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<SEC-DOCUMENT>0000950137-08-011537.txt : 20080909
<SEC-HEADER>0000950137-08-011537.hdr.sgml : 20080909
<ACCEPTANCE-DATETIME>20080909145450
ACCESSION NUMBER:		0000950137-08-011537
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20080731
FILED AS OF DATE:		20080909
DATE AS OF CHANGE:		20080909

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VIRCO MFG CORPORATION
		CENTRAL INDEX KEY:			0000751365
		STANDARD INDUSTRIAL CLASSIFICATION:	PUBLIC BUILDING AND RELATED FURNITURE [2531]
		IRS NUMBER:				951613718
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0131

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08777
		FILM NUMBER:		081062850

	BUSINESS ADDRESS:	
		STREET 1:		2027 HARPERS WAY
		CITY:			TORRANCE
		STATE:			CA
		ZIP:			90501
		BUSINESS PHONE:		3105330474

	MAIL ADDRESS:	
		STREET 1:		P O BOX 44846
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90044
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>v43622e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, DC 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-Q</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Quarterly Report Pursuant to Section&nbsp;13 or 15(d) of the Securities
Exchange Act of 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the quarterly period ended July&nbsp;31, 2008</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Transition Report Pursuant to Section&nbsp;13 or 15(d) of the
Securities Exchange Act of 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission File number 1-8777</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>VIRCO MFG. CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in Its Charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Delaware
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">95-1613718</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction of <BR>
Incorporation or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer<BR>
Identification No.)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">2027 Harpers Way, Torrance, CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">90501</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of Principal Executive Offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Registrant&#146;s Telephone Number, Including Area Code: <U>(310)&nbsp;533-0474</U></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">No change<BR>
(Former name, Former Address and Former Fiscal Year, if Changed Since Last Report)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the Exchange Act. (Check one):</DIV>

<TABLE width="100%" style="font-size: 10pt; margin-top: 6pt">
<TR valign="top">
<TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT></TD>
<TD align="center">Accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;</TD>
<TD align="center">Non-accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT><BR>(Do not check if a smaller reporting company)</TD>
<TD align="right">Smaller reporting company&nbsp;<FONT face="Wingdings">&#111;</FONT></TD></TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act).
Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares outstanding for each of the registrant&#146;s classes of common stock, as of
the latest practicable date:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock, $.01 par value &#151; 14,522,701 shares as of August&nbsp;31, 2008.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>






<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VIRCO MFG. CORPORATION
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">INDEX

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#101">Part I. Financial Information
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#102">Item&nbsp;1. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Condensed consolidated balance sheets &#151; July&nbsp;31, 2008, January&nbsp;31, 2008 and July&nbsp;31, 2007
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Unaudited condensed consolidated statements of income &#151; Three months ended July&nbsp;31, 2008 and 2007
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Unaudited condensed consolidated statements of income &#151; Six months ended July&nbsp;31, 2008 and 2007
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">6</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Unaudited condensed consolidated statements of cash flows &#151; Six months ended July&nbsp;31, 2008 and 2007
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"> 7</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Notes to unaudited condensed consolidated financial statements &#151; July&nbsp;31, 2008
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#108">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">15</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#109">Item&nbsp;3. Quantitative and Qualitative Disclosures about Market Risk
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">17</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#110">Item&nbsp;4. Controls and Procedures
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">18</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#111">Part II. Other Information
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#112">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#113">Item&nbsp;4. Submission of Matters to a Vote of Security Holders
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#114">Item&nbsp;6. Exhibits
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Exhibit&nbsp;10.1 &#151; First Amendment to Lease, dated as of August&nbsp;20, 2008, by and between AMB Property,
L.P., a Delaware limited partnership (&#147;Lessor&#148;) and the Company (&#147;Lessee&#148;).</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Exhibit&nbsp;10.2 &#151; Amendment No.&nbsp;1 to the Second Amended and Restated Credit Agreement, dated as of
July&nbsp;31, 2008, between the Company and Wells Fargo Bank, National Association.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Exhibit&nbsp;31.1 &#151; Certification of Robert A. Virtue, Principal Executive Officer, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Exhibit&nbsp;31.2 &#151; Certification of Robert E. Dose, Principal; Financial Officer, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Exhibit&nbsp;32.1 &#151; Certifications of Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of
2002.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v43622exv10w1.htm">EXHIBIT 10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v43622exv10w2.htm">EXHIBIT 10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v43622exv31w1.htm">EXHIBIT 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v43622exv31w2.htm">EXHIBIT 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v43622exv32w1.htm">EXHIBIT 32.1</A></FONT></TD></TR>
</TABLE>
</DIV>
<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->2&nbsp;<!-- /Folio -->
</DIV>






<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;1. Financial Statements</U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VIRCO MFG. CORPORATION
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONDENSED CONSOLIDATED BALANCE SHEETS

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">1/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 0px solid #000000">(In thousands, except share data)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unaudited (Note 1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Unaudited (Note 1)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net trade accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">409</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,028</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work in process, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials and supplies, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,414</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,376</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land and land improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and building improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,397</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,817</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill and other intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,304</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">156,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">127,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">150,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See Notes to Unaudited Condensed Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VIRCO MFG. CORPORATION
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">CONDENSED CONSOLIDATED BALANCE SHEETS

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">1/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 0px solid #000000">(In thousands, except share data)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000">Unaudited (Note 1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Unaudited (Note 1)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Checks released but not yet cleared bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,893</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,850</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued compensation and employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,874</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued self-insurance retention and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,708</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued pension expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,153</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Authorized 3,000,000 shares, $.01 par value; none
issued or outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Authorized 25,000,000 shares, $.01 par value;
issued 14,522,701 shares at 7/31/2008, 14,428,662
shares at 1/31/2008; and 14,428,662
shares at 7/31/2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(39,109</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37,224</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48,806</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,566</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">156,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">127,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">150,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See Notes to Unaudited Condensed Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VIRCO MFG. CORPORATION
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONDENSED CONSOLIDATED STATEMENTS OF INCOME

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Unaudited (Note 1)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Three months ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">(In thousands, except per share data)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">80,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,931</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,825</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,990</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,610</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,430</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See Notes to Unaudited Condensed Consolidated Financial Statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VIRCO MFG. CORPORATION
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONDENSED CONSOLIDATED STATEMENTS OF INCOME

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Unaudited (Note 1)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Six months ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">(In thousands, except per share data)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">109,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">120,053</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,788</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and
administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,811</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,444</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See Notes to Unaudited Condensed Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VIRCO MFG. VIRCO MFG. CORPORATION
</DIV>

<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Unaudited (Note 1)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Six months ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">(In thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net income to net cash used in
operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,414</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in operating assets and liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,640</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,672</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(181</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,183</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,577</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,944</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,020</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,849</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,526</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,487</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,114</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sale of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,486</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,097</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,816</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividend paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(721</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease) increase  in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,892</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See Notes to Unaudited Condensed Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VIRCO MFG. CORPORATION
</DIV>

