UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended October 31, 2009May 1, 2010

OR

For the transition period from              to

Commission file number 0-13200

Astro-Med, Inc.

(Exact name of registrant as specified in its charter)

(401) 828-4000

(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  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  x.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.05 Par Value – 7,153,0907,290,139 shares

(excluding treasury shares) as of November 30, 2009May 14, 2010

ASTRO-MED, INC.

INDEX

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Part I. FINANCIAL INFORMATION

ASTRO-MED, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notesNotes to the unauditedcondensed consolidated financial statements.statements (unaudited).

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ASTRO-MED, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

See accompanying notesNotes to the unauditedcondensed consolidated financial statements.statements (unaudited).

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ASTRO-MED, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

See accompanying notesNotes to the unauditedcondensed consolidated financial statements.statements (unaudited).

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ASTRO-MED, INC.

NOTES TO THE UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(1) Overview

Headquartered in West Warwick, Rhode Island, Astro-Med Inc. is a leading manufacturer ofdevelops and manufactures specialty high tech printing systems, electronic medical instrumentation,printers and test and measurement instruments.data acquisition systems. The Company’s products are distributed through its own sales force in the United States, Canada, and Western Europe and by authorized dealers elsewhere in the world. Astro-Med, Inc. products are sold under the brand names Astro-Med^® ,Test & Measurement, Grass^® Technologies and QuickLabel^® Systems and are employed around the world in a wide range of aerospace, automotive, communications, chemical, food and beverage, medical, military, industrial, and packaging applications.

Unless otherwise indicated, references to “Astro-Med,” the “Company,” “we,” “our,” and “us” in this Quarterly Report on Form 10-Q refer to Astro-Med, Inc. and its consolidated subsidiaries.

(2) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Astro-Med without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods included herein. Results of operations for the interim periods presented herein are not necessarily indicative of the results that may be expected for the full year. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with footnotes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009. Subsequent events have been evaluated by management through2010.

Results of operations for the timeinterim periods presented herein are not necessarily indicative of filing this Form 10-Q with the SEC on December 4, 2009 and are disclosed as applicable.results that may be expected for the full year.

The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Some of the more significant estimates relate to the allowances for doubtful accounts and credits, inventory valuation, impairment of long-lived assets and goodwill, income taxes, share-based compensation and warranty reserves. Management’s estimates are based on the facts and circumstances available at the time estimates are made, past historical experience, risk of loss, general economic conditions and trends, and management’s assessments of the probable future outcome of these matters. Consequently, actual results could differ from those estimates.

Certain reclassificationsSubsequent events have been made toevaluated by management through the prior year’s presentation to conform tofiling of this form 10-Q with the current year’s presentation.SEC.

(3) Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

(4) Net Income Per Common Share

Basic net income per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted net income per share is calculated by dividing net income (loss) by the weighted average number of shares and, if dilutive, common equivalent shares for stock options outstanding during the period. A reconciliation of the shares used in calculating basic and diluted net income per share is as follows:

For the three and nine months ended October 31,May 1, 2010 and May 2, 2009, the diluted per share amounts do not reflect options outstanding of 794,727632,897 and 800,686, respectively. For the three and nine months ended November 1, 2008, the diluted per share amounts do not reflect options outstanding of 513,667 and 285,064, respectively. These outstanding options were not included,797,839 respectively, due to their anti-dilutive effect, as the exercise price of the options was greater than the average market price of the underlying stock during the periods presented.

ASTRO-MED, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the three months ended May 2, 2009, diluted net loss per common share is the same as basic net loss per common share, as the inclusion of the effect of the common share equivalents then outstanding would be anti-dilutive. For this reason, excluded from the calculation of diluted net loss per common share for the three month period ended May 2, 2009 were “in the money” options to purchase 202,622 shares of the Company’s common stock.

(5) Revenue Recognition

The majority of Astro-Med’s product sales are recorded at the time of shipment, when legal title has transferred and risk of loss passes to the customer, when persuasive evidence of an arrangement exists, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured in accordance with the requirements in Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition in Financial Statements.” When a sale arrangement involves training or installation, the deliverables in the arrangement are evaluated to determine whether they represent separate units of accounting in accordance with SAB 104 and FASB’s ASC TopicAccounting Standards Codification (ASC) 605-25, “Revenue Recognition-Multiple-Element Arrangements.” This evaluation occurs at inception of the arrangement and as each item in the arrangement is delivered. The total fee from the arrangement is allocated to each unit of accounting based on its relative fair value. Fair value for each element is established generally based on the sales price charged when the same or similar element is sold separately. Revenue is recognized when revenue recognition criteria for each unit of accounting are met. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. All of our equipment contains embedded operating systems and data management software which is included in the purchase price of the equipment. The software is deemed incidental to the systems as a whole, as it is not sold or marketed separately and its production costs are minor as compared to those of the hardware system. Returns and customer credits are infrequent and are recorded as a reduction to sales. Rights of return are not included in sales arrangements. Revenue associated with products that contain specific customer acceptance criteria is not recognized before the customer acceptance criteria are satisfied. Discounts from list prices are recorded as a reduction to sales. Amounts billed to customers for shipping and handling fees are included in sales while related shipping and handling costs are included in cost of sales.

