately ~~50.6%~~46.1%. Orders were updown approximately ~~7.6%~~7.3% for the ~~second~~third quarter of fiscal 2010 as compared to the ~~second~~third quarter of fiscal 2009 and, on a year-to-date basis, ~~are~~were down approximately ~~3.9%~~4.8%. The decrease in net sales for the first ~~six~~nine months of fiscal 2010 as compared to the first ~~six~~nine months of fiscal 2009 was attributable, in part, to large orders booked in the fourth quarter of fiscal 2008 for a rail station in Beijing and a network of displays in the U.K. that converted to net sales in the first quarter of fiscal 2009. Due to the focus on large contracts in this market and the small number of contracts actually booked, volatility is not unusual. Overall, we have made considerable investments in growing our business internationally, where we do not have the same market share as we do domestically. As stated in prior filings, in the second half of fiscal 2009, we began to see more competitive pressures in this area similar to the competitive pressures described above in the Live Events market because the competitors tend to overlap. We believe that this had an adverse impact on our order bookings in the second half of fiscal 2009 ~~which continued in~~and the first ~~half~~three quarters of fiscal 2010. In spite of the foregoing, it appears that this market may be seeing some strengthening, as our opportunities seem to be increasing. If this strengthening converts to additional orders in the future, we expect that they will be at lower contract gross profit levels as compared to ~~the prior~~ fiscal ~~year.~~2009.

Advertising Revenues. We occasionally sell products in exchange for the advertising revenues generated from use of the products. These sales represented less than 1%1.0% and 2%1.7% of net sales for the first ~~six~~nine months of fiscal 2010 and 2009, respectively. The gross profit percent on these transactions ~~have~~has typically been higher than the gross profit percent on other transactions of similar size, although the selling expenses associated with these transactions also are typically higher.

Backlog. The order backlog as of ~~October 31, 2009~~January 30, 2010 was approximately ~~$90~~$100 million as compared to ~~$134~~$128 million as of ~~November 1, 2008~~January 31, 2009 and ~~$113~~$90 million at the beginning of the ~~second~~third quarter of fiscal 2010. Historically, our backlog varies due to the timing of large orders. The decline in backlog is the result of the lower level of order bookings as previously described across all markets coupled with the differences in net sales during the periods. Backlog varies significantly ~~quarter to quarter~~quarter-to-quarter due to the effects of large orders, and significant variations can be expected, as explained previously. In addition, our backlog is not necessarily indicative of future sales or net income.

Selling Expenses. Selling expenses consist primarily of salaries, other employee-related costs, travel and entertainment expense, facilities-related costs for sales and service offices, and expenditures for marketing efforts, including collateral materials, conventions and trade shows, product demos and supplies.

Selling expenses for the ~~second~~third quarter of fiscal 2010 were lower than selling expenses in the ~~second~~third quarter of fiscal 2009 as a result of a decrease in personnel costs, including taxes and benefits, of approximately ~~$1.3~~$1.0 million, a decline of ~~$0.6~~$0.2 million in travel and entertainment costs and commissions, a ~~$0.4~~$0.1 million decrease in costs of conventions, a decrease of ~~$0.3~~$0.6 million in bad debt expense and ~~an increase~~a net decrease of ~~$0.1~~$0.3 million in various other categories. The decrease in travel and entertainment costs is a reflection of cost savings initiatives and the lower level of sales ~~opportunities and cost savings initiatives in place.~~opportunities. The decrease in costs of conventions is a result ~~of cost savings initiatives, which resulted in~~ a lower number of trade shows attended and decreased costs of those where attendance was appropriate.

The decrease in bad debt expense is due to the natural volatility of bad debt expense that we experience.

General and Administrative. General and administrative expenses consist primarily of salaries, other employee-related costs, professional fees, shareholder relations fees, facilities and equipment-related costs for administration departments, amortization of intangibles and supplies.

Product Design and Development. Product design and development expenses consist primarily of salaries, other employee-related costs, facilities and equipment-related costs and costs of supplies.