<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">July&nbsp;31, 2008

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 1. Basis of Presentation</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article&nbsp;10 of Regulation&nbsp;S-X.
Accordingly, they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months and six months ended July
31, 2008, are not necessarily indicative of the results that may be expected for the fiscal year
ending January&nbsp;31, 2009. The balance sheet at January&nbsp;31, 2008 has been derived from the audited
financial statements at that date, but does not include all of the information and footnotes
required by accounting principles generally accepted in the United States for complete financial
statements. For further information, refer to the consolidated financial statements and footnotes
thereto included in the Company&#146;s Annual Report on Form 10-K for the fiscal year ended January
31, 2008 (&#147;Form&nbsp;10-K&#148;). All references to the &#147;Company&#148; refer to Virco Mfg. Corporation and its
subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 2. Seasonality</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The market for educational furniture and equipment is marked by extreme seasonality, with over
50% of the Company&#146;s total sales typically occurring from June to September each year, which is
the Company&#146;s peak season. Hence, the Company typically builds and carries significant amounts of
inventory during and in anticipation of this peak summer season to facilitate the rapid delivery
requirements of customers in the educational market. This requires a large up-front investment in
inventory, labor, storage and related costs as inventory is built in anticipation of peak sales
during the summer months. As the capital required for this build-up generally exceeds cash
available from operations, the Company has historically relied on third-party bank financing to
meet cash flow requirements during the build-up period immediately proceeding the peak season.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In addition, the Company typically is faced with a large balance of accounts receivable during
the peak season. This occurs for two primary reasons. First, accounts receivable balances
typically increase during the peak season as shipments of products increase. Second, many
customers during this period are government institutions, which tend to pay accounts receivable
more slowly than commercial customers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s working capital requirements during and in anticipation of the peak summer season
require management to make estimates and judgments that affect assets, liabilities, revenues and
expenses, and related contingent assets and liabilities. On an on-going basis, management
evaluates its estimates, including those related to market demand, labor costs, and stocking
inventory.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 3. New Accounting Standards</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In October&nbsp;2006, the Financial Accounting Standards Board (&#147;FASB&#148;) ratified EITF 06-4,
&#147;<I>Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements</I>&#148; (&#147;EITF 06-4&#148;). This statement is effective for fiscal
years beginning after December&nbsp;15, 2007. This statement clarifies that FASB 106, &#147;Employers
Accounting for Post-Retirement Benefits other than Pensions,&#148; applies to endorsement split-dollar
life insurance arrangements. Prior to 2003, the Company provided split-dollar life insurance
benefits to substantially all management employees. In 2003, the Company terminated the program
for all active employees and surrendered the related policies. The Company did not terminate the
policies for employees that had retired prior to 2003. The Company has purchased life insurance
on the lives of the retired participants that will pay death benefits in excess of the amount
promised to participants. The Company adopted EITF 06-4 on February&nbsp;1, 2008, and recorded a
$1,820,000 adjustment to its balance sheet to record a non-current liability included with
accrued pension benefits and an equal decrease in retained earnings. The Company expects
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">to incur approximately $120,000 per year of accretion expense related to the liability, offset by
collection of death benefits. There was no impact on prior periods related to this adoption.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In September&nbsp;2006, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Statement of
Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;157, &#147;<I>Fair Value Measurements</I>&#148;. This Standard
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS No.&nbsp;157 is
effective for financial statements issued for fiscal years beginning after November&nbsp;15, 2007,
which is the year beginning February&nbsp;1, 2008 for the Company. The Company adopted SFAS No.&nbsp;157
effective February&nbsp;1, 2008. The adoption of SFAS No.&nbsp;157 for financial assets and liabilities
held by the Company did not have a material effect on the Company&#146;s financial statements or notes
thereto. As of July&nbsp;31, 2008, the Company has financial assets in cash, which is measured at fair
value using quoted prices for identical assets in an active market (Level 1 fair value hierarchy)
in accordance to SFAS No.&nbsp;157.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In February&nbsp;2008, the FASB issued FSP FAS 157-2, <I>Effective Date of FASB Statement No. </I>157 (FSP
FAS 157-2), which permits a one year deferral of the application of SFAS No.&nbsp;157 for all
non-financial assets and non-financial liabilities, except those that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least annually). The Company
will adopt SFAS No.&nbsp;157 for non-financial assets and non-financial liabilities on February&nbsp;1,
2009 and does not expect the provisions to have a material effect on its results of operations,
financial position or cash flows.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, <I>&#147;The Fair Value Option for Financial Assets and
Financial Liabilities&#151;Including an Amendment of FASB Statement No.&nbsp;115&#148;. </I>SFAS No.&nbsp;159 permits
entities to choose to measure many financial instruments and certain other items at fair value.
Unrealized gains and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS No.&nbsp;159 is effective for financial
statements issued for fiscal years beginning after November&nbsp;15, 2007, which is the year beginning
February&nbsp;1, 2008 for the Company. The Company adopted SFAS No.&nbsp;159 on February&nbsp;1, 2008 and
elected not to measure any additional financial instruments or other items at fair value.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In September&nbsp;2006, the FASB issued SFAS No.&nbsp;158, &#147;<I>Employers&#146; Accounting for Defined Benefit
Pension and Other Postretirement Plans</I>,&#148; an amendment of FASB Statements No.&nbsp;87, 88, 106, and
132(R). This standard requires recognition of the funded status of a benefit plan in the
statement of financial position. The standard also requires recognition in other comprehensive
income of certain gains and losses that arise during the period but are deferred under pension
accounting rules, as well as modifies the timing of reporting and adds certain disclosures. SFAS
No.&nbsp;158 provides recognition and disclosure elements to be effective as of the end of the fiscal
after December&nbsp;15, 2006, and measurement elements to be effective for fiscal years ending after
December&nbsp;15, 2008. The Company adopted the recognition provisions of SFAS No.&nbsp;158 and applied
them to the funded status of the its defined benefit plans resulting in a decrease in
Shareholders Equity of $1,900,000. In the fiscal year ending January&nbsp;31, 2009 the Company will
recognize the impact of using the fiscal year end date for recording pension expense and
liabilities. The Company will use the second alternative transition method (Method 2). The
actuarial valuation prepared at year end will cover a 13&nbsp;month period, and the estimated
transition period adjustment will be charged to retained earnings. The Company is currently
evaluating the impact on its financial statements, if any, from the adoption of this standard.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141 (Revised), &#147;<I>Business Combinations</I>&#148; (&#147;SFAS No.
141(R)&#148;), replacing SFAS No.&nbsp;141, &#147;<I>Business Combinations</I>&#148; (&#147;SFAS No.&nbsp;141&#148;), and SFAS No.&nbsp;160,
&#147;<I>Noncontrolling Interests in Consolidated Financial Statements &#151; An Amendment of ARB No.&nbsp;51</I>&#148;
(&#147;SFAS No.&nbsp;160&#148;). SFAS No.&nbsp;141(R) retains the fundamental requirements of SFAS No.&nbsp;141, broadens
its scope by applying the acquisition method to all transactions and other events in which one
entity obtains control over one or more other businesses, and requires, among other things, that
assets acquired and liabilities assumed be measured at fair value as of the acquisition date,
that liabilities related to contingent considerations be recognized at the acquisition date and
remeasured at fair value in each subsequent reporting period, that acquisition-related costs be
expensed as incurred, and that income be recognized if the fair value of the net assets acquired
exceeds the fair value of the consideration transferred. SFAS No.&nbsp;160 establishes accounting and
reporting standards for noncontrolling interests (i.e., minority interests) in a subsidiary,
including changes in a parent&#146;s ownership interest in a subsidiary and requires, among other
things, that noncontrolling interests in subsidiaries be classified as a separate component of
equity. Except for the presentation and disclosure requirements of SFAS No.&nbsp;160, which are to be
applied retrospectively for all periods presented, SFAS No.&nbsp;141 (R)&nbsp;and SFAS No.&nbsp;160 are to be
applied prospectively in financial statements issued for fiscal years beginning after December
15, 2008. The Company does not anticipate any material impact to its financial statements from
the adoption of SFAS No.&nbsp;160.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 4. Inventories</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Fiscal year end financial statements at January&nbsp;31, 2008 reflect inventories verified by physical
counts with the material content valued by the LIFO method. At July&nbsp;31, 2008 and 2007, there were
no physical verifications of inventory quantities. Cost of sales is recorded at current cost. The
effect of penetrating LIFO layers is not recorded at interim dates unless the reduction in
inventory is expected to be permanent. No such adjustments have been made for the three-month or
six-month periods ended July&nbsp;31, 2008 and 2007. LIFO reserves at July&nbsp;31, 2008, January&nbsp;31, 2008
and July&nbsp;31, 2007 were $7,193,000, $7,193,000 and $7,357,000, respectively. Management
continually monitors production costs, material costs and inventory levels to determine that
interim inventories are fairly stated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 5. Debt</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective as of March&nbsp;18, 2008, the Company entered into the Second Amended and Restated Credit
Agreement (the &#147;Agreement&#148;), dated as of March&nbsp;12, 2008, with Wells Fargo Bank, National
Association (the &#147;Lender&#148;) and a related Revolving Line of Credit Note (the &#147;Note&#148;), dated as of
March&nbsp;12, 2008, in favor of the Lender. The Agreement provides the Company with a secured
revolving line of credit (the &#147;Revolving Credit&#148;) of up to $65,000,000, with seasonal adjustments
to the credit limit, and includes a sub-limit of up to $10,000,000 for the issuance of letters of
credit. The Revolving Credit is secured by a first priority perfected security interest in
certain of the personal and real property of the Company and its subsidiaries in favor of the
Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective July&nbsp;31, 2008, the Company entered into Amendment No.&nbsp;1 (the &#147;First Amendment&#148;) to the
Second Amended and Restated Credit Agreement with the Lender. The First Amendment modified the
Agreement to provide for, among other items, a borrowing base formula that may limit the amount
available under the Revolving Credit or the letter of credit subfeature, monthly monitoring of
the borrowing base and auditing of the collateral. In addition, the amendment modified or
eliminated certain covenants, including the leverage ratio. Availability under the line was
$21,951,000 at July&nbsp;31, 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Revolving Credit will mature on February&nbsp;1, 2010. Interest under the Revolving Credit is
payable monthly at a fluctuating rate equal to the Lender&#146;s prime rate or, if the Company elects,
LIBOR plus a fluctuating margin. The Agreement provides for an unused commitment fee of 0.25%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Agreement is subject to various financial covenants including a minimum consolidated fixed
charge coverage ratio, and a maximum leverage ratio. The Agreement also places certain
restrictions on activities by the Company, including capital expenditures, new operating leases,
dividends and the repurchase of the Company&#146;s common stock. The Agreement is secured by certain
of the Company&#146;s accounts receivable, inventories, equipment and real property. The Company was
in compliance with its covenants at July&nbsp;31, 2008. Management believes the carrying value of debt
approximated fair value at July&nbsp;31, 2008 and 2007, as all of the long-term debt bears interest at
variable rates based on prevailing market conditions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The foregoing description of each of the Agreement, the Note, the Revolving Credit and the First
Amendment are qualified in the entirety by reference to the agreements attached as Exhibits 10.1,
10.2, 10.3 and 10.4 to the Form 8-K submitted by the Company to the SEC on March&nbsp;24, 2008 and the
agreement attached as Exhibit&nbsp;10.2 hereto, each of which is incorporated herein by reference.
These agreements have been included to provide investors with information regarding their terms
and are not intended to provide any other factual information about the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">At January&nbsp;31, 2008, the Company borrowed under an asset based line of credit with Wells Fargo.
The revolving line typically provided for advances of 80% on eligible accounts receivable and
20%- 60% on eligible inventory. The advance rates fluctuated depending on the time of year and
the types of assets. The agreement had an unused commitment fee of 0.375%. Interest was at prime
or LIBOR +2.5%. Availability under the line was $19,074,000 at January&nbsp;31, 2008. This line was
replaced by the Agreement, as described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 6. Income Taxes</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">There were no significant increases or decreases in the unrecognized tax benefits during the
three and six months ended July&nbsp;31, 2008. As of July&nbsp;31, 2008, the Company does not believe
there are any positions for which it is reasonably possible that the total amount of unrecognized
tax benefits will significantly increase or decrease within the next 12&nbsp;months.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Internal Revenue Service (the &#147;IRS&#148;) has completed the examination of all of the Company&#146;s
federal income tax returns through 2004 with no issues pending or unresolved. The years 2004
through 2007 remain open for examination by the IRS. The tax years 2003 to 2007 remain open for
major state taxing jurisdictions. The Company is not being audited by a major taxing jurisdiction
at July&nbsp;31, 2008. Subsequent to July&nbsp;31, 2008, the Company was notified by the IRS that it will
be auditing the Company&#146;s tax filings for fiscal year ended January&nbsp;31, 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">At January&nbsp;31, 2008, the Company had net operating losses carried forward for federal and state
income tax purposes, expiring at various dates through 2027. Federal net operating losses that
can potentially be carried forward total approximately $3,202,000 at January&nbsp;31, 2008. State net
operating losses that can potentially be carried forward total approximately $21,019,000 and at
January&nbsp;31, 2008. The Company also had determined that it was more likely than not that some
portion of the state net operating loss carry forwards and other state deferred tax assets would
not be realized and had provided a valuation allowance of $841,000 on the deferred tax assets at
January&nbsp;31, 2008. The Company evaluates the valuation allowance on a quarterly basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 7. Net Income per Share</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Six Months Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">(In thousands, except per share data)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">(In thousands, except per share data)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net effect of dilutive stock options based on
the treasury stock method using average
market price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Totals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share &#151; basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share &#151; diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>



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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 8. Stock Based Compensation</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s two stock plans are the 2007 Employee Incentive Plan (the &#147;2007 Plan&#148;) and the 1997
Employee Incentive Stock Plan (the &#147;1997 Plan&#148;). The 1997 Plan expired in 2007. Under the 2007
Plan, the Company is permitted to grant an aggregate of 1,000,000 shares of common stock to its
employees and directors in the form of stock options or other stock-based awards. As of July&nbsp;31,
2008, 48,531 stock awards and 262,500 stock units have been issued under the 2007 Plan and
724,613 shares remain available for future grant. At July&nbsp;31, 2008 there were 161,433 unexercised
options outstanding that were issued pursuant to the 1997 Plan. Stock options granted under the
2007 Plan and 1997 Plan have an exercise price equal to the market price at the date of grant and
have a maximum term of 10&nbsp;years.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The shares of common stock issued upon exercise of a previously granted stock option are
considered new issuances from shares reserved for issuance upon adoption of the various plans.
While the Company does not have a formal written policy detailing the procedure for exercising
stock options, it requires that the option holders provide a written notice of exercise to the
stock plan administrator plus the applicable exercise price and tax withholdings, if any, prior to
issuance of the shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Accounting for the Plans</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Summary of restricted stock and stock unit awards at July&nbsp;31, 2008 and 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrecognized</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Compensation</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Expense for 3 months ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Expense for 6 months ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost at</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">7/31/2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">7/31/2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">7/31/2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">7/31/2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">7/31/2008</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2007 Stock Incentive Plan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">262,500 Restricted Stock Units,
issued 6/19/2007, vesting over 5
years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">177,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,364,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">35,644 Grants of Restricted
Stock, issued 6/17/2008, vesting
over 1&nbsp;year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12,887 Grants of Restricted
Stock, issued 6/19/2007, vesting
over 1&nbsp;year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>1997 Employee Incentive Stock Plan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">270,000 Restricted Stock Units,
issued 6/30/2004, vesting over 5
years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">17,640 Grants of Restricted
Stock, issued 6/20/2006, vesting
over 1&nbsp;year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Totals for the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">214,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">140,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">249,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,833,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stockholders&#146; Rights</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On October&nbsp;15, 1996, the Board of Directors declared a dividend of one preferred stock purchase
right (the &#147;Rights&#148;) for each outstanding share of the Company&#146;s common stock. Each of the Rights
entitles a stockholder to purchase for an exercise price of $50.00 ($20.70, as adjusted for stock
splits and stock dividends), subject to adjustment, one one-hundredth of a share of Series&nbsp;A
Junior Participating Cumulative Preferred Stock of the Company, or under certain circumstances, shares of common stock of the Company or a successor company with a market value equal to two
times the exercise price. The Rights are not exercisable, and would only become exercisable for
all other persons when any person has acquired or commences to acquire a beneficial interest of at
least 20% of the Company&#146;s outstanding common stock. The Rights have no voting privileges, and may
be redeemed by the Board of Directors at a price of $.001 per Right at any time prior to the
acquisition of a beneficial ownership of 20% of the outstanding common shares. There are 200,000
shares (483,153 shares as adjusted by stock splits and stock dividends) of Series&nbsp;A Junior
Participating Cumulative Preferred Stock reserved for issuance upon exercise of the Rights. On
July&nbsp;31, 2007, the Company and Mellon Investor Services LLC
entered into an amendment to the Rights Agreement governing the Rights. The amendment, among other things, extended the term of the Rights
issued under the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Rights Agreement to October&nbsp;25, 2016, removed the dead-hand provisions from the
Rights Agreement, and formally replaced the former Rights Agent, The Chase Manhattan Bank, with
its successor-in-interest, Mellon Investor Services LLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 9. Comprehensive Income (Loss)</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Comprehensive income (loss)&nbsp;for the three months and six months ended July&nbsp;31, 2008 and 2007 was
the same as net income (loss)&nbsp;reported on the statements of operations. Accumulated comprehensive
income (loss)&nbsp;at July&nbsp;31, 2008 and 2007 and January&nbsp;31, 2008 is composed of minimum pension
liability adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 10. Retirement Plans</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company and its subsidiaries cover all employees under a noncontributory defined benefit
retirement plan, entitled the Virco Employees&#146; Retirement Plan (the &#147;Plan&#148;). Benefits under the
Plan are based on years of service and career average earnings. As more fully described in the
Form 10-K, benefit accruals under the Plan were frozen effective December&nbsp;31, 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company also provides a supplementary retirement plan for certain key employees, the VIP
Retirement Plan (the &#147;VIP Plan&#148;). The VIP Plan provides a benefit of up to 50% of average
compensation for the last five years in the VIP Plan, offset by benefits earned under the Virco
Employees&#146; Retirement Plan. As more fully described in the Form 10-K, benefit accruals under this
plan were frozen effective December&nbsp;31, 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company also provides a non-qualified plan for non-employee directors of the Company (the
&#147;Non-Employee Directors Retirement Plan&#148;). The Non-Employee Directors Retirement Plan provides a
lifetime annual retirement benefit equal to the director&#146;s annual retainer fee for the fiscal
year in which the director terminates his or her position with the Board, subject to the director
providing 10&nbsp;years of service to the Company. As more fully described in the Form 10-K, benefit
accruals under this plan were frozen effective December&nbsp;31, 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The net periodic pension costs for the Plan, the VIP Plan, and the Non-Employee Directors
Retirement Plan for the three months and six months ended July&nbsp;31, 2008 and 2007 were as follows
(in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000">Three Months Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Non-Employee Directors</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Pension Plan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">VIP Retirement Plan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Retirement Plan</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(224</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of transition amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(80</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(134</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognized net actuarial loss or (gain)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlement and curtailment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000">Six Months Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Non-Employee Directors</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Pension Plan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">VIP Retirement Plan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Retirement Plan</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(600</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(448</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of transition amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(268</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognized net actuarial loss or (gain)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000">Six Months Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Non-Employee Directors</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Pension Plan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">VIP Retirement Plan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Retirement Plan</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlement and curtailment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 11. Warranty</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company accrues an estimate of its exposure to warranty claims based upon both current and
historical product sales data and warranty costs incurred. The majority of the Company&#146;s products
sold through January&nbsp;31, 2005 carry a five-year warranty. Effective February&nbsp;1, 2005, the Company
extended its standard warranty period to 10&nbsp;years. The Company periodically assesses the adequacy
of its recorded warranty liabilities and adjusts the amounts as necessary. The warranty liability
is included in accrued liabilities in the accompanying consolidated balance sheets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The following is a summary of the Company&#146;s warranty claim activity for the three months and six
months each ended July&nbsp;31, 2008 and 2007 (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Six Months Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2008</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">7/31/2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">(In thousands)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning Accrued Warranty Balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">536</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs Incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(362</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(241</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(705</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(486</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ending Accrued Warranty Balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 12. Subsequent Events</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subsequent to the quarter ended July&nbsp;31, 2008 the Company entered into a five-year extension of a
lease for the manufacturing and distribution facility located in Torrance, CA. This agreement
extends the lease through February&nbsp;28, 2015. On August&nbsp;21, 2008 the Company entered into an
agreement to sell a former manufacturing and warehouse facility located in Conway, AR. This
building has been held as rental property for the last two years. The Company anticipates sales
proceeds of approximately $2.5&nbsp;million, and will record a gain on sale of nearly $1&nbsp;million. The
Company anticipates that the sale will close in the third quarter ending October&nbsp;31, 2008.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">VIRCO MFG. CORPORATION
</DIV>