Infrequently, Astro-Med recognizes revenue for non-recurring engineering (NRE) fees for product modification orders upon completion of agreed-upon milestones. Revenue is deferred for any amounts received prior to completion of milestones. Certain of our NRE arrangements include formal customer acceptance provisions. In such cases, we determine whether we have obtained customer acceptance for the specific milestone before recognizing revenue. NRE fees have not been significant in the periods presented herein.

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ASTRO-MED, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Infrequently, Astro-Med receives requests from customers to hold product being purchased from us for the customers’ convenience. Revenue is recognized for such bill and hold arrangements in accordance with the requirements of SAB 104 which requires, among other things, the existence of a valid business purpose for the arrangement; the transfer of ownership of the purchased product; a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the readiness of the product for shipment; the use of customary payment terms; no continuing performance obligation by usus; and segregation of the product from our inventories.

(6) Share-Based Compensation

Astro-Med has one equity incentive plan (the “Plan”) under which incentive stock options, non-qualified stock options, restricted stock and other equity based awards may be granted to officers and keycertain employees. To date, only options have been granted under the Plan. Options granted to employees vest over four years. An aggregate of 1,000,000 shares were authorized for awards under the Plan. The exercise price of each stock option will be established at the discretion of the Compensation Committee; however, any incentive stock options granted must be at an exercise price of not less than fair market value at the date of grant. The Plan provides for an automatic annual grant of ten-year options to purchase 5,000 shares of stock to each non-employee director upon the adjournment of each annual shareholders’ meeting. Each such option is exercisable at the fair market value as of the grant date and vests immediately prior to the next succeeding annual shareholders’ meeting. During the second quarter of fiscalAt May 1, 2010, 15,000 options were awarded to non-employee directors pursuant to the Plan. At October 31, 2009, 810,500741,500 shares were available for grant under the Plan.

We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and the Company’s dividend yield. The stock price volatility assumption is based on the historical weekly price data of Astro-Med’sour common stock over a period equivalent to the weighted average expected life of theour options. Management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors. In determining the expected life of the option grants, Astro-Medthe Company has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed the expected risk tolerance of different option groups. The risk-free interest rate is based on the actual U.S. Treasury zero coupon rates for bonds matching the expected term of the option as of the option grant date.

ASTRO-MED, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value of stock options granted during the ninethree months ended October 31,May 1, 2010 and May 2, 2009 and November 1, 2008 was estimated using the following assumptions:

The weighted average fair value per share for options granted was $1.67$2.12 during the first quarter of fiscal 2010 and $1.512011 compared to $1.77 during the secondfirst quarter of fiscal 2010 compared to $3.41 and $3.65 during the first and second quarters of fiscal 2009. No options were granted during the third quarter of fiscal 2010 and 2009.2010.

Aggregated information regarding stock options granted under the Plan for the nine months ended October 31, 2009as of May 1, 2010 is summarized below:

Share-based compensation expense was recognized as follows:

As of October 31, 2009May 1, 2010 there was $532,485$492,606 of unrecognized compensation expense related to unvested options.

Astro-Med has an Employee Stock Purchase Plan allowing eligible employees to purchase shares of common stock at a 15% discount from fair value on the date of purchase. A total of 247,500 shares were reserved for issuance under this plan. During the quarters ended October 31, 2009 and November 1, 2008, 2,331 and 1,684 shares were purchased under this plan. During the ninethree months ended October 31,May 1, 2010 and May 2, 2009, 1,728 and November 1, 2008, 7,416 and 4,1532,383 shares were purchased under this plan. As of October 31, 2009, 86,444May 1, 2010, 82,790 shares remain available.

During the quarter ended May 1, 2010, the Company purchased approximately 200,000 stock options held by certain key executives. The options had an exercise price of $5.45 and were due to expire on March 20, 2010. The purchase price paid by the Company for the options was approximately $250,000, representing the closing price for the Astro-Med’s common stock on March 3, 2010, less a 10% discount and the exercise price for each of the options. The original underlying stock options were granted during fiscal 2000 and there was no unrecognized compensation expense associated with the options. This transaction was charged to equity. The cash settlement of these options during the current quarter was a one-time event, as the Company has not historically settled any options for cash and has no plans to do so again in the future.

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ASTRO-MED, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

(7) Comprehensive Income (Loss)

The Company’s comprehensive income (loss) is as follows:

ASTRO-MED, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(8) Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead. The components of inventories are as follows:

(9) Income Taxes

The Company’s effective tax rates for the periods, which are based on the projected effective tax rate for the full year, are as follows:

As of October 31, 2009, ourMay 1, 2010, the Company’s cumulative unrecognized tax benefits totaled $1,157,347$888,971 compared to $1,127,452$875,225 as of January 31, 2009.2010. There were no developments affecting unrecognized tax benefits during the three and nine monthsquarter ended October 31, 2009.May 1, 2010.

During the third quarter of fiscal 2010, we recognized an income tax expense of approximately $353,000, which included an expense of $378,000 on the quarter’s pre-tax income and a benefit of $25,000 related to the difference between the prior year’s tax provision and the actual return as filed. During the third quarter of fiscal 2009, we recognized an income tax expense of approximately $203,000, which included an expense of $301,000 on the quarter’s pre-tax income, a benefit of $71,000 related to the extension of the R&D tax credit and a benefit of $27,000 related to the difference between the prior year’s tax provision and the actual returns as filed.