Gain on insurance proceeds: During the third quarter of fiscal 2010, we recorded a gain on insurance proceeds of $1.5 million related to the fire at our Star Circuits manufacturing facility as described in Note 10 of the notes to the consolidated financial statements.

Goodwill Impairment: During the third quarter of fiscal 2010, we recorded a goodwill impairment of $0.7 million related to our Schools and ~~5.5%~~Theatres business unit and $0.7 million related to our International business unit. The impairment for both business units was generally related to a decline in the market value of ~~net~~our stock during the period and lower sales ~~for fiscal 2010.~~expected over the next 12 months.

Interest expense decreased slightly for the ~~second~~third quarter of fiscal 2010 as compared to the ~~second~~third quarter of fiscal 2009. For the first ~~six~~nine months of fiscal 2010, interest expense decreased 50.0% to $0.1 million from $0.2 million for the first ~~six~~nine months of fiscal 2009. The decrease is due to lower average borrowings outstanding during the first half of fiscal 2010 as compared to the first half of fiscal 2009 and lower bank costs for letters of credit. We expect that interest expense will remain at relatively low levels for the rest of fiscal 2010.

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OTHER INCOME (EXPENSE), NET

Other income (expense) ~~decreased~~increased for the ~~second~~third quarter of fiscal year 2010 to a loss of ~~$0.7~~$0.3 million as compared to a loss of ~~$1.3~~$0.7 million for the ~~second~~third quarter of fiscal year 2009. For the first ~~six~~nine months of fiscal 2010, it decreased to a loss of ~~$1.3~~$1.6 million as compared to a loss of ~~$1.7~~$2.4 million for the same period in fiscal 2009. The decrease of net other expense ~~results~~resulted from the effects of earnings attributable to unconsolidated affiliates and currency gains and losses and a pre-tax loss of approximately $0.2 million in the first quarter of 2010 from the sale of our investment in Ledtronics, our Malaysia affiliate. Finally, as a ~~result of~~resulted from the loss in value of the U.S. dollar, we experienced lower levels of currency losses on U.S. dollar advances to foreign subsidiaries. On a ~~year to date~~year-to-date basis, we have realized approximately ~~$0.7~~$0.1 million more in currency gains in fiscal 2010 versus the same period in fiscal 2009. We also continue to have losses resulting from our equity investment in ~~OutCast~~Outcast Media International, Inc. (“~~OutCast”~~Outcast”), formerly known as FuelCast Media International, LLC. These losses ~~are~~were approximately $0.4 million less in the third quarter and $0.2 million ~~higher in the second quarter and year to date~~less year-to-date for fiscal 2010 as compared to the same periods one year ago. During the quarter, our equity basis in these losses was reduced to 10%, which caused the decline. We began to recognize losses at the rate of 10% since we have written our equity investment down to zero, and the rate of 10% represents our share of losses based on our ownership percentage of the next senior security which is the convertible debt. See notes 1 and 10 of the consolidated financial statements for additional information. Furthermore, our losses could increase in the rest of fiscal 2010, as explained in ~~Note~~note 10 of the consolidated financial statements. The losses could result if ~~OutCast~~Outcast is unable to refinance its debt which includes approximately $1.6 million owed to us and approximately $1.8 million which we guarantee. As of the date of filing this report, we ~~have~~had entered into a non-binding letter of intent with Outcast, which ~~includes~~contemplates repayment of accounts owed to ~~us.~~us, and we have obtained additional collateral in the form of a guarantee from a third party on a portion of the amount owed.