<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Results of Operations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s results for the first six months of fiscal 2008 have been adversely impacted by
current economic conditions, significant cost increases for steel, plastic, energy and other
commodities, and the related impact on school budgets and spending. The current economic
environment has negatively impacted sales revenue in multiple ways. First, the challenging
economic conditions have adversely impacted government budgets, which in turn have affected school
funding. On a state-by-state basis, which is the level at which most funding for school furniture
and equipment is actually generated, our decline in revenue is in states that were most affected by
declines in real estate values. Two states with large declines in housing values &#151; California and
Florida &#151; account for 100% of our revenue decline. Second, school budgets have been impacted by
increased costs for energy and food, further affecting the funds available for furniture and
equipment. Finally, the Company received orders from schools later in the year this year than in
prior years, further compressing the narrow delivery window associated with shipments of
educational furniture and equipment. The Company also absorbed significant cost increases with
respect to two of its most significant raw materials, steel and plastic, as well as increased
energy costs, affecting manufacturing operations, and increased fuel costs, affecting the expenses
associated with the distribution of furniture to school locations. As more fully described in the
Company&#146;s annual report on Form 10-K for the fiscal year ended January&nbsp;31, 2008, the Company sells
a significant portion of its annual sales volume under annual fixed price contracts. During the
period covered by the contracts, the Company has limited, and, in some cases, no ability to
increase selling prices. During the first six months of fiscal 2008, the Company worked to
maintain the strength of its financial position, strengthen its competitive position in the
education market, and recover gross margin lost to increasing energy and commodity costs. As more
fully discussed in the Company&#146;s annual report on Form 10-K, Virco sells a significant portion of
furniture that is priced under a nationwide contract. Under this contract the Company is the
exclusive supplier of movable classroom furniture and is the exclusive authorized reseller for many
of its vendor partners. Subsequent to July&nbsp;31, 2008, Virco was awarded a new three-year nationwide
contract with this same purchasing alliance covering the period beginning January&nbsp;31, 2009 through
December&nbsp;31, 2011. In addition to the three year extension, the Company has added valuable new
vendor partners for which it is the sole reseller under this contract. The Company received a
mid-year price adjustment under the contract as well as price adjustments for 2009 designed to
recover the increased costs of commodities and energy. In addition to the successful extension and
expansion of this contract, the Company has instituted mid-year price adjustments to virtually all
dealers and resellers of its product. New product development has continued throughout the period
ended July&nbsp;31, 2008, and acceptance of our new products by the market has been encouraging. In
order to maintain the financial strength of the Company, production levels were sharply reduced in
the second quarter to control inventory and our line of credit with Wells Fargo Bank was amended to
maintain appropriate levels of liquidity and to modify covenants to match economic conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended July&nbsp;31, 2008, the Company earned a pre-tax profit of $5,714,000 on
sales of $80,216,000 compared to a pre-tax profit of $11,990,000 on sales of $88,931,000 in the
same period last year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales for the second quarter decreased by $8,715,000, a 9.8% decrease, compared to the same period
last year. Incoming orders for the same period decreased by approximately 9.5% compared to the
prior year. The reasons for these decreases are described in more detail above. Backlog at July
31, 2008 increased by approximately 5% compared to the prior year. Gross margin as a percentage of
sales decreased to 32.3% in 2007 compared to 37.9% in the prior year. The decrease in margin was
caused by increased costs of raw materials and a 26% reduction in production hours during the
second quarter, which adversely affected absorption of overhead costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Selling, general and administrative expense for the second quarter ended July&nbsp;31, 2008 decreased by
approximately $1,215,000 compared to the same period last year, but increased as a percentage of
sales by 1.0%. The decrease in spending was attributable to decreased variable compensation
expenses. Freight and field service expenses remained stable, but increased as a percentage of
sales due to increased fuel and energy prices. Interest expense decreased by approximately
$335,000 compared to the same period last year as a result of reduced interest rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the six months ended July&nbsp;31, 2008 the Company earned a pre-tax profit of $1,167,000 on sales
of $109,410,000 compared to a pre-tax profit of $9,010,000 on sales of $120,053,000 in the same
period last year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales for the first six months decreased by $10,643,000, or 8.9%, compared to the same period last
year. The decrease was attributable to a reduction in sales volume, offset in part by an increase
in prices. Incoming orders for the same period decreased by approximately 7.1%. Gross margin as a
percentage of sales decreased to 32.4% compared to 37.7% in the same period last year. In dollars,
gross margin decreased by approximately $9.8&nbsp;million. Approximately $4&nbsp;million of the reduction
was
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">attributable to a change in sales volume, approximately $3.3&nbsp;million due to decreased overhead
absorption, with the balance attributable to increased material costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Selling, general and administrative expense for the six months ended July&nbsp;31, 2008 decreased by
approximately $1,410,000 compared to the same period last year, but increased as a percentage of
sales by 1.5%. The decrease in spending was attributable to decreased variable compensation costs.
Freight and field service costs were stable, but increased as a percentage of sales due to
increased fuel and energy prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense decreased by approximately $570,000 compared to the same period last year due to
reduced interest rates in addition to lower loan balances during the first quarter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As more fully discussed in the Company&#146;s annual report on Form 10-K for the period ended January
31, 2008, the Company benefited from federal and state net operating loss carry forwards and had a
100% valuation allowance against net deferred tax assets as of the second quarter ended July&nbsp;31,
2007. As such, income tax expense consisted primarily of alternative minimum tax and other minimum
taxes. During the third quarter of 2007 the Company reduced the valuation allowance. For the
first six months ended July&nbsp;31, 2008, the income tax provision reflects a more typical effective
tax rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Liquidity and Capital Resources</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of seasonally high shipments in the second quarter, accounts and notes receivable
increased by approximately $27.6&nbsp;million at July&nbsp;31, 2008 compared to January&nbsp;31, 2008.
Receivables decreased at July&nbsp;31, 2008 compared to July&nbsp;31, 2007 due to the decrease in second
quarter sales compared to the prior year. The Company traditionally builds large quantities of
component inventory during the first quarter in anticipation of seasonally high summer shipments.
During the second and third quarters, the Company reduces levels of component production and
assembles components to a finished goods state as customer orders are received. At July&nbsp;31, 2008,
inventories were higher than the prior year. The increase in inventory is primarily attributable
to increased levels of raw materials and product purchased for re-sale. The increase in raw
materials is in large part attributable to decreased second quarter production. Management
believes that the increased levels of purchased materials should result in reduced purchases in the
third quarter. Production levels for the balance of the year will be driven by sales demand, not a
requirement to reduce inventories of manufactured product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The increase in receivables and inventory during the first six months was financed through the
credit facility with Wells Fargo Bank. At July&nbsp;31, 2008 compared to July&nbsp;31, 2007, borrowings
under the line of credit were comparable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has established a goal of limiting capital spending to approximately than $5,000,000
for 2008, which is slightly less than anticipated depreciation expense. Capital spending for the
six months ended July&nbsp;31, 2008 was $2,487,000 compared to $2,114,000 for the same period last year.
Capital expenditures are being financed through the Company&#146;s credit facility established with
Wells Fargo Bank and operating cash flow. Approximately $21,951,000 was available for borrowing as
of July&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash used in operating activities for the six months ended July&nbsp;31, 2008 was $27,849,000
compared to $18,526,000 for the same period last year. The increase in cash used in operations for
the first six months was primarily attributable to decreased profitability compared to the prior
year. The Company believes that cash flows from operations, together with the Company&#146;s unused
borrowing capacity with Wells Fargo Bank will be sufficient to fund the Company&#146;s debt service
requirements, capital expenditures and working capital needs for the next twelve months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first six months of the year, the Company declared and paid two quarterly cash dividends
of $0.025 per share. Subsequent to the July&nbsp;31, 2008, the Company declared a third quarterly cash
dividend of $.025 per share, payable September&nbsp;16, 2008. Payment of a quarterly dividend was
predicated on 1) the strength of our balance sheet; 2) anticipated cash flows; and 3) future cash
requirements. Management anticipates that subsequent quarterly dividends will continue to be paid
following a review of these factors and Board approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;5, 2008, the Company announced that its Board of Directors authorized a stock repurchase
program under which the Company may acquire up to $3&nbsp;million of the Company&#146;s common stock in
fiscal year 2008. Such repurchases may be made pursuant to open market or privately negotiated
transactions. This $3&nbsp;million common stock repurchase program includes any unused amounts
previously authorized for repurchase by Company such that the maximum aggregate amount of common
stock that the Company may repurchase is $3&nbsp;million of the Company&#146;s common stock. Actual
repurchases will be made after due consideration of stock price, projected cash flows and
alternative uses of capital. During the second quarter, the Company repurchased 13,000 shares of
stock for $63,000.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Off Balance Sheet Arrangements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the six months ended July&nbsp;31, 2008, there were no material changes in the Company&#146;s off
balance sheet arrangements or contractual obligations and commercial commitments from those
disclosed in the Company&#146;s annual report on Form 10-K for the fiscal year ended January&nbsp;31, 2008.
Subsequent to the quarter ended July&nbsp;31, 2008 the Company entered into a five-year extension of a
lease for the manufacturing and distribution facility located in Torrance, CA. This agreement
extends the lease through February&nbsp;28, 2015.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Critical Accounting Policies and Estimates</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s critical accounting policies are outlined in its annual report on Form 10-K for the
fiscal year ended January&nbsp;31, 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Forward-Looking Statements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, including in this quarterly report, the Company or its representatives have made
and may make forward-looking statements, orally or in writing, including those contained herein.
Such forward-looking statements may be included in, without limitation, reports to stockholders,
press releases, oral statements made with the approval of an authorized executive officer of the
Company and filings with the Securities and Exchange Commission. The words or phrases
&#147;anticipates,&#148; &#147;expects,&#148; &#147;will continue,&#148; &#147;believes,&#148; &#147;estimates,&#148; &#147;projects,&#148; or similar
expressions are intended to identify &#147;forward-looking statements&#148; within the meaning of the Private
Securities Litigation Reform Act of 1995. The results contemplated by the Company&#146;s
forward-looking statements are subject to certain risks and uncertainties that could cause actual
results to vary materially from anticipated results, including without limitation, material
availability and cost of materials, especially steel, availability and cost of labor, demand for
the Company&#146;s products, competitive conditions affecting selling prices and margins, capital costs
and general economic conditions. Such risks and uncertainties are discussed in more detail in the
Company&#146;s Annual Report on Form 10-K for the fiscal year ended January&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s forward-looking statements represent its judgment only on the dates such statements
were made. By making any forward-looking statements, the Company assumes no duty to update them to
reflect new, changed or unanticipated events or circumstances.
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;3. Quantitative and Qualitative Disclosures about Market Risk</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective as of March&nbsp;18, 2008, the Company entered into the Second Amended and Restated Credit
Agreement (the &#147;Agreement&#148;), dated as of March&nbsp;12, 2008, with Wells Fargo Bank, National
Association (the &#147;Lender&#148;) and a related Revolving Line of Credit Note (the &#147;Note&#148;), dated as of
March&nbsp;12, 2008, in favor of the Lender. The Agreement provides the Company with a secured revolving
line of credit (the &#147;Revolving Credit&#148;) of up to $65,000,000, with seasonal adjustments to the
credit limit, and includes a sub-limit of up to $10,000,000 for the issuance of letters of credit.
The Revolving Credit is secured by a first priority perfected security interest in certain of the
personal and real property of the Company and its subsidiaries in favor of the Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective July&nbsp;31, 2008, the Company entered into Amendment No.&nbsp;1 (the &#147;First Amendment&#148;) to the
Second Amended and Restated Credit Agreement with the Lender. The First Amendment modified the
Agreement to provide for, among other items, a borrowing base formula that may limit the amount
available under the Revolving Credit or the letter of credit subfeature, monthly monitoring of the
borrowing base and auditing of the collateral. In addition, the amendment modified or eliminated
certain covenants, including the leverage ratio. Availability under the line was $21,951,000 at
July&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Revolving Credit will mature on February&nbsp;1, 2010. Interest under the Revolving Credit is
payable monthly at a fluctuating rate equal to the Lender&#146;s prime rate or, if the Company elects,
LIBOR plus a fluctuating margin. The Agreement provides for an unused commitment fee of 0.25%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Agreement is subject to various financial covenants including a minimum consolidated current
ratio, a minimum consolidated fixed charge coverage ratio, and a maximum leverage ratio. The
Agreement also places certain restrictions on activities by the Company, including capital
expenditures, new operating leases, dividends and the repurchase of the Company&#146;s common stock. The
Agreement is secured by certain of the Company&#146;s accounts receivable, inventories, equipment and
real property. The Company was in compliance with its covenants at July&nbsp;31, 2008. Management
believes the carrying value of debt
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">approximated fair value at July&nbsp;31, 2008 and 2007, as all of the long-term debt bears interest at
variable rates based on prevailing market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The foregoing description of each of the Agreement, the Note, the Revolving Credit and the First
Amendment are qualified in the entirety by reference to the agreements attached as Exhibits 10.1,
10.2, 10.3 and 10.4 to the Form 8-K submitted by the Company to the SEC on March&nbsp;24, 2008 and the
agreement attached as Exhibit&nbsp;10.2 hereto, each of which is incorporated herein by reference. These
agreements have been included to provide investors with information regarding their terms and are
not intended to provide any other factual information about the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At January&nbsp;31, 2008, the Company borrowed under an asset based line of credit with Wells Fargo. The
revolving line typically provided for advances of 80% on eligible accounts receivable and 20%- 60%
on eligible inventory. The advance rates fluctuated depending on the time of year and the types of
assets. The agreement had an unused commitment fee of 0.375%. Interest was at prime or LIBOR &#043;2.5%.
Availability under the line was $19,074,000 at January&nbsp;31, 2008. This line was replaced by the
Agreement, as described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As more fully described on the Company&#146;s annual report on Form&nbsp;10K for the fiscal year ended
January&nbsp;31, 2008, the Company sells a substantial quantity of furniture under annual fixed price
contracts, with little and sometimes no ability to increase prices during the duration of the
contact. During the course of the contract, the results of operations can be impacted by the cost
of certain commodities. During the six month period ended July&nbsp;31, 2008, the Company has been
adversely impacted by increased costs for steel, plastic, and fuel.
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;4. Controls and Procedures</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Disclosure Controls and Procedures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company maintains disclosure controls and procedures that are designed to ensure that the
information required to be disclosed in reports filed with the Securities and Exchange Commission
(the &#147;Commission&#148;) pursuant to the Securities Exchange Act of 1934 (the &#147;Exchange Act&#148;) is
recorded, processed, summarized and reported within the time periods specified in the Commission&#146;s
rules and forms, and that such information is accumulated and communicated to the Company&#146;s
management, including its Principal Executive Officer and Principal Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Assessing the costs and
benefits of such controls and procedures necessarily involves the exercise of judgment by
management, and such controls and procedures, by their nature, can provide only reasonable
assurance that management&#146;s objectives in establishing them will be achieved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company carried out an evaluation, under the supervision and with the participation of the
Company&#146;s management, including its Principal Executive Officer along with its Principal Financial
Officer, of the effectiveness of the design and operation of disclosure controls and procedures as
of the end of the period covered by this Quarterly Report on Form 10-Q, pursuant to Exchange Act
Rule&nbsp;13a-15. Based upon the foregoing, the Company&#146;s Principal Executive Officer, along with the
Company&#146;s Principal Financial Officer, concluded that, subject to the limitations noted in this
Part&nbsp;I, Item&nbsp;4, the Company&#146;s disclosure controls and procedures are effective in ensuring that (i)
information required to be disclosed by the Company in the reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the Commission&#146;s rules and forms and (ii)&nbsp;information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is accumulated and communicated to the
Company&#146;s management, including its principal executive and principal financial officers, or
persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Internal Control Over Financial Reporting</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There was no change in the Company&#146;s internal control over financial reporting during the fiscal
quarter ended July&nbsp;31, 2008 that has materially affected, or is reasonably likely to materially
affect, the Company&#146;s internal control over financial reporting.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">VIRCO MFG. CORPORATION
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">OTHER INFORMATION