During the nine months ended October 31, 2009, we recognized an income tax expense of approximately $544,000, which included an expense of $569,000 on the nine month’s pre-tax income and a benefit of $25,000 related to the difference between the prior year’s tax provision and the actual return as filed. During the nine months ended November 1, 2008, we recognized an income tax expense of approximately $1,612,000 which included 1) expense of $1,651,000 on the nine month’s pre-tax income, 2) expense of $59,000 related to discrete payment of additional state franchise tax, 3) benefit of $71,000 related to the extension of the R&D tax credit and 4) benefit of $27,000 related to the difference between the prior year’s tax provision and the actual returns as filed.-8-

ASTRO-MED, INC.

NOTES TO THE UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)STATEMENTS (unaudited)

(10) Segment Information

The Company reports three segments consistent with its sales product groups: Test & Measurement (T&M); QuickLabel Systems (QuickLabel) and Grass Technologies (GT)(Grass). The Company evaluates segment performance based on the segment profit before corporate expenses.

Summarized below are the Net Sales and Segment Operating Profit for each reporting segment:

(11) Recent Accounting Pronouncements

FASB Establishes Accounting Standards Codification™

Effective August 2, 2009, Astro-Med adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105, “Generally Accepted Accounting Principles” (“the Codification”). The Codification represents a major restructuring of accounting and reporting standards and is designed to simplify user access to all authoritative U.S. generally accepted accounting principles (“GAAP”) by providing this literature in a topically organized structure. The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is now the official single source of authoritative U.S. GAAP. All existing accounting standards are superseded and all other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections within the Codification. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issue Task Force Abstracts, but instead will issue Accounting Standard Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right as they serve only to update the Codification, provide background information about the guidance and provide the basis for conclusions on the change(s) in the Codification. The principle impact on our financial statements is limited to disclosures, as all references to authoritative accounting literature will now be referenced in accordance with the Codification.

ASTRO-MED, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Business CombinationsFair Value Measurements

In April 2009,January 2010, the FASB issued guidance included in ASC Topic 805, “Business Combinations,Accounting Standards Update (ASU) 2010-06, “Improving Disclosures About Fair Value Measurement,” which amends the accounting for assets and liabilities arising from contingencies in a business combination and requires that pre-acquisition contingencies be recognized atreporting entities to make new disclosures about recurring or nonrecurring fair value ifmeasurements including significant transfers into and out of Level 1 and Level 2 fair value can be reasonably determined. Ifmeasurements and information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value cannot be reasonably determined, measurement is required to be based on the best estimate in accordance with FASB’s ASC Topic 450, “Contingencies.” We adopted this guidance effective February 1, 2009, and it will apply to all business combinations prospectively from that date. The impact of this guidance on our consolidated financial statements will depend on the nature, terms and size of the acquisitions we consummate in the future.

In December 2007, the FASB issued guidance included in ASC Topic 805, “Business Combinations,” which improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The provisions in the guidance establish principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and determines what information to disclose in order to enable users of the financial statements to evaluate the nature and financial effects of the business combination. We adopted this guidance effective February 1, 2009, and it will apply to all business combinations prospectively from that date. The impact of this guidance on our consolidated financial statements will depend on the nature, terms and size of the acquisitions we consummate in the future.

Fair Value Accounting

In August 2009, the FASB issuedmeasurements. ASU No. 2009-05, “Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value”, which provided amendments for the fair value measurement of liabilities. ASU No. 2009-05 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 of the following techniques: 1) a valuation technique that uses either the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as an asset; or 2) another valuation technique that is consistent with the principles in ASC Topic 820 such as the income and market approach to valuation. ASU No. 2009-05 also clarifies that when estimating the 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. This update further clarifies that if the fair value of a liability is determined by reference to a quoted price in an active market for an identical liability, that price would be considered a Level 1 measurement in the fair value hierarchy. Similarly, if the identical liability has a quoted price when traded as an asset in an active market, it is also a Level 1 fair value measurement if no adjustments to the quoted price of the asset are required. This update2010-06 is effective for the first interim or annual reporting periodperiods beginning after issuance.December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The adoption of ASU 2009-05 did not have any impact on our consolidated financial position or results of operations.

In April 2009, the FASB issued guidance included in ASC Topic 320, “Investment-Debt and Equity Securities,” which amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial statements. The guidance requires that an entity evaluate for and record an other-than-temporary impairment even when it concludes that it does not intend to sell an impaired security and does not believe it likely that it will be required to sell the security before recovery of the amortized cost basis. Once an entity has determined that an other-than-temporary impairment has occurred, it is required to record the credit loss component of the difference between the securities’s amortized cost basis and the estimated fair value in earnings, whereas the remaining difference is to be recognized as a component of other comprehensive income and amortized over the remaining life of the security. This guidance is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this guidance2010-06 did not have a material impact on our consolidated financial position or results of operations.

In April 2009, the FASB issued guidance included in ASC Topic 820, “Fair Value Measurement and Disclosures,” for estimating fair value when the volume and level of activity related to the asset or liability have significantly decreased. This also includes guidance on identifying circumstances that indicate a transaction is not orderly and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. This guidance is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. The adoption of this standard did not have a material impact on our consolidated financial position or results of operations.