INCOME TAX EXPENSE

Income taxes were approximately ~~$3.9~~($5.5) million in the ~~second~~third quarter of fiscal 2010 and ~~$6.8~~$2.5 million for the ~~second~~third quarter of fiscal 2009. For the first ~~six~~nine months of fiscal 2010, income taxes decreased to ~~$5.5~~$0.2 million as compared to ~~$11.9~~$14.4 million for the first ~~six~~nine months of fiscal 2009. The effective rate for the third quarter of fiscal 2010 was approximately 39.8% as compared to 37.8% for the third quarter of fiscal 2009. The effective tax rate for the ~~six~~nine months ended ~~October 31, 2009~~January 30, 2010 was ~~46.8%~~0.1% as compared to ~~35.1%~~35.6% for the first ~~six~~nine months of fiscal 2009. The ~~effective rate for the second quarter of fiscal 2010 was approximately 44.8% as compared to 35.7% for the second quarter of fiscal 2009. The increase for the quarter and year to date~~decrease in the effective rate on a year-to-date basis is ~~due to~~ the ~~size~~result of the losses ~~incurred~~ in foreign jurisdictions which have low tax rates relative to ~~domestic income,~~the United States. Congress has not reinstated the tax credit for research and development activities which causes the effective rate to increase. In addition, due to the lower levels of income expected for the year domestically, the items that cause a change from the statutory rate to the effective rate have a more significant impact. If we are able to increaseexpired on December 31, 2009. This has had an adverse impact on our ~~income, we would expect that the~~ effective tax rate ~~will decrease.~~as the credit was approximately $0.9 million in the prior year. As of December 31, 2009, we are therefore not recognizing any future benefits until such time as it is reinstated.

LIQUIDITY AND CAPITAL RESOURCES

Working capital was ~~$121.5~~$117.7 million at ~~October 31, 2009~~January 30, 2010 and ~~$107.3~~$107.4 million at May 2, 2009. We have historically financed working capital needs through a combination of cash flow from operations and borrowings under bank credit agreements.

Cash provided by operations for the first ~~six~~nine months of fiscal 2010 was ~~$29.7~~$37.9 million. ~~Net income~~The net loss of ~~$6.3~~$2.1 million plus ~~depreciation and amortization of $11.3 million, $9.4~~$17.9 million in changes in net operating assets, adjusted by depreciation and amortization of $17.0 million, the add-back of ~~$1.3~~$1.5 million of equity in net losses of equity investments, and ~~$1.7~~$2.5 million of stock-based compensation, and $1.4 million of goodwill impairment and various other items, generated most of the cash provided by operations.

The most significant drivers of the change in net operating assets for the first ~~six~~nine months of fiscal 2010 were the decreases in accounts receivable, long-term receivables, inventories, and costs and estimated earnings in excess of billings and increases in customer deposits. These changes were offset by decreases in accounts payable, billing in excess of costs and estimated earnings, accrued expenses and warranty obligations, and income taxes payable. The decrease in accounts receivables and inventories was the result of the lower level of net sales; however, days sales outstanding increased by two days over fiscal 2009 ~~year end~~year-end levels. Days inventory outstanding decreased slightly as compared to the end of fiscal 2009. Other changes in net operating assets were not significant and generally related to the change in overall business during the quarter. Overall, changes in operating assets and liabilities can be impacted by the timing of cash flows on large orders, as described above, that can cause significant fluctuations in the short term. As a result of various initiatives underway, including changes in manufacturing, purchasing, collections and payment processes, we expect to continue improving our cash flow relative to sales and costs of goods from operating activities.

~~-26-~~

Cash used by investing activities of ~~$5.9~~$13.4 million for the first ~~six~~nine months of fiscal 2010 included ~~$6.2~~$12.9 million for purchases of property and equipment, ~~and $0.3~~$1.7 million of purchased receivables from an affiliate, and a $0.1 million investment, which was offset by ~~$0.1~~$0.7 million of proceeds from ~~the sale of property and equipment~~insurance for assets destroyed in a fire and $0.5 million from sale of Ledtronics, our Malaysian affiliate. During the first ~~six~~nine months of fiscal 2010, we invested approximately ~~$1.7~~$3.6 million in manufacturing equipment, ~~$1.3~~$1.9 million in product demonstration equipment, ~~$1.3~~$1.6 million in information systems infrastructure, including software, ~~$0.3~~$3.8 million in facilities, and ~~$1.7~~$2.0 million in rental equipment. These investments were made to support sales, in the case of demo and rental equipment, and other areas, primarily for maintaining existing infrastructure rather than for growth needs. The investment in facilities related to the closing of a transaction we committed to in fiscal 2007 to purchase a building in Brookings, South Dakota. As of the end of the ~~second~~third quarter of fiscal 2010, capital expenditures were ~~2.7%~~4.3% of net sales. The purchase of receivables from an affiliate consists of our purchase of receivables from ~~OutCast~~Outcast to facilitate cash flow from operations of ~~their~~its business.