</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;1A. Risk Factors
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As more fully described on the Company&#146;s annual report on Form&nbsp;10K for the fiscal year ended
January&nbsp;31, 2008, the Company sells a substantial quantity of furniture under annual fixed price
contracts, with little and sometimes no ability to increase prices during the duration of the
contact. During the course of the contract, the results of operations can be impacted by the cost
of certain commodities. During the six month period ended July&nbsp;31, 2008, the Company has been
adversely impacted by increased costs for steel, plastic, and fuel. Subsequent to the quarter
ended July&nbsp;31, 2008, the Company raised selling prices to a significant portion of its customers in
effort to recover margin lost to increased costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As more fully described on the Company&#146;s annual report on Form&nbsp;10K for the fiscal year ended
January&nbsp;31, 2008, approximately 40% of the Company&#146;s sales are priced under a nationwide contract.
Subsequent to the quarter ended July&nbsp;31, 2008, Virco was awarded a new three-year nationwide
contract with this same purchasing alliance covering the period beginning January&nbsp;31, 2009 through
December&nbsp;31, 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other than as discussed above, there have been no material changes in risk factors as disclosed in
the Form 10-K for the period ended January&nbsp;31, 2008.
</DIV>

<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;4. Submission of Matters to a Vote of Security Holders
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a description of matters submitted to a vote of registrant&#146;s stockholders at the
Annual Meeting of Stockholders held June&nbsp;17, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Election of three directors whose terms expire in 2011.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Votes For</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Authority Withheld</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Donald S. Friesz</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,337,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,612,430</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Glen D. Parish</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,334,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,615,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James R. Wilburn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,337,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,612,257</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ratification of the appointment of Ernst &#038; Young LLP as the Company&#146;s independent registered public
accounting firm for fiscal year 2008 was approved; 12,899,356 shares were voted for the proposal,
39,871 shares were voted against it and 10,254 shares abstained.
</DIV>

<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;6. Exhibits
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Exhibit&nbsp;10.1 &#151; First Amendment to Lease, dated as of August&nbsp;20, 2008, by and between AMB Property,
L.P., a Delaware limited partnership (&#147;Lessor&#148;) and the Company (&#147;Lessee&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Exhibit&nbsp;10.2 &#151; Amendment No.&nbsp;1 to the Second Amended and Restated Credit Agreement, dated as of
July&nbsp;31, 2008, between the Company and Wells Fargo Bank, National Association.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Exhibit&nbsp;31.1 &#151; Certification of Robert A. Virtue, Principal Executive Officer, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Exhibit&nbsp;31.2 &#151; Certification of Robert E. Dose, Principal Financial Officer, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Exhibit&nbsp;32.1 &#151; Certifications of Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of
2002.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SIGNATURES
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">VIRCO MFG. CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: September 9, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><I>Robert E. Dose</I>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><I>Vice President &#151; Finance</I>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>