ASTRO-MED, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In April 2009, the FASB issued guidance included in ASC Topic 825, “Financial Instruments,” which requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements and requires those disclosures in summarized financial information at interim reporting periods. This guidance is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In September 2006, the FASB issued guidance included in ASC Topic 820, “Fair Value Measurement and Disclosures,” which clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under this guidance, fair value measurements would be separately disclosed by level within the fair value hierarchy. We adopted this guidance for financial assets and liabilities effective February 1, 2008 and for non financial assets and liabilities effective February 1, 2009. The adoption of this guidance did not have a material effect on our consolidated financial position or results of operations. See Note 13 for further details.

Revenue Recognition

In October 2009, the FASB issued ASU 2009-13, “Revenue Recognition (Topic 605) - —Multiple-Deliverable Revenue Arrangements - Arrangements—a consensus of the FASB Emerging Issues Task Force” and ASU 2009-14, “Software (Topic 985) - —Certain Arrangements That Include Software Elements - Elements—a consensus of the FASB Emerging Issues Task Force.” ASU 2009-13 provides amendments to the criteria in Subtopic 605-25 for separating consideration in multiple-deliverable arrangements. The amendments in this update established a selling price hierarchy for determining the selling price of a deliverable. ASU 2009-13 also eliminates the residual method of allocating arrangement consideration. ASU 2009-14 removes (1) tangible products containing software components and (2) non-software components that function together to deliver the tangible products essential functionality from the scope of software revenue guidance (ASC 965-605). ASU 2009-14 also provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. We are currently evaluating the impact of adopting these updates on our consolidated financial position and results of operations.

Other Accounting Changes

In May 2009, the FASB issued guidance included in ASC Topic 855, “Subsequent Events,” which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. In particular, the guidance addresses: the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. This guidance isbecame effective for interim and annual reporting periods ending after June 15, 2009. The adoption did not have a material impact on our consolidated financial position or results of operations.

Except for the ASU’s Nos. 2009-5, 2009-13 and 2009-14, as discussed above, all other ASUs issued by the FASB during 2009as of the filing date of this Quarterly Report on Form 10-Q are not expected to have a material effect on our consolidated financial statements.

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ASTRO-MED, INC.

NOTES TO THE UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)STATEMENTS (unaudited) (continued)

(12) Securities Available for Sale

SecuritiesPursuant to our investment policy, securities available for sale include auction rate securities and state and municipal securities with various contractual or anticipated maturity dates.dates ranging from two to thirteen months and an auction rate security. These securities are carried at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity until realized. Realized gains and losses from the sale of available for sale securities, if any, are determined on a specific identification basis. A decline in the fair value of any available for sale security below cost that is determined to be other than temporary will result in a write-down of its carrying amount to fair value. No such impairment charges were recorded for any period presented. All short-term investment securities classified as current assets have original maturities greater than 90 days. The fair value, amortized cost and gross unrealized gains and losses of the securities are as follows:

(13) Fair Value

We measure our financial assets at fair value on a recurring basis in accordance with the guidance provided in ASC Topic 820-10,820, “Fair Value Measurement and Disclosures” which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, ASC Topic 820-10820 establishes a three-tiered hierarchy for inputs used in management’s determination of fair value of financial instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect management’s belief about the assumptions market participants would use in pricing a financial instrument based on the best information available in the circumstances.

The fair value hierarchy is summarized as follows:

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ASTRO-MED, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

The following table represents the fair value hierarchy for our financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of October 31, 2009:basis:

The Level 3 assets consistasset consists of an auction rate securitiessecurity whose underlying assets are backed by either municipal assets or state-issued student and educational loans.assets. While we continue to earn interest on our auction rate securitiessecurity at the maximum contractual rates, these investments arerate, this investment is not currently trading and dotherefore does not currently have a readily determinable market value. We useThe Company uses the services of our investment advisor in concert with a global investment management and advisory firm to manage ourits auction rate securitiessecurity position. This investment management firm has developed and implemented a proprietary methodology for pricing auction rate securities using a disciplined discounted cash flow

ASTRO-MED, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

approach to establish fair market valuation. As of January 31, 2009,May 1, 2010, we adoptedused the market valuation as published by thisour investment management firm relative to our twoone remaining auction rate securities. Based on their market valuation,security. Accordingly, we recorded an unrealized loss of $98,550$8,570 related to our auction rate securitiessecurity as of October 31, 2009.May 1, 2010. We believe this unrealized loss is primarily attributable to the limited liquidity of these investmentsthis investment and have no reason to believe that any of the underlying issuers are presently at risk of default. Management has the intent and the ability to hold these securitiesthis security for an indefinite period of time and, accordingly, believes that the unrealized loss on its auction rate securities holdingssecurity holding is temporary in nature.