-29-

Cash used by financing activities of ~~$3.7~~$3.5 million for the first ~~six~~nine months of fiscal 2010 consisted of the dividend paid to shareholders of $3.9 million on June 23, 2009, which was partially offset by ~~$0.2~~$0.4 million of proceeds from the exercise of stock options. During the second quarter of fiscal 2010, we paid off the long-term debt related to a purchase of a long-term software maintenance agreement incurred in the first quarter of fiscal 2010 as a result of incentives and pricing considerations.

A minimum fixed charge coverage ratio of 2 to 1 at the end of any fiscal year. The ratio is equal to (a) EBITDA less dividends, a capital expenditure reserve of $6 million, and income tax expense, over (b) all principal and interest payments with respect to debt, excluding debt outstanding on the line of credit, and

b.	A ratio of interest-bearing debt, excluding any marketing obligations, to EBITDA of less than 1 to 1 at the end of any fiscal quarter.

~~-27-~~

-30-

~~RECENT EVENTS~~

In October 2009, our subsidiary Star Circuits, Inc., which produces circuit boards for use in our products, had a fire which damaged or destroyed its key production equipment and building mechanical and structural components. Operations have been stopped in this facility until new equipment is installed and building repair is completed, which is estimated to be in the fourth quarter of fiscal 2010. Our insurance policies and coverages entitle us to receive payments for business interruption, as well as recoveries for damage to the building and equipment as a result of the fire. Income resulting from business interruption insurance, if any, and property damage insurance will not be recognized until all contingencies are resolved. The total extent of the property damage and other expected costs to rebuild and cover losses are estimated to be between approximately $2.0 to $4.0 million. Although there are assets included within inventory and property and equipment that have been impaired, we believe that insurance proceeds will be sufficient to cover substantially all of the losses and the additional expenses incurred and therefore we have not recognized any losses as of October 31, 2009. This estimate is subject to change based on the final insurance settlement and completion of our analysis of potential losses. We have been able to source the circuit boards from an outside vendor.

IItem~~tem~~ 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY EXCHANGE RATES

Through ~~October 31, 2009,~~January 30, 2010, most of our net sales were denominated in United States dollars, and our exposure to foreign currency exchange rate changes on net sales has not been significant. Net sales originating outside the United States for the ~~second~~third quarter of fiscal 2010 were approximately ~~12.4%~~13.1% of total net sales, of which a portion was denominated in Canadian dollars, euros, Chinese renminbi or British pounds. If we believed that currency risk in any foreign location was significant, we would utilize foreign exchange hedging contracts to manage our exposure to the currency fluctuations. Over the ~~long-term,~~long term, net sales to international markets are expected to increase as a percentage of net sales and, consequently, a greater portion of this business could be denominated in foreign currencies. In addition, we fund our foreign subsidiaries’ operating cash ~~to foreign subsidiaries~~needs in the form of loans denominated in United States dollars. As a result, operating results may become subject to fluctuations based upon changes in the exchange rates of certain currencies in relation to the United States dollar. To the extent that we engage in international sales denominated in United States dollars, an increase in the value of the United States dollar relative to foreign currencies could make our products less competitive in international markets. This effect is also impacted by the sources of raw materials from international sources. We will continue to monitor and minimize our exposure to currency fluctuations and, when appropriate, use financial hedging techniques, including foreign currency forward contracts and options, to minimize the effect of these fluctuations. However, exchange rate fluctuations as well as differing economic conditions, changes in political climates, differing tax structures and other rules and regulations could adversely affect our financial results in the future.

INTEREST RATE RISKS

Our exposure to market rate risk for changes in interest rates relates primarily to our debt and long-term accounts receivables. We maintain a blend of both fixed and floating rate debt instruments. As of ~~October 31, 2009,~~January 30, 2010, our outstanding debt approximated less than $0.1 million, substantially all of which was in variable rate obligations. Each 100 basis point increase or decrease in interest rates would have an insignificant annual effect on variable rate debt interest based on the balances of such debt as of ~~October 31, 2009.~~January 30, 2010. For fixed-rate debt, interest rate changes affect its fair market value but do not affect earnings or cash flows.

In connection with the sale of certain display systems, we have entered into various types of financings with customers. The aggregate amounts due from customers include an imputed interest element. The majority of these financings carry fixed rates of interest. As of ~~October 31, 2009,~~January 30, 2010, our outstanding long-term receivables were approximately ~~$20.6~~$20.4 million. Each 25 basis point increase in interest rates would have an associated annual opportunity cost to us of approximately ~~$0.1 million.~~$0.1million.

~~-28-~~

The following table provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations, for the last ~~two~~ quarters of fiscal year 2010 and subsequent fiscal years.

	Fiscal Years (dollars in thousands)												Fiscal Years (dollars in thousands)
	2010		2011		2012		2013		2014		Thereafter		2010			2011			2012			2013			2014			Thereafter
Assets:
Long-term receivables, including
current maturities:
Fixed-rate	$	4,627	$	3,347	$	3,095	$	2,734	$	1,564	$	5,314	$	4,374		$	3,314		$	3,053		$	2,757		$	1,593		$	5,351
Average interest rate		7.6%		8.0%		8.0%		8.0%		8.2%		8.4%		6.0	%		8.0	%		8.0	%		8.0	%		8.2	%		8.0	%
Liabilities:
Long- and short-term debt
Fixed-rate	$	13	$	26	$	-	$	-	$	-	$	-	$	13		$	26		$	-		$	-		$	-		$	-
Average interest rate		0.0%		0.0%		0.0%		0.0%		0.0%		0.0%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Long-term marketing obligations,
including current portion
Fixed-rate	$	105	$	361	$	247	$	137	$	134	$	7	$	20		$	341		$	253		$	151		$	134		$	7
Average interest rate		9.2%		8.9%		8.8%		8.7%		8.9%		8.4%		8.8	%		8.8	%		8.7	%		8.6	%		8.9	%		8.4	%

The carrying amounts reported on the balance sheet for long-term receivables and long- and short-term debt approximates their fair value.

Approximately ~~$53.0~~$52.6 million of our cash balances are denominated in United States dollars. Cash balances in foreign currencies are operating balances maintained in accounts of our foreign subsidiaries. A portion of the cash held in foreign accounts is used to collateralize outstanding bank guarantees issued by the foreign subsidiary.

-31-

IItem~~tem~~ 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as of ~~October 31, 2009,~~January 30, 2010, which is the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of ~~October 31, 2009,~~January 30, 2010, our disclosure controls and procedures were effective.

Based on the evaluation described in the foregoing paragraph, our Chief Executive Officer and Chief Financial Officer concluded that during the quarter ended ~~October 31, 2009,~~January 30, 2010, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PPART~~ART~~ II. OTHER INFORMATION

IItem~~tem~~ 1. LEGAL PROCEEDINGS

Our company and two of our executive officers are named as defendants in a consolidated class action filed in the U.S. District Court for the District of South Dakota in November 2008 on behalf of a class of investors who purchased our stock in the open market between November 15, 2006 and April 5, 2007. In an Amended Consolidated Complaint filed on April 13, 2009 (“Complaint”), the plaintiffs allege that the defendants made false and misleading statements of material facts about our business and expected financial performance in the company’s press releases, its filings with the Securities and Exchange Commission, and conference calls, thereby inflating the price of the company’s common stock. The Complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Complaint seeks compensatory damages on behalf of the alleged class in an unspecified amount, reasonable fees and costs of litigation, and such other and further relief as the Court may deem just and proper. On June 5, 2009, we filed a motion to dismiss the Complaint. In July 2009, the plaintiffs filed a memorandum of law in opposition to our motion to dismiss. In September 2009, we filed a reply memorandum in support of the motion to dismiss. Briefing on the motion is underway.