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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v43622exv10w1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w1</TITLE>
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<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>FIRST AMENDMENT TO LEASE</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This First Amendment to Lease (&#147;Amendment&#148;) is made and entered into as of August&nbsp;20, 2008, by
and between AMB Property, L.P., a Delaware limited partnership (&#147;Lessor&#148;) and Virco Mfg.
Corporation, a Delaware corporation (&#147;Lessee&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RECITALS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Lessor and Lessee are parties to that certain Standard Industrial/Commercial Single Lessee
Lease &#151; Net dated February&nbsp;1, 2005 which includes an Addendum to American Industrial Real Estate
Association Standard Industrial/Commercial Single Lessee Lease &#151; Net (&#147;Addendum&#148;) as amended by a
First Amendment to Lease dated November&nbsp;7, 2005 (collectively &#147;Lease&#148;). Pursuant to the terms and
conditions of the Lease, Lessee leased from Lessor the premises commonly known as 2027 Harpers Way,
Torrance (&#147;Premises&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Lessee has requested and Lessor has agreed to extend the term of the Lease on the terms set
forth in this Amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;All capitalized terms used herein but not specifically defined in this Amendment shall have
the meanings ascribed to such terms in the Lease. The term &#147;Lease&#148; where used in the Lease shall
hereinafter refer to the Lease, as amended by this Amendment.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AGREEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the foregoing and the mutual covenants, conditions and
agreements contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Extension of Term</U>. The Term of the Lease is hereby extended (&#147;Extended Term&#148;) until
and including February&nbsp;28, 2015 (&#147;Lease Termination Date&#148;). The Extended Term shall commence on
full execution of this Amendment (&#147;Extended Term Commencement Date&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Base Rent</U>. During the Extended Term, the monthly Base Rent as set forth in
paragraph 1.5 of the Lease and as described in paragraph 4 of the Lease shall be as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Extended Term Commencement Date &#151; February&nbsp;28, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">- $234,780.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;1, 2010 &#151; February&nbsp;28, 2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">- $296,270.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;1, 2011 &#151; February&nbsp;29, 2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">- $307,450.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;1, 2012 &#151; February&nbsp;28, 2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">- $318,630.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;1, 2013 &#151; February&nbsp;28, 2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">- $329,810.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;1, 2014 &#151; February&nbsp;28, 2015</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">- $340,990.00</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Management Fee</U>. Notwithstanding anything to the contrary, commencing on March&nbsp;1,
2010, payable monthly thereafter as, when and in the manner that Rent is payable under the Lease,
Lessee shall pay to Lessor a property management fee equal to 1.25% of the Base Rent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Lessor&#146;s Work</U>. Lessor, at its sole cost and expense in a commercially reasonable
time and manner using Lessor&#146;s standard grade of materials, finishes and construction techniques,
shall complete the following (collectively &#147;Lessor&#146;s Work&#148;):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Install new HVAC units to properly serve the front office building (&#147;New
HVAC Units&#148;). Repair or replace, as reasonably determined by Lessor and Lessee,
interior ducting to make the new HVAC units fully</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>operational. Notwithstanding the installation of the New HVAC Units, Lessee shall continue to be responsible for the
maintenance and repair of the HVAC units after their replacement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Install new walk pads around all HVAC units on the entire roof area (both
the front office building and the entire rear building).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Repair window mullions broken by the settling in the downstairs courtyard
as well as the ponding problem at the upstairs (entry)&nbsp;courtyard.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Install a new COOL roof (&#147;New Roof&#148;) to include 81 new skylights on the
rear warehouse and 116 new skylights on the front warehouse. Each skylight shall
have security grills. Lessee&#146;s use of the Premises including, but not limited to,
its manufacturing processes shall not damage the New Roof including, but not limited
to, emitting particulates which damage the New Roof. Notwithstanding anything to the
contrary, Lessor shall, at Lessee&#146;s sole cost and expense, maintain the New Roof
including, but not limited to, Lessor entering into a roof maintenance contract with
a contractor approved by Lessee, which approval shall not be unreasonably withheld,
delayed or conditioned.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To the extent that Lessor&#146;s costs are not increased for Lessor&#146;s Work,
Lessor shall cooperate with Lessee in incorporating environmentally sensitive
characteristics into the design and execution of Lessor&#146;s Work including, but not
limited installation of a &#147;cool roof,&#148; i.e., a roof that reflects and emits a
portion of the sun&#146;s heat back to the sky instead of transferring it to the
Building.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Repair or replace broken ground aggregate panels in the vicinity of the
gated entry to the main lobby entrance but excluding the path leading all the way
out to Harpers Way.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At such time as the Building is repainted by Lessee, Lessor shall
re-caulk various panel joints on the exterior walls.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the foregoing or anything to the contrary, Lessor shall not install solar
panels or wind turbines on the Building. Further, Lessor shall not repair or replace broken and
aging sprinkler system back flow devices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessee, at its sole cost and expense, shall cooperate with Lessor and Lessor&#146;s contractors in
the completion of Lessor&#146;s Work. Such cooperation shall include, but not be limited to, providing
access to the Premises at all reasonable times to Lessor and Lessor&#146;s contractors, moving all
furniture, fixtures, equipment and decorations (collectively &#147;Lessee Property&#148;) in the manner
deemed necessary by Lessor or Lessor&#146;s contractors to allow Lessor or Lessor&#146;s contractors to
complete Lessor&#146;s Work, and returning installing, attaching or affixing the Lessee Property after
completion of Lessor&#146;s Work.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Lessee Improvement Allowance</U>. Subject to Lessee&#146;s compliance with the provisions of
this Amendment and the Lease, Lessor shall provide to Lessee an allowance in the amount of Six
Hundred Thousand and zero/00 Dollars ($600,000.00) (the &#147;TI Allowance&#148;) to construct and install
only improvements and upgrades to the two buildings which constitute the Building (&#147;Alterations&#148;)
and which have been approved in writing by Lessor pursuant to this Amendment which approval shall
not be unreasonably withheld or delayed. The Alterations shall include, but not necessarily be
limited to, new carpet and paint, wall coverings, ceiling tiles and ceiling finishes, bathroom
repairs and upgrades in both the front office building and the administrative area and shop offices
and restrooms of the rear manufacturing building and repair of broken or aging sprinkler system
backflow devices. Additionally, Lessee may use a portion of the TI Allowance on the replacing of
old and inefficient roof top air handlers, HVAC equipment, and blowers with new, more energy
efficient models and hiring an engineer to investigate the load capacity of the storage mezzanine
in the manufacturing area of the Building and a portion of the TI allowance not to exceed $50,000
for a backup electrical generator which shall be the property of Lessor at the end of the Term,
Extended Term or earlier termination of the Lease. The TI Allowance shall be used to design,
prepare, plan, obtain the approval of, construct and install the Alterations and for no other
purpose. Except as otherwise expressly provided herein, Lessor shall have no obligation to
contribute the TI Allowance unless and until the Alterations have been completed in a good and
workmanlike manner in lien free condition and evidence of same reasonably satisfactory to Lessor
has been received by Lessor to include, but not be limited to (a)&nbsp;receipt by Lessor of
unconditional mechanics&#146; lien releases from the contractor and all subcontractors, labor suppliers
and materialmen for the Alterations completed by the contractor, subcontractors, labor suppliers
and materialmen and for which Lessee seeks funds from the TI Allowance to pay for such Alterations,
(b)&nbsp;receipt by Lessor of
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any and all documentation reasonably required by Lessor detailing the
Alterations have been completed and the materials and supplies used as of the date of Lessee&#146;s
request for the progress payment, including, without limitation, invoices, bills, or statements for
the Alterations completed and the materials and supplies used, and (c)&nbsp;completion by Lessor or
Lessor&#146;s agents of any inspections of the Alterations completed and materials and supplies used as deemed
reasonably necessary by Lessor. The TI Allowance progress payments shall be paid to Lessee within
fourteen (14)&nbsp;days from the satisfaction of the conditions set forth in the immediately preceding
sentence. Should the total cost of constructing the Alterations be less than the TI Allowance, the
TI Allowance shall be automatically reduced to the amount equal to said actual cost.
Notwithstanding the foregoing or anything to the contrary, the TI Allowance shall only be paid by
Lessor to Lessee for Alterations completed by Lessee, and for which Lessee has complied with items
(a)&nbsp;and (b)&nbsp;above, between full execution of this Amendment and December&nbsp;31, 2009 (&#147;TI Completion
Period&#148;). To the extent that Alterations are not completed during the TI Completion Period, Lessor
shall not have any obligation to pay, nor shall Lessee have any right to receive, the TI Allowance.
If the Lease is terminated prior to the date on which the Alterations are completed, for any
reason due to the default of Lessee hereunder or under the Lease, in addition to any other remedies
available to Lessor under the Lease, Lessee shall pay to Lessor as additional rent under the Lease,
within five (5)&nbsp;days of receipt of a statement therefor, any and all costs incurred by Lessor and
not reimbursed or otherwise paid by Lessee through the date of termination in connection with the
Alterations to the extent planned, installed and/or constructed as of such date of termination,
including, but not limited to, any costs related to the removal of all or any portion of the
Alterations and restoration costs related thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U>&#147;As-Is&#148;</U>. Except for the completion of Lessor&#146;s Work and payment of TI Allowance
pursuant to this Amendment, Lessee acknowledges and agrees that its tenancy of the Premises through
the Lease Termination Date is a continuation of its tenancy of the Premises under the Lease.
Therefore, Lessee accepts the Premises in its existing condition, &#147;as-is, where is, and with all
faults&#148;. Except as specifically set forth herein, it is expressly understood and agreed that Lessor
has no responsibility or obligation to or for (1)&nbsp;repair or perform any work with respect to the
Premises including, but not limited to, the building, floor, roof, storefront (if any), walls,
ceiling, lighting fixtures, heating, ventilating and air-conditioning systems, plumbing, bathrooms,
utilities systems or otherwise, (2)&nbsp;the condition of the Premises, (3)&nbsp;the suitability of the
Premises for any use by Lessee, (4)&nbsp;the presence of any hazardous, toxic or environmentally
sensitive materials in, on or below the Premises, or (5)&nbsp;the existence of any other physical
impairment or impairment to the Premises not specifically disclosed in this Lease. Lessee
acknowledges and agrees that, during its tenancy of the Premises, it has had sufficient opportunity
to investigate and inspect the physical condition of the Premises and accepts the Premises subject
to the foregoing in its existing condition, &#147;as-is, where is and with all faults&#148;. Notwithstanding
the foregoing or anything to the contrary in the Lease, Lessee shall have no obligation or
liability for the presence of any hazardous, toxic or environmentally sensitive materials in, on or
below the Premises, except to the extent that same were brought on to the Premises by Lessee or its
employees, agents, agents, contractors, visitors or invitees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>New Roof Repairs and Maintenance</U>. Notwithstanding anything to the contrary in the
Lease and Addendum, upon completion of the New Roof, Lessor, at Lessee&#146;s sole cost and expense,
shall maintain and repair the New Roof (&#147;New Roof Repair Costs&#148;), as deemed reasonably necessary by
Lessor including, but not limited to a roof inspection and maintenance contract. The New Roof
Repair Costs may, at Lessor&#146;s sole option, be estimated by Lessor and paid by Lessee on a monthly
basis as additional rent under the Lease in the same time and manner as rent is otherwise paid
under the Lease, or paid by Lessee, as additional rent, within fifteen (15)&nbsp;days of receipt by
Lessee from Lessor of a bill for such New Roof Repair Costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>New HVAC Repairs and Maintenance</U>. Notwithstanding anything to the contrary in the
Lease and Addendum, upon completion of the New HVAC Units, Lessee shall, at its sole cost and
expense, maintain, repair and replace the New HVAC Units and any ducting or additional equipment
related thereto (&#147;Related HVAC Equipment&#148;) including, but not limited to a obtaining and
maintaining, at Lessee&#146;s sole cost and expense, a service contract (&#147;HVAC Contract&#148;), with a
licensed HVAC contractor (&#147;HVAC Contractor&#148;) approved by Lessor in advance, providing for the
maintenance and repair of the New HVAC Units and Related HVAC Equipment and providing for at least
quarterly maintenance of the New HVAC Units and Related HVAC Equipment by the HVAC Contractor. If
Lessee fails to obtain or maintain the HVAC Contract, fails to perform any maintenance or repairs
suggested or required by the HVAC Contractor, or fails to perform any of Lessee&#146;s obligations under
this Paragraph&nbsp;7, after five (5)&nbsp;days written notice from Lessor to Lessee, Lessor may, at Lessee&#146;s
sole cost and expense plus an administrative fee payable by Lessee to Lessor, as additional rent,
equal to fifteen percent (15%) of such cost and expense, obtain and maintain the HVAC Contract,
authorize or perform any repairs or maintenance suggested or required by the HVAC Contractor,
perform such Lessee&#146;s obligations or authorize or perform any repairs, replacements or maintenance
which would be Lessee&#146;s obligations as deemed reasonably necessary by Lessor. Notwithstanding the
foregoing and except to the extent caused by the negligent or intentional acts or omissions of
Lessee, its employees, agents, or contractors or the breach by Lessee of any
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of its obligations under the Lease, Lessee shall have no obligation to replace the New HVAC Units or Related HVAC
Equipment until after February&nbsp;28, 2015.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U>Capital Expenditures</U>. Paragraph 53(j) of the Addendum is hereby deleted and of no
further force or effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U>Lessor&#146;s Obligations Under Lease</U>. Notwithstanding anything to the contrary in the
Lease, Lessee acknowledges and agrees that Lessor has completed its obligations under Paragraphs
54(d) and (f)&nbsp;of the Addendum and Paragraph&nbsp;2 of Exhibit&nbsp;A (Work Letter Agreement) to the Lease and
has no further obligations thereunder.<U> </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U>Exercise of Option to Extend</U>. Notwithstanding anything to the contrary, the
Extended Term as set forth in this Amendment shall be deemed the exercise of the Option to Extend
granted in the Lease and Lessee shall have no further option to extend the term of the Lease beyond
the Lease Expiration Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U>Warehouse Condition</U>. Schedule&nbsp;1, &#147;Warehouse Condition,&#148; of the Lease is amended as
follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Item&nbsp;9: Notwithstanding anything to the contrary contained in
Schedule&nbsp;1, Lessor, at its sole cost and expense, shall remove ventilation
ducting and ventilation equipment and make any repairs to the roof and roof
structure necessitated by their removal.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Item&nbsp;11: Notwithstanding anything to the contrary contained in
Schedule&nbsp;1, Lessor, at its sole cost and expense, shall remove all roof mounted
equipment as set forth in Item&nbsp;11 of Schedule&nbsp;1 and make any repairs to the roof
necessitated by their removal.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Items 15, 16 and 17: Notwithstanding anything to the contrary
contained in Schedule&nbsp;1, Lessee shall not be required to &#147;add high bay lighting&#148;
as set forth in items 15, 16 and 17.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Item&nbsp;22: Notwithstanding anything to the contrary contained in
Schedule&nbsp;1, Lessee shall not be responsible to &#147;restore door #30 at wood
grinder&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Item&nbsp;23: Notwithstanding anything to the contrary contained in
Schedule&nbsp;1, Lessee shall be responsible to remove the small spray booth at the
lower level under the upholstery area, but it shall not be required to remove the
stack assembly.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Item&nbsp;24: Notwithstanding anything to the contrary contained in
Schedule&nbsp;1, Lessee shall not be obligated to &#147;install walls made of drywall and
galvanized studs under upholstery mezzanine.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;<U>Lessor&#146;s Address for Payments and Notices</U>. The address for notices to Lessor as
set forth in the Lease shall be to:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt">AMB Property, L.P.<BR>
c/o AMB Property Corporation<BR>
Pier 1, Bay 1<BR>
San Francisco, CA 94111<BR>
Attention: Daniel L. Anderson
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The address for payments to Lessor as set forth in the Lease shall be to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt">AMB Property, L.P.<BR>
c/o AMB Property Corporation<BR>
P.O. Box 6156<BR>
Hicksville, NY 11802-6156
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;<U>Broker&#146;s Fees</U>. Except for The Klabin Company, who shall be paid pursuant to a
separate written agreement with Lessor, Lessee represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no broker, agent or
other person brought about this transaction and Lessee shall indemnify, defend, protect and hold
Lessor harmless from and against any claims, losses, liabilities, demands, costs, expenses or
causes of action by any broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Lessee with regard to this leasing transaction.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;<U>Effect of Amendment</U>. Except as modified herein, the terms and conditions of the
Lease shall remain unmodified and continue in full force and effect. In the event of any conflict
between the terms and conditions of the Lease and this Amendment, the terms and conditions of this
Amendment shall prevail. Except as otherwise provided herein, the terms and provisions of the Lease
are hereby incorporated in this Amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;<U>Authority</U>. Subject to the provisions of the Lease, this Amendment shall be binding
upon and inure to the benefit of the parties hereto, their respective heirs, legal representatives,
successors and assigns. Each party hereto and the persons signing below warrant that the person
signing below on such party&#146;s behalf is authorized to do so and to bind such party to the terms of
this Amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;<U>Counterparts</U>. This Amendment may be executed in counterparts by the parties, which
counterparts, each of which shall be an original, but all of which shall constitute one and the
same instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;<U>Estoppel</U>. Lessee warrants, represents and certifies to Lessor that as of the date
of this Amendment, (a)&nbsp;Lessor is not in default under the Lease, as amended by this Amendment, and
(b)&nbsp;Lessee does not have any defenses or offsets to payment of rent and performance of its
obligations under the Lease, as amended by this Amendment, as and when the same become due.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>&#091;signatures on following page&#093;</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the date first written
above.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Lessor:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Lessee:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">AMB Property, L.P.<br>
a Delaware limited partnership</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Virco Mfg. Corporation,<br>
a Delaware corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>