The following table provides a summary of changes in fair value of our auction rate securities for the three and nine months ended October 31, 2009:May 1, 2010:

(14) Litigation Settlement

In April 2008, followingNovember 2009, Astro-Med was awarded a trial in$1,391,000 judgment related to a lawsuit filed by the U.S. District Court of Rhode Island, the jury foundCompany against a former employee to have violated his noncompeteand a competitor business. At issue in the lawsuit was the violation of a non-competition agreement and awarded the Company damages of $375,800 against bothwhich the former employee and the former employee’s new employer.had signed as a condition of employment with Astro-Med. The Company was also awarded$1,391,000 judgment included both punitive and exemplary damages, and attorneys’as well as attorney fees (all of which have been previously expensed), resulting and related interest earned on the judgment and was recorded as a gain on legal settlement in the consolidated statement of operations and as a receivable in prepaid and other current assets in the consolidated balance sheet for the fiscal year ended January 31, 2010. In November 2009, the Company also filed a motion to amend the original judgment to include additional legal fees of $73,000. This motion was granted on February 12, 2010. On February 17, 2010, the Company collected a total award of over $1.1 million. The defendants appealed the judgment to the United States Court of Appeals for the First Circuit and posted a bond for approximately $1.3 million as a security for payment of the judgment during the appeal process. On October 22, 2009, the First Circuit affirmed the judgment in favor of the Company. The case is now back in the District Court, where the Company has a motion pending for payment of the judgment, together with its post-verdict attorneys fees and costs, from the bond. In accordance with the guidance issued by the FASB in ASC Topic 450 “Gain Contingencies,” we do not recognize gain contingencies until realized, hence we have not recognized any income$1,495,000 related to this contingency.

(15) Subsequent Events

We received a letter fromlegal proceeding, which includes the Internal Revenue Service dated November 24, 2009, which acknowledged the conclusion of the examinations of the Company’s federal returns for fiscal years 2005 through 2008. As a result of these tax return years being settled, we will record a benefit$1,391,000 gain on legal settlement recorded in the fourth quarter of this fiscal year2010 and $104,000 for interest and the additional attorney fees as granted pursuant to the February 12, 2010 motion. The $104,000 has been recorded as an additional gain on legal settlement in the first quarter of approximately $335,000, related to a previously uncertain tax position that was taken in accordance with the guidancefiscal 2011 and is included in FASB ASC Topic 740, “Accountingother income in the accompanying income statement for Income Taxes.”the period ended May 1, 2010.

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ASTRO-MED, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Business Overview

This section should be read in conjunction with Astro-Med’s Condensed Consolidated Financial Statements included elsewhere herein and our Annual Report on Form 10-K for the fiscal year ended January 31, 2009.2010.

Astro-Med is a multi-national enterprise, which designs, develops, manufactures, distributes and manufactures systems that have the ability to acquire, process, analyze, store and present electronic data inservices a variety of useable forms. We sell our product under brand names including Astro-Med^® Test & Measurement (T&M), QuickLabel^® Systems (QuickLabel) and Grass^® Technologies (GT). Products sold under the Astro-Med T&M brand acquire and record data and print the output onto charts or electronic media. Products sold under the QuickLabel brand create product and packaging labels and tags in one or many colors. Products sold under the GT brand electronically capture and record neurological data that is used to diagnose epilepsy or to study sleep disorders. The Company supplies abroad range of products that includeacquire, store, analyze and present data in multiple formats. The Company organizes its structure around a core set of competencies, including research and development, manufacturing, service, marketing and distribution. We market and sell our products and services through the following three sales product groups:

Astro-Med markets and sells its products and services globally through a diverse distribution structure of sales personnel, manufacturing representatives and dealers that deliver a full complement of branded products and services to customers who are in a variety of industries.

Astro-Med competes worldwide in many markets including clinical and research diagnostics, aerospace, specialty printing systems and data acquisition and analysis. We retain a competitive position in our respective markets by virtue of proprietary technology, product reputation, delivery, technical assistance and service to customers. We market our products worldwide by advertising and promotion using major national and international trade journals, scientific meetings and trade shows, direct mailing campaigns and the internet. Our products are sold by direct field sales persons as well as independent dealers and representatives. In the United States, the Company has factory-trained direct field sales people located in major cities from coast to coast specializing in either Astro-Med T&M products, QuickLabel products or Grass Technologies products. Additionally, we have direct field sales and service centers in Canada, England, France, United Kingdom and Germany staffed by our own employees. In the remaining parts of the world, Astro-Med utilizes approximately 60 independent dealers and representatives selling and marketing our products in 80 countries.markets.

Products sold under the Astro-Med T&M brand include ToughWriter printers, ToughSwitches, Everest Telementary recorders and Dash series data recorders. ToughWriter ruggedized page printers are used on the flight deck and in the cabins of military and commercial aircraft to print hard copies of airport maps, flight itineraries, weather maps, gate information and ground communications. ToughSwitches are used in commercial and military aircraft and military vehicles to connect multiple computers or Ethernet-compatible devices together. These products are ruggedized to comply with rigorous military and commercial flightworthiness standards for operation under extreme environmental conditions. The Company is currently furnishing ToughWriters for the Airbus A380, the Airbus A400M, Bombardier B145, the Boeing C-17, B-787, B-777, B-747, B-767, and Lockheed C-130. Other products sold under the Astro-Med brand include the Everest, used widely in the aerospace industry to monitor and track space vehicles, aircraft, missiles and other systems in flight. The Company’s Dash Series product line consists of a family of portable data recorders used as maintenance and troubleshooting instruments in pulp and paper mills, metal mills, power plants, automotive R&D centers and manufacturing plants. Dash Series include the Dash 2EZ, Dash 8X, Dash 8HF, Dash 8XPM, Dash 18, Dash 20HF and the Dash 32HF.