We believe that we, and the other defendants, have meritorious defenses to the claims made in the Complaint, and we intend to contest these actions vigorously. We are not able to predict the ultimate outcome of this litigation, but regardless of the merits of the claims, it may be costly and disruptive. The total costs cannot be reasonably estimated at this time. Securities class action litigation can result in substantial costs and divert our management’s attention and resources, which may have a material adverse effect on our business, financial condition and results of operations, including our cash flow.

In the third quarter of fiscal 2008, our Board of Directors received letters from lawyers acting on behalf of three of our shareholders. The letters demanded that our company pursue claims against our officers, directors, and unspecified others for allegedly wrongful conduct based upon the same general events as are alleged in the Complaint. The Board referred the demands to a special committee of independent directors for investigation and action. The special committee concluded its investigation and determined that it would not be in the best interests of the company to take any action on the allegations contained in the demands at this time and that it will continue to monitor the matter and revisit the demands if more information becomes available.

~~-29-~~

IItem~~tem~~ 1A. RISK FACTORS

The discussion of our business and operations included in this Quarterly Report on Form 10-Q should be read together with the risk factors described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended May 2, ~~2009. It describes~~2009 as amended and supplemented by the risk factors listed below. They describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties, together with other factors described elsewhere in this Report, have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. New risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect financial performance.

Difficult and volatile conditions in the capital, credit and commodities markets and in the overall economy could continue to materially adversely affect our financial position, results of operations and cash flow, and we do not know ifthese conditions will improve in the near future. Our financial position, results of operations and cash flow could continue to be materially adversely affected by the current and continuing difficult conditions and significant volatility in the capital, credit and commodities markets and in the overall worldwide economy. These factors, combined with declining business and consumer confidence and increased unemployment, have precipitated a worldwide economic slowdown and recession in the United States and other parts of the world. The continuing impact that these factors might have on us and our business is uncertain and cannot be predicted at this time. Current economic conditions have accentuated each of the risks described in this Annual Report on Form 10-K and magnified their potential effect on us and our business. The difficult conditions in these markets and the overall economy affect our business in a number of ways. For example:

-32-

Although we believe we have sufficient liquidity under our credit agreement with a bank to run our business, under extreme market conditions, there can be no assurance that such funds would be available or sufficient and, in such a case, we may not be able to successfully obtain additional financing on favorable terms, or at all.

·	Market volatility has exerted downward pressure on our stock price, which may make it more difficult for us to raise additional capital in the future.

·	Economic conditions could continue to result in our customers experiencing financial difficulties or electing to limit spending because of the declining economy, which may result in decreased net sales and earnings for us.

·	Economic conditions combined with the weakness in the credit markets could continue to lead to increased price competition for our products, increased risk of excess and obsolete inventories and higher overhead costs as a percentage of revenue.

If the markets in which we participate experience further economic downturns, as well as a slow recovery period, this could continue to negatively impact our sales and revenue generation, margins and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations

We do not know if market conditions or the state of the overall economy will improve in the near future or when improvement will occur.

Circumstances could arise in which our goodwill and intangible assets could become impaired, causing us to recognize substantial non-cash impairment charges, which would adversely affect our financial results. We have pursued and will continue to seek potential acquisitions to complement and expand our existing businesses, increase our revenues and profitability, and expand our markets. As a result of prior acquisitions, we have goodwill and intangible assets recorded on our balance sheet as described in the notes to the consolidated financial statements contained elsewhere in this report. We will continue to evaluate the recoverability of the carrying amount of our goodwill and intangible assets on an ongoing basis, and we may incur substantial non-cash impairment charges, which would adversely affect our financial results. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result. A decline in our market capitalization or in our estimated forecasted discounted cash flows also could result in an impairment of our goodwill and intangible assets. A non-cash impairment charge could materially and adversely affect the net income for the reporting period in which it is recorded.

Uncertainties inherent in certain accounting matters could adversely affect our operating results. The discussion of goodwill impairment and long-lived assets matters in Notes 1 and 5 to our consolidated financial statements is incorporated by reference.

IItem~~tem~~ 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

IItem~~tem~~ 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

IItem~~tem~~ 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

IItem~~tem~~ 5. OTHER INFORMATION

Not applicable.

IItem~~tem~~ 6. EXHIBITS

~~The~~Certain of the following exhibits are incorporated by reference from prior filings. The form with which each exhibit was filed ~~with this Quarterly Report on Form 10-Q:~~and the date of filing are as indicated below.

10.1	Loan Agreement dated October 14, 1998 between U.S. Bank National Association and Daktronics, Inc. (4)

10.2	Sixth Amendment to Loan Agreement Dated January 23, 2007 by and between Daktronics, Inc. and U.S. Bank National Association. (3)

-33-

10.3	Eighth Amendment to Loan Agreement Dated November 12, 2009 by and between Daktronics, Inc. and U.S. Bank National Association. (1)

10.4	Renewal Revolving Note Dated November 12, 2009 between Daktronics, Inc. and U.S. Bank National Association. (2)

31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(5)

31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(5)

32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).(5)

32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).(5)

(1)

Incorporated by reference to Exhibit 10-1 filed with our Current Report on Form 8-K filed on November 12, 2009.

(2)

Incorporated by reference to Exhibit 10-2 filed with our Current Report on Form 8-K filed on November 12, 2009.

(3)

Incorporated by reference to Exhibit 10-1 filed with our Current Report on Form 8-K filed on January 25, 2007.

(4)

Incorporated by reference to Exhibit 10-6 filed with our Quarterly Report on Form 10-Q filed on December 11, 1998.

~~-30-~~

(5)

Filed herewith electronically.

SSIGNATURE~~IGNATURE~~

	~~/s/ William R. Retterath~~
	~~Daktronics, Inc.~~
	~~William R. Retterath,~~
	~~Chief Financial Officer~~
	~~(Principal Financial Officer~~
	~~and Principal Accounting~~
	/s/ William R. Retterath Daktronics, Inc. William R. Retterath, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

	Six Months Ended						Nine Months Ended
	October 31,			November 1,			January 30,				January 31,
	2009			2008			2010				2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	6,281		$	21,923
Adjustments to reconcile net income to net cash provided
Net income (loss)								$	(2,090	)	$	26,085
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation		11,123			11,872				16,762			18,026
Amortization		157			157				236			236
Gain on sale of property and equipment		(26	)		(977	)			(993	)		(977	)
Stock-based compensation		1,712			1,594				2,491			2,367
Equity in losses of affiliates		1,347			1,266				1,532			1,698
Goodwill impairment									1,410			-
Provision for doubtful accounts		(269	)		69				(270	)		71
Loss on sale of equity investee		231			-				230			-
Deferred income taxes, net		(299	)		(191	)			(554	)		(356	)
Change in operating assets and liabilities		9,400			(20,021	)			19,059			(19,520	)
Net cash provided by operating activities		29,657			15,692				37,813			27,630

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(6,247	)		(16,569	)			(12,945	)		(19,306	)
Loans to equity investees		-			(500	)			-			(499	)
Purchases of equity investment									(100	)		-
Purchases of receivables from equity investee, net		(306	)		-				(1,676	)		-
Proceeds from sale of property and equipment		104			2,947
Proceeds from sale and insurance recoveries of property and equipment									820			3,017
Proceeds from sale of equity method investments		535			-				535			-
Net cash used in investing activities		(5,914	)		(14,122	)			(13,366	)		(16,788	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on notes payable		(13	)		(546	)
Proceeds from exercise of stock options		207			578				365			626
Excess tax benefits from stock-based compensation		-			159				60			363
Principal payments on long-term debt									(13	)		(545	)
Dividend paid		(3,874	)		(3,635	)			(3,874	)		(3,635	)
Net cash used in financing activities		(3,680	)		(3,444	)			(3,462	)		(3,191	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(201	)		237				(180	)		214
INCREASE IN CASH AND CASH EQUIVALENTS		19,862			(1,637	)			20,805			7,865

CASH AND CASH EQUIVALENTS:
Beginning		36,501			9,325				36,501			9,325
Ending	$	56,363		$	7,688			$	57,306		$	17,190

Supplemental disclosures of cash flow information:
Cash payments for:
Interest:	$	202		$	219			$	227		$	330
Income taxes, net of refunds		8,375			8,346				8,752			15,417

Supplemental schedule of non-cash investing and financing activities:
Demonstration equipment transferred to inventory		929			869				1,062			991
Purchase of property and equipment included in accounts payable		-			261				993			-
Conversion of accounts receivable to equity interest in affiliate		-			1,947				-			1,947

See notes to consolidated financial statements.

	Amount			Amount
Beginning accrued warranty costs	$	19,724		$	18,205
Warranties issued during the period		1,992			2,241
Settlements made during the period		(5,232	)		(4,034	)
Changes in accrued warranty costs for pre-existing
warranties during the period, including expirations		1,721			717
Ending accrued warranty costs	$	18,205		$	17,129

		Three Months Ended		Six Months Ended			Three Months Ended		Nine Months Ended
		October 31,	November 1,	October 31,	November 1,		January 30,	January 31,	January 30,	January 31,
		2009	2008	2009	2008		2010	2009	2010	2009
Net sales	Net sales	100.0%	100.0%	100.0%	100.0%	Net sales	100.0%	100.0%	100.0%	100.0%
Cost of goods sold	Cost of goods sold	70.9%	71.6%	72.2%	71.7%	Cost of goods sold	85.1%	73.6%	75.3%	72.3%
	Gross profit	29.1%	28.4%	27.8%	28.3%	Gross profit	14.9%	26.4%	24.7%	27.7%
Operating expenses	Operating expenses	21.1%	16.7%	22.3%	17.9%	Operating expenses	34.2%	21.1%	25.2%	18.7%
	Operating income	8.0%	11.7%	5.5%	10.4%	Operating income (loss)	(19.3%)	5.3%	(0.5%)	9.0%
Interest income	Interest income	0.3%	0.3%	0.3%	0.3%	Interest income	0.5%	0.4%	0.3%	0.3%
Income expense	Income expense	-0.1%	0.0%	0.0%	0.0%	Income expense	0.0%	0.0%	0.0%	0.0%
Other income (expense), net	Other income (expense), net	-0.6%	-0.8%	-0.6%	-0.5%	Other income (expense), net	(0.4%)	(0.5%)	(0.5%)	(0.5%)
	Income before income taxes	7.6%	11.2%	5.2%	10.2%	Income (loss) before income taxes	(19.2%)	5.2%	(0.7%)	8.5%
Income tax expense		3.4%	4.0%	2.4%	3.6%
Income tax expense (benefit)						Income tax expense (benefit)	(7.6%)	2.0%	0.0%	3.1%
	Net income	4.2%	7.2%	2.8%	6.6%	Net income (loss)	(11.6%)	3.2%	(0.7%)	5.7%

Fiscal years ending	Amount		Amount
2010	$	1,708	$	860
2011		3,080		2,929
2012		2,102		1,831
2013		1,443		1,119
2014		1,027		773
Thereafter		1,871		1,839
Total	$	11,231	$	9,351