<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AMB Property Corporation,
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
a Maryland corporation,<BR>
its general partner
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Robert E. Dose
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Name: Robert E. Dose<br>Its: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VP Finance
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Daniel L. Anderson</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Daniel L. Anderson<br>
Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>v43622exv10w2.htm
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w2</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDMENT NO. 1 TO<BR>
SECOND AMENDED AND RESTATED Credit AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>AMENDMENT NO. 1 </B>dated as of July&nbsp;31, 2008 (&#147;<U>Amendment</U>&#148;) between <B>VIRCO MFG.
CORPORATION</B>, a Delaware corporation (the &#147;<U>Borrower</U>&#148;), and <B>WELLS FARGO BANK, NATIONAL
ASSOCIATION </B>(the &#147;<U>Bank</U>&#148;), and amends the Second Amended and Restated Credit Agreement dated
as of March&nbsp;12, 2008 (as amended, restated, supplemented or otherwise modified, the &#147;<U>Credit
Agreement</U>&#148;) between the Borrower and the Bank. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein as therein defined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, subject to the satisfaction of the conditions set forth herein, the Borrower and the
Bank have agreed to certain amendments to the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and
valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties
hereto agree as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;1. </B><B><I>Amendment to Section&nbsp;1.</I></B><B><I>1(a)</I></B><B><I> of the Credit Agreement. </I></B>Section&nbsp;1.1(a) of the Credit
Agreement hereby is amended and restated in its entirety as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Line of Credit</U>. During the Line of Credit Period, Bank hereby agrees,
subject to the terms and conditions of this Agreement, to make advances (&#147;<U>Advances</U>&#148;)
to Borrower from time to time in an aggregate principal amount at any time outstanding not to
exceed the lesser of (i)&nbsp;the Maximum Line of Credit Amount minus the Letter of Credit Usage
or (ii)&nbsp;the Borrowing Base minus the Letter of Credit Usage (&#147;<U>Line of Credit</U>&#148;). The
proceeds of all advances made hereby shall be used to finance Borrower&#146;s working capital
requirements and for other lawful purposes consistent with the provisions hereof. Borrower&#146;s
obligation to repay advances under the Line of Credit shall be evidenced by a promissory note
substantially in the form of <U>Exhibit&nbsp;A</U> attached hereto (&#147;<U>Line of Credit
Note</U>&#148;), all terms of which are incorporated herein by this reference. In connection with
the foregoing, the amount, if any, by which the LC Usage Amount at any time exceeds the
lesser of the Maximum Line of Credit Amount or the Borrowing Base, in either case, at such
date shall be payable immediately by Borrower to Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;2. </B><B><I>Amendment to Section&nbsp;1.</I></B><B><I>1(b)</I></B><B><I> of the Credit Agreement. </I></B>Section&nbsp;1.1(b) of the Credit
Agreement hereby is amended and restated in its entirety as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Letter of Credit Subfeature</U>. As a subfeature under the Line of Credit, Bank
agrees from time to time during the term thereof to issue or cause an affiliate to issue
sight commercial or standby letters of credit for the account of Borrower (each, a
&#147;<U>Letter of Credit</U>&#148; and collectively, &#147;<U>Letters of Credit</U>&#148;); <I>provided however,</I>
Bank shall have no obligation to issue a Letter of Credit if any of the following would
result after giving effect to the requested Letter of Credit: (i)&nbsp;the Letter of Credit Usage
would exceed the Borrowing Base less the then extant amount of outstanding Advances, or (ii)
the Letter of Credit Usage would exceed $10,000,000, or (iii)&nbsp;the Letter of Credit Usage
would exceed the Maximum Line of Credit Amount less the then extant amount of outstanding
Advances. The form and substance of each Letter of Credit shall be subject to approval by
Bank, in its sole discretion. Each commercial Letter of Credit shall be issued for a term
not to exceed one hundred eighty (180)&nbsp;days, as designated by Borrower; <I>provided, however,</I>
that no commercial Letter of Credit shall have an expiration date subsequent to the Line of
Credit Termination Date. Each standby Letter of Credit shall be issued for a term not to
exceed twelve (12)&nbsp;months, as designated by Borrower; <I>provided, however</I>, that no standby
Letter of Credit shall have an expiration date subsequent to the Line of Credit Termination
Date. Each Letter of Credit shall be subject to the additional terms and conditions of the
Letter of Credit agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each drawing paid under a Letter of Credit shall be
deemed an Advance under the Line of Credit and shall be repaid by Borrower in accordance with
the terms and conditions of this Agreement applicable to such advances; <I>provided, however,</I>
that if Advances under the Line of Credit are not available, for any reason, at the time any
drawing is paid, then Borrower shall immediately pay to Bank the full amount drawn, together
with interest thereon from the date such drawing is paid to the date such amount is fully
repaid by Borrower, at the rate of interest applicable to advances under the Line of Credit.
In such event Borrower agrees that Bank, in its sole discretion, may debit any account
maintained by Borrower with Bank for the amount of any such drawing. All Prior Letters of
Credit which are outstanding as of the date hereof shall be deemed &#147;Letters of Credit&#148;
hereunder.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3. </B><B><I>Amendments to Section&nbsp;1.</I></B><B><I>2(f)</I></B><B><I> of the Credit Agreement. </I></B>Section&nbsp;1.2(f) of the Credit
Agreement hereby is amended and restated in its entirety as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Collateral Audits; Appraisals</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Borrower shall pay to Bank its customary fees plus reasonable out-of-pocket expenses
for each financial or collateral analysis and examination (i.e., audit) of Borrower and its
Subsidiaries performed by personnel employed by Bank (or the actual charges paid or incurred
by Bank if it elects to employ the services of one or more Persons to perform such audits);
<I>provided, however </I>that so long as no Event of Default has occurred and is continuing,
Borrower shall not be obligated to reimburse Bank the fees and costs of more than two (2)
audits in any fiscal year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Bank shall have the right to have the Inventory, Equipment and the Real Property
Collateral of the Borrower and its Subsidiaries appraised from time to time by a qualified
appraiser selected by Bank. Borrower shall pay to Bank its customary fees plus reasonable
out-of-pocket expenses for each appraisal conducted by personnel employed by Bank (or the
actual charges paid or incurred by Bank if it elects to employ the services of one or more
third Persons to appraise the Inventory, Equipment and Real Property Collateral of Borrower
and its Subsidiaries).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;4. </B><B><I>Amendments to Article&nbsp;II of the Credit Agreement</I></B><B>. </B>Article&nbsp;II of the Credit
Agreement hereby is supplemented by adding the following Sections&nbsp;2.16 and 2.17 immediately
following Section&nbsp;2.15 appearing in Article&nbsp;II:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.16. <U>Eligible Accounts</U>.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Eligible Accounts are bona fide existing payment obligations of Account Debtors
created by the sale and delivery of Inventory or the rendition of services to such Account
Debtors in the ordinary course of Borrower&#146;s business, owed to Borrower without any known
defenses, disputes, offsets, counterclaims, or rights of return or cancellation. As to each
Account that is identified by Borrower as an Eligible Account in a Borrowing Base Certificate
submitted to Bank, such Account is not excluded as ineligible by virtue of one or more of the
defining criteria set forth in the definition of Eligible Accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.17. <U>Eligible Inventory</U>.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All Eligible Inventory is of good and merchantable quality, free from known defects. As
to each item of Inventory that is identified by Borrower as Eligible Inventory in a Borrowing
Base Certificate submitted to Bank, such Inventory is not excluded as ineligible by virtue of
one or more of the defining criteria set forth in the definition of Eligible Inventory.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;5. </B><B><I>Amendments to Section&nbsp;4.3 of the Credit Agreement</I></B><B>. </B>Section&nbsp;4.3 of the Credit
Agreement hereby is amended by redesignating clause (g)&nbsp;thereof as clause (k)&nbsp;and inserting the
following clauses (g), (h), (i)&nbsp;and (j)&nbsp;immediately following clause (f)&nbsp;thereof:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <U>Account Debtor Information</U>. Not later than 30&nbsp;days after July&nbsp;31 and
January&nbsp;31 of each year, a detailed report setting forth a true and complete list of all
Account Debtors of Borrower and its Subsidiaries as of July&nbsp;31 and January&nbsp;31, respectively,
together with the address, phone number and name of the primary relationship contact for each
Account Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <U>Borrowing Base Reports</U>. Not later than the fifth Business Day following the
end of each month, a detailed calculation of the Borrowing Base (including detail regarding
those Accounts of Borrower that are not Eligible Accounts), in the form of the Borrowing Base
Certificate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <U>Weekly Reports</U>. If the date of determination is between April 1 and July
31, not later than Monday of each week for the week most recently ended:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) an aging of the Accounts of Borrower, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Bank,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) an aging, by vendor, of the accounts payable and any book overdraft of
Borrower and its Subsidiaries, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Inventory reports specifying the cost of the Inventory of Borrower and its
Subsidiaries, by category (i.e., by reference to whether such Inventory is raw
material, work-in-process, &#147;assemble-to-ship&#148; component or finished goods Inventory),
as adjusted to reflect the market value of such Inventory if lower than the cost
thereof, with additional detail showing additions to and deletions therefrom;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <U>Monthly Reports</U>. If the date of determination is between August 1 and March
31, not later than the 10th day of each month for the month most recently ended:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) an aging of the Accounts of Borrower, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Bank,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) an aging, by vendor, of the accounts payable and any book overdraft of
Borrower and its Subsidiaries, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Inventory reports specifying the cost of the Inventory of Borrower and its
Subsidiaries, by category (i.e., by reference to whether such Inventory is raw
material, work-in-process, &#147;assemble-to-ship&#148; component or finished goods Inventory),
as adjusted to reflect the market value of such Inventory if lower than the cost
thereof, with additional detail showing additions to and deletions therefrom; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;6. </B><B><I>Amendment to Section&nbsp;5.11 of the Credit Agreement</I></B><B>. </B>Section&nbsp;5.11 of the Credit
Agreement hereby is amended and restated in its entirety as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.11 <U>Minimum Net Income</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permit Net Income as of the end of any fiscal year of the Borrower to be less than $1.0.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;7. </B><B><I>Amendment to Section&nbsp;5.13 of the Credit Agreement. </I></B>Section&nbsp;5.13 of the Credit
Agreement hereby is amended and restated in its entirety as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.13 <U>Maximum Leverage Ratio</U>.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permit the Consolidated Leverage Ratio, measured as of the end of each fiscal quarter of
each fiscal year, to be less than the required ratio set forth in the following table for the
corresponding period:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Maximum Consolidated</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Applicable Fiscal Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Leverage Ratio</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">July&nbsp;31, 2008
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.25 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">October&nbsp;31, 2008
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.50 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">January&nbsp;31, 2009
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.75 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Except as otherwise set forth in this table, the <BR>
fiscal quarter ended <BR>
January&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.25 to 1.00</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Maximum Consolidated</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Applicable Fiscal Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Leverage Ratio</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Fiscal quarter ended <BR>
April&nbsp;30 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2.50 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Except as otherwise set forth in this table, the <BR>
fiscal quarter ended <BR>
July&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.50 to 1.00</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Except as otherwise set forth in this table, the <BR>
fiscal quarter ended <BR>
October&nbsp;31 of each fiscal year
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.25 to 1.00</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;8. </B><B><I>Amendments to Annex A to the Credit Agreement</I></B><B>. </B>(a)&nbsp;The following definitions
hereby are inserted in Annex A to the Credit Agreement in the proper alphanumerical order:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Amendment No.&nbsp;1</U>&#148; means Amendment No.&nbsp;1 to Second Amended and Restated Credit
Agreement dated as of March&nbsp;12, 2008 between the Borrower and the Bank.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Base</U>&#148; means, as of any date of determination, the result of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) 80% of the amount of Eligible Accounts, less the amount, if any, of the
Dilution Reserve, <I>plus</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the lower of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Maximum Inventory Amount, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the sum of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 8%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) the Designated Finished Goods Advance Rate of the value of
Eligible Finished Goods Inventory, <I>plus</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 8%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) the Designated ATS Advance Rate of the value of Eligible ATS
Inventory, <I>plus</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 8%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) 50% of the value of Eligible Raw Material Inventory, <I>minus</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) such reserves as the Bank, in the exercise of its reasonable credit judgment,
determines are necessary or appropriate, including, without limitation, a $100,000
reserve for the payment of licensing royalties payable in connection with the sale of
inventory.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Base Certificate</U>&#148; means a certificate substantially in the form of
<U>Exhibit&nbsp;C</U> delivered by the chief financial officer of Borrower to Bank.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral Access Agreement</U>&#148; means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person
in possession of, having a Lien upon, or having rights or interests in Borrower&#146;s or its
Subsidiaries&#146; books and records, Equipment or Inventory, in each case, in form and substance
satisfactory to Bank.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Designated ATS Advance Rate</U>&#148; means, at any date, a percentage equal to (a)&nbsp;if
such date is on or after March 1 and on or before July&nbsp;31 of each year, 50% and (b)&nbsp;at all
other times, 20%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Designated Finished Goods Advance Rate</U>&#148; means, at <U>any</U> date, a
percentage equal to (a)&nbsp;if such date is on or after March 1 and on or before July&nbsp;31 of each
year, 60% and (b)&nbsp;at all other times, 50%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dilution</U>&#148; means, at any date, a percentage, based upon the experience of the
immediately prior 30 consecutive days, that is the result of dividing the Dollar amount of
(a)&nbsp;bad debt write-downs, discounts, advertising allowances, credits, returns of merchandise,
freight allowances, notes taken in lieu of payment, miscellaneous credits and adjustments, or
other dilutive items with respect to Borrower&#146;s Accounts during such period, by (b)
Borrower&#146;s gross billings with respect to Accounts during such period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dilution Reserve</U>&#148; means, as of any date of determination, an amount sufficient
to reduce the advance rate against Eligible Accounts as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>If Dilution is:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Then the Dilution Reserve is:</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Less than 5.0%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">- 0 -</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">5.0% or greater but less than 10.0%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">An amount sufficient to reduce advance rates by 5.0%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">10.0% or greater but less than 15.0%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">An amount sufficient to reduce advance rates by 10.0%</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">15.0% or greater but less than 20.0%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">An amount sufficient to reduce advance rates by 15.0%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">20.0% or greater but less than 25.0%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">An amount sufficient to reduce advance rates by 20.0%</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">25.0% or greater but less than 30.0%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">An amount sufficient to reduce advance rates by 25.0%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">For each additional 5.0% increase in Dilution
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">An amount sufficient to reduce advance rates by an<BR>
incremental 5.0%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Eligible Accounts</U>&#148; means those Accounts created by Borrower in the ordinary
course of its business, that arise out of Borrower&#146;s sale of goods or rendition of services,
that comply with each of the representations and warranties respecting Eligible Accounts made
in the Loan Documents, and that are not excluded as ineligible by virtue of one or more of
the excluding criteria set forth below; <I>provided, however, </I>that such criteria may be revised
from time to time by Bank in Bank&#146;s discretion to address the results of any audit performed
by Bank from time to time after the Closing Date. In determining the amount to be included,
Eligible Accounts shall be calculated net of customer deposits and unapplied cash and shall
not give effect to any credits reflected on Borrower&#146;s agings that would otherwise reduce the
amount of ineligible Accounts. Eligible Accounts shall not include the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) (i)&nbsp;with respect to Accounts due on or before the date that is 30&nbsp;days after the
original invoice date thereof, Accounts that the Account Debtor has failed to pay within 90
days of the original invoice date therefor or within 60&nbsp;days of the due date thereof, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) with respect to Accounts due on or after the date that is 31&nbsp;days after the
original invoice date thereof, Accounts that the Account Debtor has failed to pay within 120
days of the original invoice date therefor or within 30&nbsp;days of the due date thereof;
<I>provided, however, </I>that no Accounts shall constitute Eligible Accounts hereunder if such
Accounts are outstanding (or provide terms of payment) more than 180&nbsp;days after the original
invoice thereof,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Accounts owed by an Account Debtor (or its Affiliates) where 20% or more of all
Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause
(a)&nbsp;above,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Accounts with respect to which the Account Debtor is an Affiliate of Borrower or an
employee or agent of Borrower or any Affiliate of Borrower,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Accounts arising in a transaction wherein goods are placed on consignment or are
sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, a
cash on delivery or any other terms by reason of which the payment by the Account Debtor may
be conditional,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Accounts that are not payable in Dollars,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Accounts with respect to which the Account Debtor either (i)&nbsp;does not maintain its
chief executive office in the United States, or (ii)&nbsp;is not organized under the laws of the
United States or any state thereof, or (iii)&nbsp;is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political subdivision
thereof, or of any department, agency, public corporation, or other instrumentality thereof,
unless (y)&nbsp;the Account is supported by an irrevocable letter of credit satisfactory to Bank
(as to form, substance, and issuer or domestic confirming bank) that has been delivered to
Bank and is directly drawable by Bank, or (z)&nbsp;the Account is covered by credit insurance in
form, substance, and amount, and by an insurer, satisfactory to Bank,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Accounts with respect to which the Account Debtor is either the United States or any
department, agency, or instrumentality of the United States (exclusive, however, of Accounts
with respect to which Borrower has complied, to the reasonable satisfaction of Bank, with the
Assignment of Claims Act, 31 USC &#167; 3727),
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Accounts with respect to which the Account Debtor is a creditor of Borrower, has or
has asserted a right of setoff, has disputed its obligation to pay all or any portion of the
Account, or is the subject of litigation (including any collection actions) undertaken by
Borrower,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Accounts with respect to an Account Debtor whose total obligations owing to Borrower
exceed 20% (such percentage as applied to a particular Account Debtor being subject to
reduction by Bank in its discretion if the creditworthiness of such Account Debtor
deteriorates) of all Eligible Accounts, to the extent of the obligations owing by such
Account Debtor in excess of such percentage; <I>provided, however, </I>that, in each case, the
amount of Eligible Accounts that are excluded because they exceed the foregoing percentage
shall be determined by Bank based on all of the otherwise Eligible Accounts prior to giving
effect to any eliminations based upon the foregoing concentration limit,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) Accounts with respect to which the Account Debtor is subject to an Insolvency
Proceeding, is not Solvent, has gone out of business, or as to which Borrower has received
notice of an imminent Insolvency Proceeding or a material impairment of the financial
condition of such Account Debtor or as to which Borrower has referred the Account Debtor to
Borrower&#146;s legal or collection department (or a third Person providing such services),
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) Accounts with respect to which the Account Debtor is located in a state or
jurisdiction (e.g., New Jersey, Minnesota, and West Virginia) that requires, as a condition
to access to the courts of such jurisdiction, that a creditor qualify to transact business,
file a business activities report or other report or form, or take one or more other actions,
unless Borrower has so qualified, filed such reports or forms, or taken such actions (and, in
each case, paid any required fees or other charges), except to the extent that Borrower may
qualify subsequently as a foreign entity authorized to transact business in such state or
jurisdiction and gain access to such courts, without incurring any cost or penalty viewed by
Bank to be significant in amount, and such later qualification cures any access to such
courts to enforce payment of such Account,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) Accounts, the collection of which, Bank, in its discretion, believes to be doubtful
by reason of the Account Debtor&#146;s financial condition,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) Accounts that are not subject to a valid and perfected first priority Lien in favor
of Bank,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) Accounts with respect to which (i)&nbsp;the goods giving rise to such Account have not
been shipped and billed to the Account Debtor, or (ii)&nbsp;the services giving rise to such
Account have not been performed and billed to the Account Debtor,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) Accounts that represent the right to receive progress payments or other advance
billings that are due prior to the completion of performance by Borrower of the subject
contract for goods or services, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) Accounts representing service, finance, late or collection charges, to the extent of
such service, finance, late or collection charges.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Eligible ATS Inventory</U>&#148; means Inventory that qualifies as Eligible Finished
Goods Inventory except for the fact that such Inventory constitutes &#147;assemble-to-ship&#148;
(&#147;<U>ATS</U>&#148;) Inventory.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Eligible Finished Goods Inventory</U>&#148; means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrower&#146;s business that complies with
each of the representations and warranties respecting Eligible Finished Goods Inventory made
in the Loan Documents, and that is not excluded as ineligible by virtue of the one or more of
the excluding criteria set forth below; <I>provided, however, </I>that such criteria may be revised
from time to time by Bank in Bank&#146;s discretion to address the results of any audit or
appraisal performed by Bank from time to time after the Closing Date. In determining the
amount to be so included, Inventory shall be valued at the lower of cost or market on a basis
consistent with Borrower&#146;s historical accounting practices. An item of Inventory shall not
be included in Eligible Inventory if:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Borrower does not have good, valid, and marketable title thereto,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) it is not located at one of the locations in the continental United States set forth
on <U>Schedule&nbsp;E-1</U> or in transit from one such location to another such location,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) it is located on real property leased by Borrower or in a contract warehouse, in
each case, unless it is subject to a Collateral Access Agreement (except if the leased real
property is Borrower&#146;s facility located at 2027 Harpers Way, Torrance, California, in which
case no Collateral Access Agreement shall be required) executed by the lessor or
warehouseman, as the case may be, and unless it is segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) it is not subject to a valid and perfected first priority Lien in favor of the Bank,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) it consists of goods returned or rejected by Borrower&#146;s customer,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) it consists of goods that are obsolete or slow moving, restrictive or custom items,
work-in-process, raw materials, or goods that constitute spare parts, packaging and shipping
materials, supplies used or consumed in Borrower&#146;s business, bill and hold goods, defective
or damaged goods, &#147;seconds,&#148; or Inventory sold or acquired on consignment, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) it contains or bears any intellectual property rights licensed to Borrower or any
Subsidiary, unless Bank is reasonably satisfied that it may sell or otherwise dispose of such
Inventory without (i)&nbsp;infringing the rights of such licensor, (ii)&nbsp;violating any contract
with such licensor, or (iii)&nbsp;incurring any liability with respect to payment of royalties
other than royalties incurred pursuant to sale of such Inventory under the current licensing
agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Eligible Inventory</U>&#148; means Eligible ATS Inventory, Eligible Finished Goods
Inventory or Eligible Raw Material Inventory.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Eligible Raw Material Inventory</U>&#148; means Inventory that qualifies as Eligible
Finished Goods Inventory except for the fact that such Inventory constitutes raw materials.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>First Amendment Effective Date</U>&#148; means the first date on which all conditions
set forth in Section&nbsp;12 of Amendment No.&nbsp;1 have been satisfied.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Maximum Inventory Amount</U>&#148; means, as of any date of determination, an amount
equal to (a)&nbsp;if such date is on or after March 1 and on or before June&nbsp;30 of any calendar
year, $30,000,000, (b)&nbsp;if such date is on or after July 1 and on or before July&nbsp;31 of any
calendar year, $25,000,000 and (c)&nbsp;at all other times, $15,000,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The following definition appearing in Annex A to the Credit Agreement hereby is amended
and restated in its entirety as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; means, as applied to any Person, any other Person who, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. For purposes of this
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">definition, &#147;control&#148; means the possession, directly or indirectly through one or more
intermediaries, of the power to direct the management and policies of a Person, whether
through the ownership of stock, by contract, or otherwise; <I>provided, however, </I>that, for
purposes of the definition of Eligible Accounts and Section&nbsp;5.9 hereof: (a)&nbsp;any Person which
owns directly or indirectly 10% or more of the Stock having ordinary voting power for the
election of directors or other members of the governing body of a Person or 10% or more of
the partnership or other ownership interests of a Person (other than as a limited partner of
such Person) shall be deemed an Affiliate of such Person, (b)&nbsp;each director (or comparable
manager) of a Person shall be deemed to be an Affiliate of such Person and (c)&nbsp;each
partnership or joint venture in which a Person is a partner or joint venturer shall be deemed
an Affiliate of such Person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The following definitions appearing in Annex A to the Credit Agreement hereby are deleted
from Annex A: Consolidated Current Assets; Consolidated Current Liabilities; Consolidated Current
Assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;9. </B><B><I>Supplements to Exhibits and Schedules</I></B><B>. </B>The Credit Agreement hereby is supplemented
to include Exhibit&nbsp;C attached hereto and Schedule&nbsp;E-1 attached hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;10. </B><B><I>Consent to Amendments</I></B><B>. </B>Each Guarantor hereby acknowledges and consents to this
Amendment, and affirms and acknowledges that the Guaranty and each other Loan Document to which it
is a party remains in full force and effect and that such Person remains obligated thereunder
without defense, offset or counterclaim of any kind whatsoever, as if such Guaranty or other Loan
Document were executed and delivered to the Bank on the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;11. </B><B><I>Representations and Warranties. </I></B>To induce the Bank to enter into this Amendment,
the Borrower represents and warrants to the Bank that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Representations and Warranties in Credit Agreement</U>. Each of the
representations and warranties of the Borrower and its Subsidiaries contained in the Credit
Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or
in connection with the Credit Agreement (i)&nbsp;were true and correct when made and (ii)&nbsp;after
giving effect to this Amendment, continue to be true and correct on the date hereof (except
to the extent that such representations and warranties relate expressly to an earlier date).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Authority</U>. The execution and delivery by the Borrower of this Amendment and the
performance by the Borrower of its obligations under this Amendment (i)&nbsp;are within its power
and authority, (ii)&nbsp;have been duly authorized by all necessary proceedings, (iii)&nbsp;do not and
will not conflict with or result in any breach or contravention or any provision of law,
statute, rule or regulation to which the Borrower is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower so as to materially adversely affect
the assets, business or any activity of the Borrower, (iv)&nbsp;do not conflict with any provision
of the certificate of incorporation or bylaws of the Borrower or any agreement or other
instrument binding upon the Borrower, (v)&nbsp;do not and will not require any waivers, consents
or approvals by any of its creditors which have not been obtained, or (vi)&nbsp;do not and will
not require any approval which has not been obtained.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Enforceability of Obligations</U>. This Amendment and the Credit Agreement, as
amended hereby, constitute the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with its terms, except as enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors&#146; rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>No Event of Default</U>. No Event of Default or Default has occurred and is
continuing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;12. </B><B><I>Conditions to Effectiveness. </I></B>This Amendment shall become effective on the date
when the following conditions precedent have been satisfied:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Borrower, each Guarantor and the Bank shall have delivered an executed
counterpart of this Amendment.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) No Event of Default or Default shall have occurred and be continuing or would result
after giving effect to the transactions contemplated hereby.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The representations and warranties set forth in Section&nbsp;5 hereof shall be true and
correct on the effective date of this Amendment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) No injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated herein shall have
been issued and remain in force by any Governmental Authority against the Borrower, any
Guarantor or the Bank.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Borrower shall have paid all reasonable out-of-pocket costs and expenses of the
Bank, to the extent invoices therefor have been presented.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) All other documents and legal matters in connection with the transactions
contemplated by this Amendment shall have been delivered or executed or recorded and shall be
in form and substance satisfactory to the Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;13. </B><B><I>Admissions and Acknowledgments. </I></B>The Borrower and each Guarantor expressly
acknowledges and agrees with each of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) That such Person does not dispute the validity or enforceability of any of the Loan
Documents or any of their respective obligations under any of the foregoing, or the validity,
priority, enforceability, scope or extent of any charge, Lien, security interest or any other
encumbrance of the Bank in, on or against any of the Collateral in any judicial,
administrative or other proceeding;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) That such Person shall not challenge or dispute the validity of any of its
obligations under the Loan Documents to which it is party or any other obligations incurred
by such Person pursuant to the Loan Documents; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) That the Indebtedness evidenced by the Loan Documents is secured by first priority,
non-avoidable, perfected, valid and enforceable liens on and security interests in the
Collateral, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;14. </B><B><I>Reference to and Effect on Loan Documents.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon the effectiveness of this Amendment, on and after the date hereof, each
reference in the Credit Agreement to &#147;this Agreement&#148;, &#147;hereunder&#148;, &#147;hereof&#148; or words of like
import, and each reference in the other Loan Documents to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended hereby.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except as expressly set forth herein, this Amendment shall not by implication or
otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies
of the Bank under the Credit Agreement or any other Loan Document, and shall not alter,
modify, amend or in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement or any other Loan Document, all of which are
ratified and affirmed in all respects and shall continue in full force and effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Nothing herein shall be deemed to entitle the Borrower or any Guarantor to a waiver,
amendment, modification or other change of any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or any other Loan Document in
similar or difference circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) This Amendment shall be a Loan Document for all purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;15. </B><B><I>Benefits of Amendment</I></B><B>. </B>The terms and provisions of this Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns to the extent contemplated by the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;16. </B><B><I>Interpretation</I></B><B>. </B>The Article and Section headings used in this Amendment are for
convenience of reference only and shall not affect the construction hereof.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;17. </B><B><I>Execution in Counterparts</I></B><B>. </B>This Amendment may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one and the same
Amendment. Faxed signatures of this Amendment shall be binding for all purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;18. </B><B><I>Severability</I></B><B>. </B>If any provision of this Amendment shall be held to be invalid,
illegal or unenforceable under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such invalidity, illegality or unenforceability, which shall not
affect any other provisions hereof or the validity, legality and enforceability of such provision
in any other jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;19. </B><B><I>Governing Law</I></B><B>. </B>This Agreement shall be governed by and construed in accordance
with the laws of the State of California. The arbitration provisions of Section&nbsp;7.11 of the Credit
Agreement are incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;20. </B><B><I>Expenses</I></B><B>. </B>The Borrower agrees to pay the reasonable out-of-pocket expenses of the
Bank, including but not limited to the reasonable fees, charges and disbursements, including but
not limited to the fees, charges and disbursements of Gibson, Dunn &#038; Crutcher LLP, special counsel
for the Bank, incurred in connection with the preparation, negotiation, execution and delivery of
this Amendment and any subsequent waiver, amendment or modification of the Credit Agreement or any
other Loan Document and the security arrangements in connection herewith or therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;21. </B><B><I>No Course of Dealing. </I></B>The execution and delivery of this Amendment shall not
establish a course of dealing among the Bank, the Borrower and the Guarantors or in any other way
obligate the Bank to hereafter provide any further amendments, waivers, or consents of any kind to
the Borrower and the Guarantors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;22. </B><B><I>Arm&#146;s Length Agreement. </I></B>Each of the parties to this Amendment agrees and
acknowledges that this Amendment has been negotiated in good faith, at arm&#146;s length, and not by any
means forbidden by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;23. </B><B><I>Entire Agreement. </I></B>This Amendment together with all other instruments, agreements,
and certificates executed by the parties in connection herewith or with reference thereto, embody
the entire understanding and agreement between the parties hereto and thereto with respect to the
subject matter hereof and thereof and supercede all prior agreements, understandings, and
inducements, whether express or implied, oral or written.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;Signature Pages Follow&#093;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->36<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered
as of the date first set forth above.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>VIRCO MFG. CORPORATION</B>,
<BR>as the Borrower<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Vice President &#151; Finance, Secretary and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>VIRCO, INC.</B>,<BR>as a Guarantor<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Vice President &#151; Finance, Secretary and<BR>Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>VIRCO MGMT. CORPORATION</B>,<BR>as a Guarantor<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert E. Dose
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Robert E. Dose&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Vice President &#151; Finance, Secretary and<BR>Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>WELLS FARGO BANK, NATIONAL ASSOCIATION</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Jeff Heisinger
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Jeff Heisinger&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Signature Page to Amendment No.&nbsp;1</I><BR>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 0pt"><I>Virco Mfg. Corporation</I>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>



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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>v43622exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
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<HEAD>
<TITLE>exv31w1</TITLE>
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<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Robert A. Virtue, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this Quarterly Report on Form 10-Q of Virco Mfg. Corporation;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal
control over financial reporting that occurred during the registrant&#146;s
most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant&#146;s internal
control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record,
process, summarize and report financial information;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant&#146;s internal control over
financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: September 9, 2008&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left"><I>/s/ Robert A. Virtue</I>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>Robert A. Virtue</I>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>President and Chief Executive Officer</I>
<BR>
(Principal Executive Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>v43622exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
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<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Robert E. Dose, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this Quarterly Report on Form 10-Q of Virco Mfg. Corporation;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal
control over financial reporting that occurred during the registrant&#146;s
most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant&#146;s internal
control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material
weaknesses in the design or operation of
internal control over financial reporting
which are reasonably likely to adversely
affect the registrant&#146;s ability to record,
process, summarize and report financial
information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that
involves management or other employees who
have a significant role in the registrant&#146;s
internal control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: September 9, 2008&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left"><I>/s/ Robert E. Dose</I>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>Robert E. Dose</I>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>Vice President of Finance</I>
<BR>
(Principal Financial Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>6
<FILENAME>v43622exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
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<TITLE>exv32w1</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18<BR>
U.S.C. &#167; 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Robert A. Virtue, Chief Executive Officer of Virco Mfg. Corporation (the &#147;Company&#148;), certify,
pursuant to 18 U.S.C. &#167; 1350, as adopted pursuant to &#167; 906 of the Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. the Quarterly Report of the Company on Form 10-Q for the quarter ended July&nbsp;31, 2008, as filed
with the Securities and Exchange Commission (the &#147;Report&#148;) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: September 9, 2008&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left"><I>/s/ Robert A. Virtue</I>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>Robert A. Virtue</I>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>President and Chief Executive Officer</I>
<BR>
(Principal Executive Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Robert E. Dose, Vice President of Finance of Virco Mfg. Corporation (the &#147;Company&#148;), certify,
pursuant to 18 U.S.C. &#167; 1350, as adopted pursuant to &#167; 906 of the Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. the Quarterly Report of the Company on Form 10-Q for the quarter ended July&nbsp;31, 2008, as filed
with the Securities and Exchange Commission (the &#147;Report&#148;) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: September 9, 2008&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left"><I>/s/ Robert E. Dose</I>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>Robert E. Dose</I>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><I>Vice President of Finance</I>
<BR>
(Principal Financial Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These certifications accompany the Report pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002
and shall not be deemed filed by the Company for purposes of Section&nbsp;18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject the Company to the liability of that section.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>End of Filing</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


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