Products sold under the QuickLabel System brand include digital color label printers developed for short-run, in-house label printing; label substrates and thermal transfer ribbon, toner, and inkjet printing inks developed for use in label printers; and a range of labeling software, accessory products, and printing services which allow QuickLabel Systems sales and support staff to serve customers at virtually every level of their label printing needs. With its broad range of entry-level, mid-range, and high-performance digital label printers, QuickLabel Systems is able to provide its customers a continuous path to upgrade to new products. QuickLabel products are primarily sold to end-user manufacturers, processors, and retailers who either package products on a Just-in-Time basis; label products for private label, OEM, or contract packaging customers; or label products in foreign languages for export markets. These end-users can benefit from the time savings and cost-savings of printing their own labels digitally on-demand. Industries that commonly benefit from short-run label printing include apparel, chemicals, cosmetics, electronics, foods and beverages, medical products, and pharmaceuticals, among many other manufactured goods. Current QuickLabel models include the Vivo!, a patented electrophotographic label printer developed to print on continuous rollstock for in-house label printing; the Zeo!, a lower-duty inkjet printer developed in partnership with Hewlett-Packard; and the Xe Series of color thermal transfer label printers including the QLS-4100 Xe, QLS-2000 Xe and QLS-3000 Xe. The Xe Series of digital color thermal transfer label printers are unique in the industry in that they can be directly integrated with production line equipment and represent a novel, patented application of multi-color thermal transfer technology, historically only commercialized in single-color barcode label printers. QuickLabel also sells and supports its own Pronto! family of monochrome/barcode printers which utilize thermal transfer label printing technology in a single color.-12-

Products sold under the Grass Technologies brand include electronic equipment, software and consumable products. The electronic equipment is primarily sold into the diagnostic markets of Sleep Disorders, Epilepsy Monitoring and Long-Term Monitoring (LTM). These products are sold to hospitals, free standing clinics and private physicians’ offices. The equipment sold to these markets detects and amplifies patient data for review and analysis using sophisticated Grass clinical software for diagnosing sleep disorders and epilepsy. Customers for other Grass products include researchers at university based research centers and pharmaceutical companies engaged in drug research. This equipment consists of diagnostic recording systems, stimulation devices and accessories. The consumable line of products offered by GT are typically utilized with the systems described above. These products predominantly consist of sensing devices that are used to collect physiological data from patients.ASTRO-MED, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended October 31, 2009May 1, 2010 vs. Three Months Ended November 1, 2008May 2, 2009

Net salesSales by product group and current quarter percentage change over prior year for the three months ended October 31,May 1, 2010 and May 2, 2009 and November 1, 2008 were:

Although Astro-Med has experienced measured progress in fiscal 2010 as revenue and earnings have incrementally improved each quarter, our current year third quarter results continue to reflect the effects of the global recession in all of our markets and product lines as customers are reluctant to make capital equipment purchases and are limiting consumable product purchases to quantities necessary to satisfy immediate needs. We have responded to this worldwide recession and uncertainty in the global economy by implementing a Company-wide cost reduction initiative which began in the first quarter of the current fiscal year and includes wage and salary freezes, layoffs and a general reduction in hours worked by production staff. Astro-Med is continuing all research and development (R&D) activities as planned, as we believe that the development of new products and the enhancement of existing products will promote future growth and profitability for the Company. The Company also continues to invest in sales and marketing by expanding the existing sales force and increasing spending on various marketing campaigns.

The Company’s current year’s thirdyear first quarter sales were $16,658,000,$17,077,000, representing a slight improvement over current year second quarter sales of $16,416,000, but a 5.8% decrease16.4% increase as compared to the previous year’s thirdfirst quarter sales of $17,681,000.$14,677,000. Sales through the domestic channels for the current quarter were $11,427,000, a decline$12,175,000, an increase of 9.7%17.4% over the prior year. Current year however, current year thirdfirst quarter international shipments of $5,231,000$4,902,000 were also up by 4.1%13.9% from the previous year. A favorable impact from foreign exchange rates contributed $51,000$250,000 to the current year’s thirdfirst quarter international sales growth as compared to the same period of the prior year.increase.

Hardware sales in the current quarter were $7,079,000, representing a 7.9% decrease as compared to$5,917,000, down 8.4% over the currentprior year’s secondfirst quarter hardware sales of $7,683,000 and a$6,459,000. The decrease of 11.9% over the prior year’s third quarterin hardware sales of $8,037,000. This decreasein the current quarter was evident in all product lines, slightly tempered by a $145,000$210,000 or 32.4% and $202,000 or 18.5%26.3% increase in sales of T&M’s EverestQuickLabel’s mono, VIVO! and Ruggedized product lines, respectively, as well as a $161,000 or 24.4%Zeo! printers and an increase in Grass Technologies’ hardware linesales of Research Instruments.Grass’ Long-Term Monitoring product line. The overall lower volume of hardware shipments is an outgrowth of continued soft demand for capital equipment emanating from the worldwide recession.

Consumables sales in the current quarter were $8,353,000,$9,587,000, representing an increase of 12.1%34.6% over the currentprior year’s secondfirst quarter consumable sales of $7,450,000, and a slight$7,123,000. The current quarter increase over thewas evident in all product groups but dominated by QuickLabel System’s which was up 40.6% as compared to prior year’s thirdfirst quarter sales. The increased level of consumable sales is due to the increase in the installed base of $8,334,000. The slight growthprinters placed in service, as well as the December 2009 acquisition of the Asheboro facility which contributed approximately $1,400,000 to consumable sales for the current quarter.

Current quarter as compared to theservice and other revenue of $1,573,000 were up 43.6% from prior year’s thirdfirst quarter service and other revenue of $1,095,000. The current quarter increase in service and other revenue was shared among all three product groups with T&M up 41.4%, QuickLabel up 50.2% and Grass up 36.8% and was primarily due to the $262,000 or 34.1% increase in sales of QuickLabel System’s Vivo! & Zeo! suppliesparts and a $104,000 or 9.6% increase in the sale of Grass Technologies’ electrodesrepair revenue as well as service revenue which were up 57.8% and cream products.

Service and other revenues of $1,226,000 in the current quarter were down 6.4% from prior year’s third quarter service and other revenues of $1,310,000. The decline in service and other sales was primarily due to the 23.6% decrease in T&M’s current quarter’s service and other revenue26.5%, respectively, as compared to the third quarter of the prior year. This decrease was tempered by slight increases in both QuickLabel’s and Grass Technologies’ current quarter service and other revenue as compared to the third quarter of the prior year.year’s first quarter.

Current year’s thirdyear first quarter gross profit was $7,059,000, reflecting a 1.6% improvement over$6,865,000, an 18.1% increase from the currentprior year’s secondfirst quarter gross profit of $6,951,000, but a 7.7% decrease from the prior year’s third quarter gross profit of $7,647,000.$5,813,000. The Company’s gross profit margin of 42.4%40.2% in the current quarter reflects a decreasean increase from the prior year’s thirdfirst quarter gross profit margin of 43.3%. The lower gross profit margins for the current quarter39.6% and is primarily attributable to lowerhigher sales volume and product mix as compared to prior year.lower manufacturing costs.

Operating expenses for the current quarter were $6,098,000, consistent with current$6,244,000, relatively flat as compared to prior year’s secondfirst quarter operating expenses of $6,065,000 and a 7.0% decrease from prior year’s third$6,273,000. Current quarter operating expenses of $6,558,000. The decrease in operating expenses for the third quarter as compared to the prior year’s third quarter is primarily a result of the Company’s cost reduction initiative and sales related direct cost reductions. Specifically, selling and marketing expenses for the current quarter decreased 7.8%1.1% to $3,840,000$3,841,000 representing 22.5% of sales as compared to the previous year’s thirdfirst quarter selling and marketing expenses of $4,164,000.$3,883,000 representing 26.5% of sales. The decrease in selling and marketing for the current quarter was primarily the result of lower commissions, wages, benefits as well as lowerand trade show spending, slightly offset by a increase in travel and outside service spending. General and administrative (G&A) expenses decreased 3.9%increased 1.9% to $1,095,000$1,184,000 in the thirdfirst quarter of the current year as compared to prior year’s thirdfirst quarter G&A expenses of $1,140,000.$1,162,000. The decreaseincrease in G&A as compared to prior year was primarily drivendue to an increase in outside services partially offset by a decrease in professional service fees as compared to prior year.services. Spending on R&Dresearch & development (R&D) in the thirdfirst quarter of the current year of $1,163,000 represents a 7.3% decrease compared to$1,219,000 remained approximately flat with prior year’s thirdfirst quarter spending of $1,254,000.$1,228,000. The current quarteryear’s spending in R&D represents 7.0%7.1% of sales, in line with thea decline from prior year’s thirdfirst quarter level of 7.1% and consistent with management’s plan of maintaining current R&D levels in order to continue the development of new products and expand and improve existing products.8.4%.

The Company continued profitability in the third quarter with incomeIncome from operations of $961,000, representing an 8.5%$622,000 in the current quarter is a sharp increase as compared to current year second quarter of $886,000, although behind thefrom prior year’s thirdfirst quarter operating incomeloss of $1,089,000.$460,000. Operating margin for the thirdfirst quarter of the current year of 5.8%, a slight increase3.6% is also an improvement as compared to current year’s second quarter operating margin of 5.4%, but down compared to the prior year’s thirdfirst quarter negative operating margin of 6.2%3.1%. The lowerincrease in operating income and related marginsmargin for the thirdfirst quarter of the current year are primarilyis mainly attributable to the lowerachieving higher sales volume during the current quarter as compared to the third quarter of the prior year.while reducing operating expenses.

Other income during the thirdfirst quarter was $75,000$107,000 compared to $237,000 of other expense$104,000 in the thirdfirst quarter of the previous year. The increase in the current quarter is primarily attributed to the remaining $104,000 gain on legal settlement for interest and attorney fees recognized as a result of damages collected from a lawsuit filed against a former employee and competitor business. The increase in other income for the current quarter was primarily due to foreign exchange gains recognized in the current quarter due to the weakening of the U.S. dollar as compared to foreign exchange losses for the same period in the prior year. This increase is slightly tempered by lower investment income, due to lower overall interest rates available and foreign exchange losses in the current period as comparedquarter due to the same period incontinuing weakening of the prior year.US dollar.

The provision for income taxes forIn the thirdfirst quarter of the current year, was $353,000the Company recognized income tax expense of $299,000 reflecting an effective tax rate of 34.1%41.0%. This result compares to the prior year’s thirdfirst quarter benefit for federal and state income tax expensetaxes of $203,000$124,000 reflecting an effective tax rate of 23.8%35.0%. The increase in the effective tax rate for the thirdfirst quarter of the current year as compared to the prior year is primarily due to the benefit of the extensionunavailability of the R&D tax credit that took place in the third quarter of fiscal 2009.current quarter.

The Company reported $683,000 inrecognized net income of $430,000 for the thirdfirst quarter of the current year, representing a 16.8% increase as compared to current year’s second quarter net income of $585,000. The current quarter’s net income reflectsreflecting a return on sales of 4.1%2.5% and generated angenerating EPS of $0.09$0.06 per diluted share representingshare. On a 5.2% increase as compared to the previouscomparative basis, prior year’s thirdfirst quarter recognized a net incomeloss of $649,000 which earned$231,000 reflecting a negative return of 1.6% on sales and generating a loss of 3.7% and an EPS of $0.09$0.03 per diluted share.

-13-

Nine Months Ended October 31, 2009 vs. Nine Months Ended November 1, 2008ASTRO-MED, INC.

Net sales by product group and current quarter percentage change over prior year for the nine months ended October 31, 2009 and November 1, 2008 were:MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Net sales for the nine month period of the current fiscal year were $47,751,000, a 15.0% decline as compared to $56,152,000 reported for the first nine months of the prior fiscal year. Sales through the domestic channels for the first nine months of the current year were $33,525,000, a 14.4% decrease from the prior year. International sales of $14,226,000 for the first nine months of the current year reflect a 16.2% decrease as compared to the prior year. Unfavorable foreign exchange of $1,139,000 accounts for 41.4% of the international sales decline. All three segments have reported a decrease in sales for the first nine months of the current year as compared to prior year’s sales for the same period.

The Company’s hardware sales were $21,221,000 in the first nine months of fiscal 2010, declining 21.0% as compared to the same period in the prior year. This decline was evident in all three product groups and was slightly tempered by a $275,000 or 16.0% increase in sales of T&M’s Everest product line. Consumable sales for the first nine months of the current year of $22,925,000 declined 9.2% from the prior year’s nine month period. The decrease in consumable sales was apparent in all product groups except in QuickLabel’s Vivo! & Zeo! supplies sales which increased $798,000 or 38.2% compared to the same period in the prior year. Service and other sales revenues for the nine months ended October 31, 2009 were $3,605,000, a decrease of 10.8% from the prior year. The decline in service and other sales was shared among the three product groups, as the slight increase in service revenue in Grass Technologies was offset by lower freight, repair and parts revenue in all product groups.

The Company achieved $19,822,000 in gross profit for the first nine months of fiscal 2010 and generated a gross profit margin of 41.5% as compared to prior year’s gross profit margin of 43.7%. The decline in gross profit margin for the first nine months of the current year is due to lower sales volume.

Operating expenses in the first nine months of the current year were $18,435,000, representing an 8.8% decrease from the prior year primarily a result of the Company’s cost reduction initiative. Selling and marketing expenses for the first nine months of the current year declined 11.5% from the prior year to $11,447,000 with the decrease primarily traceable to personnel costs related to commissions and travel spending. R&D spending for the current nine months of $3,565,000 was slightly lower as compared to prior year R&D of $3,680,000. Current year spending in R&D represents 7.5% of the current year’s sales compared to 6.6% of sales in the prior year. General and administrative expenses for the first nine months of the current year were $3,423,000, a 4.8% decrease from the prior year. The lower spending level in the current year for G&A is mainly attributed to reduced accruals for bonuses.

The Company earned $1,387,000 in operating income during the first nine months of fiscal year 2010, as compared to $4,313,000 for the same period in the prior year. On a margin basis, this year’s operating income reflects an operating margin of 2.9% on sales compared to prior year’s operating margin of 7.7%.

Other income realized during the first nine months of the current fiscal year has increased $194,000 as compared to the other income reported in the previous year. This increased level of other income is primarily a result of the increase in foreign exchange gains due to the weakening of the U.S. dollar, partially offset by lower investment income.

The provision for income taxes was $544,000 for the nine month period ended October 31, 2009. This year’s provision reflects an effective tax rate of 34.4%, down from the prior year’s effective tax rate of 37.4%. The lower effective tax rate in fiscal 2010 as compared to the prior year is primarily due to comparable permanent differences on lower pre-tax income. The prior year also included an expense of $59,000 related to a discrete payment of additional state franchise tax.

Net income earned during the first nine months of the current fiscal year was $1,037,000, lower than the prior year’s first nine months of net income of $2,701,000 and reflects a return on sales of 2.2% as compared to 4.8% reported for the previous year. This year’s net income resulted in an EPS of $0.14 per diluted share as compared to an EPS of $0.36 per diluted share reported for the prior year’s first nine months.AND RESULTS OF OPERATIONS

Segment Analysis

The Company reports three segments consistent with its sales product groups: Test & Measurement (T&M); QuickLabel Systems (QuickLabel) and Grass Technologies (GT)(Grass). The Company evaluates segment performance based on the segment profit before corporate and financial administration expenses.

Summarized below are the Net Sales and Segment Operating Profit for each reporting segment: