10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934

FORM 10-Q

For Quarter Ended October 31, 2006

Commission File Number 1-8777

VIRCO MFG. CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware	95-1613718
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2027 Harpers Way, Torrance, CA	90501
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (310) 533-0474

No change

Former name, former address and former fiscal year, if changed since last report.

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated Filer o      Accelerated Filer þ      Non-Accelerated Filer o

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

     The number of shares outstanding for each of the registrant’s classes of common stock, as of the latest practicable date:

     Common Stock, $.01 par value – 14,379,506 shares as of November 23, 2006.

VIRCO MFG. CORPORATION

INDEX

Exhibit 10.1 – Stock Purchase Agreement, dated as of June 26, 2006, by and among Virco Mfg. Corporation, and certain purchasers named therein.

Exhibit 31.1 – Certification of Robert A. Virtue, President, 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.

Exhibit 31.2 – Certification of Robert E. Dose, Vice President, Finance, 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.

Exhibit 32.1 – Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 EXHIBIT 10.1

 EXHIBIT 31.1

 EXHIBIT 31.2

 EXHIBIT 32.1

2

PART I

Item 1. Financial Statements

VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	10/31/2006		1/31/2006		10/31/2005
	(In thousands, except share data)
	Unaudited (Note 1)				Unaudited (Note 1)
Assets
Current assets
Cash	$	2,158	$	1,489	$	1,441
Trade accounts receivable		28,994		17,470		22,569
Less allowance for doubtful accounts		234		200		289
Net trade accounts receivable		28,760		17,270		22,280
Other receivables		160		377		74
Inventories
Finished goods, net		7,786		11,070		8,777
Work in process, net		10,257		13,796		10,335
Raw materials and supplies, net		7,118		6,751		6,471
		25,161		31,617		25,583
Prepaid expenses and other current assets		802		1,493		631
Total current assets		57,041		52,246		50,009
Property, plant and equipment:
Land and land improvements		3,596		3,591		3,253
Buildings and building improvements		49,555		49,581		49,581
Machinery and equipment		108,385		106,475		105,114
Leasehold improvements		1,323		1,289		1,289
		162,859		160,936		159,237
Less accumulated depreciation and amortization		114,417		109,513		107,433
Net property, plant and equipment		48,442		51,423		51,804
Goodwill and other intangible assets, net		2,314		2,324		2,327
Other assets		8,728		8,727		8,816
Total assets	$	116,525	$	114,720	$	112,956

See Notes to Condensed Consolidated Financial Statements.

3

VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	10/31/2006			1/31/2006			10/31/2005
	(In thousands, except share data)
	Unaudited (Note 1)						Unaudited (Note 1)
Liabilities
Current liabilities
Checks released but not yet cleared bank	$	2,222		$	2,030		$	2,280
Accounts payable		11,856			17,504			10,339
Accrued compensation and employee benefits		6,435			6,047			5,160
Income tax payable		1,050			847			858
Current portion of long-term debt		5,012			5,012			5,012
Other accrued liabilities		4,537			5,318			4,696
Total current liabilities		31,112			36,758			28,345
Non-current liabilities:
Accrued self-insurance retention and other		3,815			2,703			2,591
Accrued pension expenses		15,671			14,618			13,749
Long-term debt, less current portion		10,877			21,541			20,537
Total non-current liabilities		30,363			38,862			36,877
Commitments and contingencies
Stockholders’ equity
Preferred stock
Authorized 3,000,000 shares, $.01 par value; none issued or outstanding		—			—			—
Common stock
Authorized 25,000,000 shares, $.01 par value; issued 14,379,506 shares at 10/31/2006, 13,137,288 at 1/31/2006 and 10/31/2005		144			131			131
Additional paid-in capital		113,616			108,143			108,143
Accumulated deficit		(54,583	)		(64,981	)		(57,198	)
Accumulated comprehensive loss		(4,127	)		(4,193	)		(3,342	)
Total stockholders’ equity		55,050			39,100			47,734
Total liabilities and stockholders’ equity	$	116,525		$	114,720		$	112,956

See Condensed Consolidated Financial Statements.

4

VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited (Note 1)

	Three months ended
	10/31/2006		10/31/2005
	(In thousands, except share data)
Net sales	$	73,678	$	70,484
Costs of goods sold		46,586		50,400
Gross profit		27,092		20,084
Selling, general and administrative expenses		20,125		21,523
Interest expense		1,014		895
Income (loss) before income taxes		5,953		(2,334	)
Income tax provision (benefit)		120		(140	)
Net income (loss)	$	5,833	$	(2,194	)
Net income (loss) per common share
Basic	$	0.41	$	(0.17	)
Diluted	$	0.41	$	(0.17	)
Weighted average shares outstanding
Basic		14,362		13,146
Diluted		14,364		13,146

See Notes to Condensed Consolidated Financial Statements.

5

VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited (Note 1)

	Nine months ended
	10/31/2006		10/31/2005
	(In thousands, except share data)
Net sales	$	186,788	$	179,644
Costs of goods sold		119,819		123,649
Gross profit		66,969		55,995
Selling, general and administrative expenses		53,134		55,572
Interest expense		3,197		2,324
Income (loss) before income taxes		10,638		(1,901	)
Income tax provision (benefit)		240		(109	)
Net income (loss)	$	10,398	$	(1,792	)
Net income (loss) per common share
Basic	$	0.77	$	(0.14	)
Diluted	$	0.77	$	(0.14	)
Weighted average shares outstanding
Basic		13,475		13,111
Diluted		13,499		13,111

See Notes to Condensed Consolidated Financial Statements.

6

VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited (Note 1)

	Nine months ended
	10/31/2006			10/31/2005
	(In thousands)
Operating activities
Net income (loss)	$	10,398		$	(1,792	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		5,486			6,767
Provision for doubtful accounts		25			60
Loss on sale of property, plant and equipment		1			77
Stock based compensation		645			—
Changes in operating assets and liabilities
Trade accounts receivable		(11,515	)		(6,343	)
Other receivables		217			91
Inventories		6,456			464
Income taxes		203			2,137
Prepaid expenses and other current assets		691			731
Accounts payable and accrued liabilities		(3,702	)		(2,611	)
Net cash provided by (used in) operating activities		8,905			(419	)
Investing activities
Capital expenditures		(2,463	)		(1,774	)
Proceeds from sale of property, plant and equipment		—			15
Net cash used in investing activities		(2,463	)		(1,759	)
Financing activities
Issuance of long-term debt		—			2,419
Repayment of long-term debt		(10,580	)		—
Proceeds from issuance of common stock		4,807			8
Net cash (used in) provided by financing activities		(5,773	)		2,427
Net increase in cash		669			249
Cash at beginning of year		1,489			1,192
Cash at end of year	$	2,158		$	1,441
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Interest, net of amounts capitalized	$	3,197		$	2,324
Income tax, net		37			(2,249	)

See Notes to Condensed Consolidated Financial Statements.

7

VIRCO MFG. CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2006

Note 1. Basis of Presentation

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 10 of Regulation 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 nine months ended October 31, 2006, are not necessarily indicative of the results that may be expected for the year ending January 31, 2007. The balance sheet at January 31, 2006, 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’s annual report on Form 10-K for the year ended January 31, 2006.

Note 2. Seasonality

The market for educational furniture is marked by extreme seasonality, with over 50% of the Company’s total sales typically occurring from June to September each year, which is the Company’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 preceding the peak season.

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.

The Company’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.

Note 3. New Accounting Standards

In February 2006, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments” (SFAS 155). SFAS 155 establishes, among other things, the accounting for certain derivatives embedded in other financial instruments. This statement permits fair value remeasurement for any hybrid financial instrument containing an embedded derivative that would otherwise require bifurcation. It also requires that beneficial interests in securitized financial assets be accounted for in accordance with SFAS No. 133. SFAS 155 is effective for fiscal years beginning after September 15, 2006, and is not expected to have a material impact on the Company’s financial operations or financial positions.

On July 13, 2006, the FASB issued Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109,

8

Accounting for Income Taxes. FIN No. 48 prescribes a recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is assessing the impact the adoption of FIN No. 48 will have on the Company’s consolidated financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (“SFAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard also expands the amount of disclosure regarding the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently reviewing the impact, if any, that SFAS 157 will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158 Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS 158”). This statement requires an employer that is a business entity to recognize in its balance sheet the over funded or under funded status of a defined benefit postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation. The recognition of the net liability or asset will require an offsetting adjustment to accumulated other comprehensive income in shareholders’ equity. SFAS 158 does not change how pensions and other postretirement benefits are accounted for and reported in the income statement. This statement is effective for fiscal years ending after December 15, 2006. The Company will be required to apply the new standard for its 2006 year-end financial statements and recognize on the 2006 balance sheet the funded status of pension and other postretirement benefit plans. The Company estimates that adoption of this statement will increase the Company’s recorded liabilities by approximately $9 million with no impact to the statement of operations.

In October 2006, the FASB ratified EITF 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This statement is effective for years beginning after December 15, 2007. This statement clarifies FASB 106, Employers Accounting for Post-Retirement Benefits other than Pensions, applies to endorsement split-dollar life insurance arrangements. The Company estimates that adoption of this statement will increase the Company’s recorded liabilities by approximately $2 million with no impact to the statement of operations or cash flows of the Company . The Company has purchased life insurance policies that are designed to pay a death benefit that is greater than the promised retirement benefit.

Note 4. Inventories

Year end financial statements at January 31, 2006 reflect inventories verified by physical counts with the material content valued by the LIFO method. At October 31, 2006 and 2005, 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 periods ended October 31, 2006 and 2005. LIFO reserves at October 31, 2006 and January 31, 2006 were $6,423,000. LIFO reserves at October 31, 2005 were $6,201,000. Management continually monitors production costs, material costs and inventory levels to determine that interim inventories are fairly stated.

Note 5. Debt

The Company has entered into a revolving credit facility with Wells Fargo Bank, amended and restated in December 2005, which provides a term loan of $20,000,000 and a secured revolving line of credit that varies as a percentage of inventory and receivables, up to a maximum of $40,000,000. The revolving line of credit increases to $50,000,000 between May and September. The term note is a two-year loan amortizing at $5,000,000 per year with interest payable monthly at a fluctuating rate equal to Wells Fargo Bank’s prime rate (8.25% at October 31, 2006) plus a 2% margin.

The revolving line has a 24-month maturity with interest payable monthly at a fluctuating rate equal to Wells Fargo Bank’s prime rate plus a fluctuating margin similar to the term note. The revolving line typically provides

9

for advances of 80% on eligible accounts receivable and 20% — 60% on eligible inventories. The advance rates fluctuate depending on the time of the year and the types of assets. The agreement has an unused commitment fee of 0.375%. Approximately $24,917,000 was available for borrowing as of October 31, 2006.

The revolving credit facility with Wells Fargo Bank is subject to various financial covenants including a minimum EBITDA and an annual clean down. The annual clean down provision limits the Company’s outstanding debt balance at a maximum of $30 million for a period of 90 consecutive days during the fourth quarter ending January 31, 2007. The agreement also places certain restrictions on capital expenditures, new operating leases, dividends and the repurchase of the Company’s common stock. The revolving credit facility is secured by the Company’s accounts receivable, inventories, equipment and property. The Company was in compliance with its covenants at October 31, 2006 and January 31, 2006. At October 31, 2005, the Company was in violation of certain of its loan covenants. In December 2005, the Company restructured its debt with Wells Fargo Bank, which waived the October 31, 2005 covenant violation and amended the terms of the loan and several of the financial covenants. The $15,877,000 due under Wells Fargo Bank’s line of credit will be payable on February 15, 2008, if the agreement is not renewed. The Company currently intends to renew the agreement.

Note 6. Income Taxes

The Company recognizes deferred income taxes under the asset and liability method of accounting for income taxes in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred income taxes are recognized for differences between the financial statement and tax basis of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on this consideration, management believes it is more likely than not that the net deferred tax assets will not be realized, and a valuation allowance has been recorded against the net deferred tax assets at October 31, 2006, January 31, 2006 and October 31, 2005.

At January 31, 2006, the Company had net operating losses that can potentially be carried forward for federal and state income tax purposes, expiring at various dates through 2026 if not utilized. Federal net operating losses that can potentially be carried forward total approximately $27,411,000 at January 31, 2006. State net operating losses that can potentially be carried forward total approximately $51,122,000 at January 31, 2006. Net operating losses carried forward will be utilized to offset taxable income realized for the nine months ended October 31, 2006.

For the nine months ended October 31, 2006, the Company recognized an income tax expense of $240,000 due to alternative minimum tax and minimum income and franchise taxes as required by various states and local tax authorities. For the nine months ended October 31, 2005, the Company recognized a net income tax benefit of $109,000.

Note 7. Net Income per Share

The following table sets forth the computation of income per share:

	Three Months Ended					Nine Months Ended
	10/31/2006		10/31/2005			10/31/2006		10/31/2005
	(In thousands, except per share data)					(In thousands, except per share data)
Net income (loss)	$	5,833	$	(2,194	)	$	10,398	$	(1,792	)
Average shares outstanding		14,362		13,146			13,475		13,111
Net effect of dilutive stock options based on the treasury stock method using average market price		2		—			24		—
Totals		14,364		13,146			13,499		13,111
Net income (loss) per share — basic	$	0.41	$	(0.17	)	$	0.77	$	(0.14	)
Net income (loss) per share — diluted	$	0.41	$	(0.17	)	$	0.77	$	(0.14	)

Potentially dilutive options and grants in the aggregate of 211,000 and 239,000 for the three and nine months ended October 31, 2005 have been excluded from the calculation of the diluted loss per share as their effect would have been anti-dilutive.

10

Note 8. Stock Based Compensation

Stock Option Plans

The Company’s two stock plans are the 1997 Employee Incentive Plan (the “1997 Plan”) and the 1993 Employee Incentive Stock Plan (the “1993 Plan”). Under the 1993 Plan, the Company was authorized to grant an aggregate of 707,384 shares (as adjusted for stock splits and stock dividends) to its employees in the form of stock options. The 1993 Plan expired in 2003 and had 47,182 unexercised options outstanding at October 31, 2006. Under the 1997 Plan, the Company may grant an aggregate of 724,729 shares (as adjusted for stock splits and stock dividends) to its employees in the form of stock options or awards. As of October 31, 2006, the 1997 Plan had 234,594 unexercised options outstanding. Options granted under these plans have an exercise price equal to the market price at the date of grant, have a maximum term of 10 years and generally become exercisable ratably over a five-year period. The Company did not grant any stock options during the quarter and the nine months ended October 31, 2006.

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 such issuance, it requires that the option holders provides a written notice of exercise to the stock plan administrator and payment for the shares prior to issuance of the shares.

Accounting for the Plans

Prior to February 1, 2006, the Company accounted for incentive stock plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related Interpretations, as permitted by FASB Statement No. 123, “Accounting for Stock Based Compensation”. No stock based employee compensation was reflected in net income, as all options granted under those plans had an exercise price equal to the fair value of the underlying common stock on the date of grant. Effective February 1, 2006 the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), “Share-Based Payment”, using the modified prospective-transition. The modified prospective method was applied to those unvested options issued prior to the Company’s adoption that have historically been accounted for under the Intrinsic Value Method. All outstanding options were 100% vested prior to the adoption. Accordingly, no compensation expense was recorded on the Company’s options during the three months and nine months ended October 31, 2006. The following table illustrates the impact on net earnings and earnings per common share if the fair value method had been applied for all periods presented.

	Three Months Ended					Nine months ended
	10/31/2006		10/31/2005			10/31/2006		10/31/2005
	(In thousands, except per share data)					(In thousands, except per share data)
Net income (loss), as reported	$	5,833	$	(2,194	)	$	10,398	$	(1,792	)
Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects		—		11			—		38
Pro forma net income (loss)	$	5,833	$	(2,205	)	$	10,398	$	(1,830	)

11

	Three Months Ended					Nine months ended
	10/31/2006		10/31/2005			10/31/2006		10/31/2005
	(In thousands, except per share data)					(In thousands, except per share data)
Net income (loss) per share — basic, as reported	$	0.41	$	(0.17	)	$	0.77	$	(0.14	)
Net income (loss) per share — diluted, as reported	$	0.41	$	(0.17	)	$	0.77	$	(0.14	)
Weighted average shares outstanding — basic		14,362		13,146			13,475		13,111
Weighted average shares outstanding — diluted		14,364		13,146			13,499		13,111

The Company has estimated the fair value of all stock option awards as of the date of grant by applying the Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are judgmental and sensitive in the determination of compensation expense. Historical information was the primary basis for the selection of the expected volatility and life of the option. The risk-free interest rate was selected based upon the yield of the U.S. Treasury issue with a term equal to the expected life of the option being valued.

Stock option activity during the three and nine months ended October 31, 2006 is as follows:

						Weighted Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual Term (in		Intrinsic Value
	Shares			Exercise Price		yrs.)		(in thousands)
Outstanding at February 1, 2006		292,571		$	11.56		2.49
Lapsed		(10,795	)		13.30
Exercised		—
Granted		—
Outstanding at April 30, 2006		281,776			11.50		2.25	$	—
Lapsed		—
Exercised		—
Granted		—
Outstanding at July 31, 2006		281,776			11.50		1.99		—
Lapsed		(47,182	)		6.37
Exercised		—
Granted		—
Outstanding at October 31, 2006		234,594			12.53		2.10		—

As all options had vested prior to February 1, 2006, there was no effect on the statement of operations or cash flows due to the adoption of FASB Statement No. 123(R).

Restricted Stock Unit Awards

On June 30, 2004, the Company granted a total of 270,000 restricted stock units, with an estimated fair value of $6.92 per unit and exercise price of $0.01 per unit, to eligible employees under the 1997 Plan. Interests in such restricted stock units vest ratably over five years, with such units vesting 20% at each anniversary date. At such time that the restricted stock units vest, they become exchangeable for shares of common stock. As such, 153,000 of the units remain outstanding as of October 31, 2006. Compensation expense is recognized based on the estimated fair value of restricted stock units and vesting provisions. Compensation expense incurred in connection with this award was $88,000 and $99,000 for quarters ended October 31, 2006 and 2005, respectively. Compensation expense incurred in connection with this award was $265,000 and $296,000 for nine months ended October 31, 2006 and 2005, respectively. As of October 31, 2006, there was

12

approximately $941,000 of unrecognized compensation cost related to non-vested restricted stock unit awards, which is expected to be recognized through June 30, 2009.

On January 13, 2006, the Company granted a total of 73,881 restricted stock units, with an estimated fair value of $5.21 per unit and exercise price of $0.01 per unit, to non-employee directors under the 1997 Plan. Interests in such restricted stock units vest 100% on July 5, 2006. Compensation expense is recognized based on the estimated fair value of restricted stock units and vesting provisions. For the nine months ended October 31, 2006, compensation expense incurred in connection with this award was $343,000. As of October 31, 2006, there was no unrecognized compensation cost related to this award.

On June 20, 2006, the Company granted a total of 17,640 shares of restricted stock, with an estimated fair value of $4.96 per unit and exercise price of $0.01 per unit, to non-employee directors under the 1997 Plan. Interests in such restricted stock units vest 100% on June 19, 2007. Compensation expense is recognized based on the estimated fair value of restricted stock units and vesting provisions. For the three ended October 31, 2006, compensation expense incurred in connection with this award was $36,000. As of October 31, 2006, there was approximately $51,000 of unrecognized compensation cost related to non-vested restricted stock unit awards. The cost is expected to be recognized through May 31, 2007. In connection with the grant of these restricted stock units all outstanding, unexercised stock options held by the non-employee directors were cancelled.

As the compensation cost for the restricted stock units was measured using the estimated fair value on the date of grant and recognized over the vesting period, there was no effect on the statements of operations, due to the adoption of FASB Statement No. 123(R). At February 1, 2006, the Company recorded a transitional reclassification of $247,000 from current liabilities to additional paid-in capital.

Note 9. Comprehensive Income (Loss)

Comprehensive income (loss) for the three and nine months ended October 31, 2006 and 2005 was the same as net income (loss) reported on the statements of operations. Accumulated comprehensive income (loss) at October 31, 2006 and 2005 and January 31, 2006 is composed of minimum pension liability adjustments.

Note 10. Retirement Plans

The Company and its subsidiaries cover all employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Plan”). Benefits under the Plan are based on years of service and career average earnings. As more fully described in the Form 10-K for the period ended January 31, 2006, benefit accruals under this plan were frozen effective December 31, 2003.

The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”). 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 Plan. As more fully described in the Form 10-K for the period ended January 31, 2006, benefit accruals under this plan were frozen effective December 31, 2003.

The Company also provides a non-qualified plan for non-employee directors of the Company (the “Non-Employee Directors Retirement Plan”). The Non-Employee Directors Retirement Plan provides a lifetime annual retirement benefit equal to the director’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 years of service to the Company. As more fully described in the Form 10-K for the period ended January 31, 2006, benefit accruals under this plan were frozen effective December 31, 2003.

The net periodic pension costs for the Plan, the VIP Plan, and the Non-Employee Directors Retirement Plan for the three months each ended October 31, 2006 and 2005 were as follows (in thousands):

13

	Three Months Ended
													Non-Employee Directors
	Pension Plan						VIP Retirement Plan						Retirement Plan
	2006			2005			2006			2005			2006			2005
Service cost	$	43		$	55		$	53		$	58		$	6		$	6
Interest cost		352			337			85			89			6			6
Expected return on plan assets		(246	)		(248	)		—			—			0			0
Amortization of transition amount		(9	)		(9	)		—			—			0			0
Amortization of prior service cost		117			107			(134	)		(125	)		22			22
Recognized net actuarial (Gain) or loss		41			33			34			27			(7	)		(7	)
Settlement and curtailment		—			—			—			—			—			—
Net periodic pension cost	$	298		$	275		$	38		$	49		$	27		$	27

	Nine Months Ended
													Non-Employee Directors
	Pension Plan						VIP Retirement Plan						Retirement Plan
	2006			2005			2006			2005			2006			2005
Service cost	$	129		$	165		$	159		$	174		$	18		$	18
Interest cost		1,056			1,011			255			267			18			18
Expected return on plan assets		(738	)		(744	)		—			—			—			—
Amortization of transition amount		(27	)		(27	)		—			—			—			—
Amortization of prior service cost		351			321			(402	)		(375	)		66			66
Recognized net actuarial (Gain) or loss		123			99			102			81			(21	)		(21	)
Settlement and curtailment		—			—			—			—			—			—
Net periodic pension cost	$	894		$	825		$	114		$	147		$	81		$	81

Note 11. Warranty

The Company provides a product warranty on most products. It generally warrants that customers can return a defective product during the specified warranty period following purchase in exchange for a replacement product or that the Company can repair the product at no charge to the customer. The Company determines whether replacement or repair is appropriate in each circumstance. The Company uses historic data to estimate appropriate levels of warranty reserves. Because product mix, production methods, and raw material sources change over time, historic data may not always provide precise estimates for future warranty expense. The following is a summary of the Company’s warranty claim activity for the three and nine month periods each ended October 31, 2006 and 2005:

	Three months ended						Nine months ended
	10/31/2006			10/31/2005			10/31/2006			10/31/2005
	(In thousands)						(In thousands)
Beginning Accrued Warranty Balance	$	1,500		$	1,500		$	1,500		$	1,500
Provision		258			261			660			693
Costs Incurred		(258	)		(261	)		(660	)		(693	)
Ending Accrued Warranty Balance	$	1,500		$	1,500		$	1,500		$	1,500

Note 12. Other Financing Activities

14

On June 6, 2006, WEDBUSH, Inc. and Wedbush Morgan Securities, Inc. (“Wedbush Morgan,” and together with WEDBUSH, Inc., the “Purchasers”), entered into a stock purchase agreement (the “Agreement”) with the Company. Pursuant to the Agreement, (a) the Purchasers purchased from the Company shares (the “Shares”) of the Company’s common stock yielding gross proceeds to the Company of $5,000,000 at a purchase price per share of $4.66 (the “Per Share Purchase Price”) and (b) the Company issued warrants to the Purchasers exercisable for 268,010 shares of common stock pursuant to which the Purchasers will have the right to acquire the 268,010 shares at an exercise price of 120% of the Per Share Purchase Price during the first three years following the closing of the transaction and at 130% of the Per Share Purchase Price during the fourth and fifth years following the closing of the transaction. The Company filed a Registration Statement on Form S-3 registering the resale of the Shares on July 6, 2006 and amended that registration statement on August 17, 2006. The Registration Statement became effective on September 18, 2006. Wedbush Morgan holds the securities purchased pursuant to the Agreement as nominee on behalf of its clients which purchased the securities.

On June 26, 2006, certain members of management and certain Directors (the “Follow-on Purchasers”) entered into a stock purchase agreement with the Company to purchase shares of common stock and warrants. On August 29, 2006 this agreement was rescinded and replaced with a similar agreement for the purchase of 57,455 shares at a purchase price per share of $5.02 (the “Follow-on Per Share Purchase Price”) yielding gross proceeds to the Company of approximately $288,000. Additionally the Company issued warrants to the Follow-on Purchasers exercisable for 14,364 shares of common stock pursuant to which the Follow-on Purchasers will have the right to acquire the 14,364 shares at an exercise price of 120% of the Follow-on Per Share Purchase Price during the first three years following the closing of the transaction and at 130% of the Follow-on Per Share Purchase Price during the fourth and fifth years following the closing of the transaction. The transaction closed during the third quarter ended October 31, 2006. Although the shares were not issued as of October 31, 2006, they have been included as shares outstanding in accordance with SFAS No. 128 Earnings per Share, as the amounts due the Company were fully paid. The Company expects to issue the 57,455 shares during the quarter ending January 31, 2007. The Company recorded $65,000 in compensation expense during the second quarter ended July 31, 2006 based on the terms of the June 26, 2006 agreement. Because the August 29, 2006 agreement set the Follow-on Per Share Purchase Price at the prior 10 day average market price of $5.02 per share, no compensation expense was required to be recorded, and the Company reversed the $65,000 compensation expense during the third quarter ended October 31, 2006.

The securities sold to the Purchasers and Follow-on Purchasers were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder, as a transaction to accredited and sophisticated investors not involving a public offering. The proceeds from the sale of the Shares were used for general corporate purposes, and the proceeds, if any, received from the exercise of the warrant agreements will be used to reduce outstanding indebtedness and for general corporate purposes. At October 31, 2006, the Company incurred $481,000 in closing costs, which were netted against the proceeds received.

15

VIRCO MFG. CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three Months Ended October 31, 2006 and 2005

For the third quarter of 2006, the Company earned net income of $5,833,000 on sales of $73,678,000 compared to net loss of $2,194,000 on sales of $70,484,000 in the same period last year.

Sales for the third quarter ended October 31, 2006 increased by $3,194,000, a 4.5% increase, compared to the same period last year. This increase in sales for the third quarter is attributable to increases in selling prices, partially offset by a decrease in unit volume. Incoming orders for the same period increased by approximately 5.8%. Backlog at October 31, 2006 is approximately 5% lower than at the same date last year.

As more fully disclosed in the Company’s Annual Report for the fiscal year ended January 31, 2006, during the fiscal years ended January 31, 2005 and January 31, 2006, the Company incurred a severe increase in the cost of certain raw materials, especially steel and petroleum related products such as plastic. Steel prices began to increase in the first quarter of 2004 and reached a peak during the fourth quarter of 2004. Petroleum related products, especially plastic, increased substantially in 2005. In addition to cost increases, in the third quarter of 2005 the Company incurred supply chain disruptions due to the hurricanes in the Gulf Coast region of the United States. The Company did not suffer any comparable adverse business conditions in 2006. In response to these cost increases, the Company raised selling prices in 2005, but did not raise them enough to compensate for the cumulative impact of the increases in commodity costs. The Company substantially raised prices again at the beginning of 2006. The combination of increased selling prices, combined with relatively stable raw materials costs have returned gross margins to more traditional levels.

Gross profit for the third quarter, as a percentage of sales, increased by more than 8% compared to the same period last year. The increase in gross margin was attributable to increased prices and to reduced manufacturing overhead variances. Of the $7 million increase in gross margin, approximately two-thirds of the increase was attributable to increased selling prices and the balance attributable to improved manufacturing variances. The Company started the second quarter of 2006 with approximately $6 million more in inventory than in the prior year. The Company ended the second quarter of 2006 with approximately $7 million less inventory than the prior year. This reduction in inventory was attained by reducing production levels by approximately 30% during the second quarter of 2006 compared to the prior year. Because the Company entered the third quarter of 2006 with less inventory, it was able to increase third quarter production by approximately 15% compared to the prior year. Production levels for the second and third quarters of 2006 were comparable. The net result of running more production in the third quarter, combined with the efficiencies realized by operating at stable levels of production during the summer, contributed to an improvement in manufacturing variances.

Selling, general and administrative expenses for the quarter ended October 31, 2006 decreased by 6.5% compared to the same period last year, and decreased as a percentage of sales by approximately 3%. The decrease as a percentage of sales was primarily attributable to an increase in the Company’s selling prices combined with cost reductions in selling, general and administrative expenses. The cost reductions were attributable to a slight reduction in unit volume combined with cost reductions. In the third quarter of 2005, the Company incurred a $742,000 restructuring charge related to a reduction in work force.

Interest expense for the quarter ended October 31, 2006 increased by approximately $120,000 compared to the same period last year. The increase was primarily due to higher interest rates offset by reduced levels of borrowing.

Nine Months Ended October 31, 2006 and 2005

For the nine months ended October 31, 2006, the Company earned net income of $10,398,000 on sales of $186,788,000 compared to net loss of $1,792,000 on sales of $179,644,000 in the same period last year.

16

Sales for the nine months ended October 31, 2006 increased by $7,144,000, a 4% increase, compared to the same period last year. The increase in sales for the first nine months is attributable to increases in selling prices, partially offset by a decrease in unit volume. Incoming orders for the first nine months increased by approximately 4.1%.

Gross profit for the first nine months increased as a percent of sales by 4.7%. As described above, and more fully disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006, the Company incurred significant increases in raw material costs during 2004 and 2005, as well as supply chain disruptions related to hurricanes in the gulf region in 2005. The Company did not suffer any comparable adverse business conditions in 2006. The Company raised prices in 2005 and again at the beginning of 2006, and margins are now approximating those realized prior to the increases in material costs. The $11 million increase in gross margin for the first nine months is primarily attributable to increased selling prices, offset slightly by increased costs.

Selling, general and administrative expenses for the nine months ended October 31, 2006 decreased slightly compared to the same period last year, and decreased as a percentage of sales by approximately 2%. The decrease as a percentage of sales was primarily attributable to the price increase. The decrease in spending for selling, general, and administration expenses was attributable to a slight decrease in units shipped combined with the impact of a reduction in force during the third quarter of 2005.

Interest expense for the nine months ended October 31, 2006 increased by approximately $873,000 compared to the same period last year. The increase is primarily due to higher interest rates combined with a slight increase in average borrowings during the period.

Financial Condition

As a result of seasonally higher deliveries in the third quarter, accounts and notes receivable increased compared to January 31, 2006. Receivables increased compared to the third quarter of 2005, partially due to increased sales and partially due to increased day’s sales outstanding. The Company traditionally builds large quantities of inventory during the first six months in anticipation of seasonally high summer shipments. This increase in inventory was significantly less than the increase in the first six months of the prior year. The Company intentionally reduced production levels during the second quarter of 2006 to more efficiently utilize inventory, and to allow for more stable and higher levels of production during the third quarter of 2006. The net effect was to move production from the second to the third quarter when compared to the prior year operations. The net impact was that the Company ended the third quarter of 2006 with approximately the same level of inventory as at the third quarter of 2005. The seasonal increase in inventory and receivables was financed through the Company’s credit facility with Wells Fargo Bank and from proceeds from the sale of stock. At the end of the third quarter, borrowings under the Company’s lines with Wells Fargo Bank had been reduced to under $16 million compared to over $26 million at October 31, 2005.

On June 6, 2006, the Company sold 1,072,041 shares of its common stock (the “Shares”), and warrants to purchase 268,010 shares of its common stock, to WEDBUSH, Inc. and clients of Wedbush Morgan Securities, Inc. for an aggregate purchase price of $5 million, or $4.66 per Share (the “Per Share Purchase Price”). On August 29, 2006, the Company entered into a follow-on investment agreement with certain Directors and members of management. The investment with Directors and management was made under substantially the same terms but at a higher price, for the issuance of 57,455 shares of common stock and 14,363 warrants, yielding proceeds of approximately $288,000. The investment with Directors and managers was completed subsequent to October 31, 2006. The Company incurred approximately $481,000 in closing costs which were netted against the proceeds received from the sale of Shares. The cash received from the shares of stock was used to strengthen the balance sheet and finance seasonal business activities.

The Company has established a goal of limiting capital spending to less than $4,000,000 for 2006, which is approximately one-half of anticipated depreciation expense. Capital spending for the nine months ended October 31, 2006, was $2,463,000 compared to $1,774,000 for the same period last year. Capital expenditures are being financed through the Company’s credit facility with Wells Fargo Bank and operating cash flow.

Net cash generated in operating activities for the nine months ended October 31, 2006 was $8,905,000 compared to net cash used in operations of $419,000 for the same period last year. The increase in operating

17

cash was attributable to the significant improvement in net income; offset by increased cash used for receivables and increased cash used for inventory.

The Company believes that cash flows from operations, cash raised from the June 6, 2006 and June 26, 2006 stock sales, and the Company’s unused borrowing capacity under the Company’s credit facility will be sufficient to fund the Company’s debt service requirements, capital expenditures and working capital needs. Approximately $24,917,000 was available for borrowing as of October 31, 2006 when calculated using the asset based advance formula. In order to comply with debt covenants, the Company must meet a “clean down” requirement of less than $30 million for 90 days. The Company anticipates that it will meet this requirement.

Critical Accounting Policies and Estimates

The Company’s critical accounting policies are outlined in its Form 10-K for fiscal year ended January 31, 2006.

Forward-Looking Statements

From time to time, 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 “anticipates,” “expects,” “will continue,” “believes,” “estimates,” “projects,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The results contemplated by the Company’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’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’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006.

The Company’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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company has entered into a revolving credit facility with Wells Fargo Bank, amended and restated in December 2005, which provides a term loan of $20,000,000 and a secured revolving line of credit that varies as a percentage of inventory and receivables, up to a maximum of $40,000,000. The revolving line of credit increases to $50,000,000 between May and September. The term note is a two-year loan amortizing at $5,000,000 per year with interest payable monthly at a fluctuating rate equal to Wells Fargo Bank’s prime rate (8.25% at October 31, 2006) plus a 2% margin.

The revolving line has a 24-month maturity with interest payable monthly at a fluctuating rate equal to Wells Fargo Bank’s prime rate plus a fluctuating margin similar to the term note. The revolving line typically provides for advances of 80% on eligible accounts receivable and 20% — 60% on eligible inventory. The advance rates fluctuate depending on the time of the year and the types of assets. The agreement has an unused commitment fee of 0.375%. Approximately $24,917,000 was available for borrowing as of October 31, 2006.

The revolving credit facility with Wells Fargo Bank is subject to various financial covenants including a minimum requirement, minimum EBITDA and an annual clean down. The annual clean down provision limits the Company’s outstanding debt balance at a maximum of $30 million for a period of 90 consecutive days during the fourth quarter ending January 31, 2007. The agreement also places certain restrictions on capital expenditures, new operating leases, dividends and the repurchase of the Company’s common stock. The revolving credit facility is secured by the Company’s accounts receivable, inventories, equipment and property. The Company was in compliance with its covenants at October 31, 2006, January 31, 2006. At October 31, 2005, the Company was in violation of certain of its loan covenants. In December 2005, the Company restructured its debt with Wells Fargo Bank, which waived the October 31, 2005 covenant violation and amended the terms of the loan and several of the financial covenants. The $15,877,000 due under Wells Fargo

18

Bank’s line of credit will be payable on February 15, 2008, if the agreement is not renewed. The Company currently intends to renew the agreement.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the Securities and Exchange Commission (the “SEC”) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and Chief 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’s objectives in establishing them will be achieved.

We carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report pursuant to Exchange Act Rule 13a-15. Based upon the foregoing, the Company’s President and Chief Executive Officer, along with the Company’s Chief Financial Officer and other members of management, concluded that the Company’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 SEC’s rules and forms and (ii) 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’s management, including its President and Chief Executive Officer as well as its Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

No changes in the Company’s internal control over financial reporting have come to management’s attention during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

19

PART II

VIRCO MFG. CORPORATION

OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

On June 6, 2006, WEDBUSH, Inc. and Wedbush Morgan Securities, Inc. (“Wedbush Morgan,” and together with WEDBUSH, Inc., the “Purchasers”), entered into a stock purchase agreement (the “Agreement”) with the Company. Pursuant to the Agreement, (a) the Purchasers purchased from the Company shares (the “Shares”) of the Company’s common stock yielding gross proceeds to the Company of $5,000,000 at a purchase price per share of $4.66 (the “Per Share Purchase Price”) and (b) the Company issued warrants to the Purchasers exercisable for 268,010 shares of common stock pursuant to which the Purchasers will have the right to acquire the 268,010 shares at an exercise price of 120% of the Per Share Purchase Price during the first three years following the closing of the transaction and at 130% of the Per Share Purchase Price during the fourth and fifth years following the closing of the transaction. The Company filed a Registration Statement on Form S-3 registering the resale of the Shares on July 6, 2006 and amended that registration statement on August 17, 2006. The Registration Statement became effective on September 18, 2006. Wedbush Morgan holds the securities purchased pursuant to the Agreement as nominee on behalf of its clients which purchased the securities.

On June 26, 2006 certain members of management and certain Directors (the “Follow-on Purchasers”) entered into a stock purchase agreement with the Company (the “Follow-on Agreement”), purchasing 57,455 shares at a purchase price per share of $5.02 (the “Follow-on Per Share Purchase Price”) yielding gross proceeds to the Company of approximately $288,000. Additionally, the Company issued warrants to the Follow-on Purchasers exercisable for 14,364 shares of common stock pursuant to which the Follow-on Purchasers will have the right to acquire the 14,364 shares at an exercise price of 120% of the Follow-on Per Share Purchase Price during the first three years following the closing of the transaction and at 130% of the Follow-on Per Share Purchase Price during the fourth and fifth years following the closing of the transaction. The transaction closed during the third quarter ended October 31, 2006. Although the shares were not issued as of October 31, 2006, they have been included as shares outstanding in accordance with SFAS No. 128 Earnings per Share, as the amounts due the Company were fully paid. The Company expects to issue the 57,455 shares during the quarter ending January 31, 2007.

The securities sold to the Purchasers and Follow-on Purchasers pursuant to the Agreements were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder, as a transaction to accredited and sophisticated investors not involving a public offering. The proceeds from the sale of the Shares were used for general corporate purposes, and the proceeds, if any, received from the exercise of the warrant agreements will be used to reduce outstanding indebtedness and for general corporate purposes. At October 31, 2006, the Company incurred $492,000 in closing costs, which were netted against the proceeds received.

Item 6. Exhibits

Exhibit 10.1 – Stock Purchase Agreement, dated as of June 26, 2006, by and among Virco Mfg. Corporation, and certain purchasers named therein.

Exhibit 31.1 – Certification of Robert A. Virtue, President, 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.

Exhibit 31.2 – Certification of Robert E. Dose, Vice President, Finance, 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.

20

Exhibit 32.1 – Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

21

VIRCO MFG. CORPORATION

SIGNATURES

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.

	VIRCO MFG. CORPORATION
Date: December 8, 2006	By:	/s/ Robert E. Dose
		Robert E. Dose
		Vice President – Finance

22

EX-10.1

Exhibit 10.1

AMENDED STOCK PURCHASE AGREEMENT

     This Amended STOCK PURCHASE AGREEMENT (this “Agreement”), is made and entered into as of August 29, 2006, by and between VIRCO MFG. CORPORATION, a Delaware corporation (the “Company”), and the purchasers listed on the signature page of this Agreement (each a “Purchaser” and collectively the “Purchasers”).

     WHEREAS, the Company and the Purchasers entered into certain Stock Purchase Agreements dated as of June 26, 2006 (the “Prior Agreements”) whereby the Company agreed to issue and sell, and the Purchasers agreed to purchase and pay for, an aggregate of 60,246 shares of the Company’s Common Stock, par value $.01 per share (the “Shares”); and

     WHEREAS, pricing for the Shares in the Prior Agreement was based upon a ten (10) day measuring period that had been negotiated a few weeks prior to the date of the Prior Agreement by third party investors; and

     WHEREAS, following discussions with the American Stock Exchange (the “Amex”) in connection with the Company’s application to list the Shares on the Amex, it was mutually agreed that the ten (10) day measuring period to calculate the fair market value of the Shares was inappropriate and should relate instead to the June 26, 2006 date of the Stock Purchase Agreements, rather than to the date of the Company’s agreement with its third party investors; and

     WHEREAS, the Company and the Purchasers have mutually agreed to reprice the Shares based upon the June 26, 2006 date of the Prior Agreement.

     NOW THEREFORE, the parties hereto agree that the Prior Agreements are hereby cancelled and rescinded, and the entire continuing understanding and agreement of the Company and the Purchasers with respect to sale and purchase of the Shares is as set forth in this Stock Purchase Agreement.

1. AGREEMENT TO SELL AND PURCHASE THE SHARES

     1.1 PURCHASE AND SALE

     Subject to the terms and conditions of this Agreement, the Purchasers hereby agree to purchase (severally and not jointly), and the Company hereby agrees to sell and issue to the Purchasers, at the Closing (as defined below) the respective number of Shares, as are set forth on Schedule A to this Agreement, and each Purchaser agrees to purchase and pay for that number of the Shares as is indicated next to his/her name on Schedule A.

     1.2. DELIVERIES AT CLOSING

     (a) Completion of the purchase and sale of the Shares (the “Closing”) shall occur at the offices of Gibson, Dunn & Crutcher LLP, counsel to the Company, at 2029 Century Park East, 40th Floor, Los Angeles, California, at 11:00 a.m. local time on September 31, 2006, or such other time and date as may be agreed by the parties (the “Closing Date”).

     (b) At the Closing, the Company shall issue and deliver to each Purchaser a stock certificate registered in the name of such Purchaser representing the number of Shares purchased by such Purchaser as set forth on Schedule A hereto. Each stock certificate shall bear an appropriate legend referring to the fact that the Shares are being sold in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 under the Securities Act, as applicable.

     (c) At the Closing each Purchaser shall pay to the Company readily available funds in the respective amount committed as set forth opposite his name on Schedule A (collectively in the aggregate, the “Purchase Price”).

2. PURCHASE PRICE

     The Purchase Price for the Shares deliverable by the Company to the Purchasers at Closing shall be $5.02 for each of the Shares purchased, which was the average daily closing price for shares of the Company’s Common Stock on the American Stock Exchange (“Amex”) during a ten (10) day measuring period prior to the date of the Prior Agreement.

3. CONDITIONS TO CLOSING

     (a) The Company’s obligation to complete the sale of the Shares shall be subject to its receipt on the Closing Date of funds in the full amount of the Purchase Price in payment for the Shares.

     (b) The Purchasers’ obligation to pay for the Shares shall be subject to their receipt of the following items on the Closing Date:

     (i) Stock certificates representing the Shares in form satisfactory to the Purchasers;

     (ii) Warrant certificates in the form attached hereto as Schedule B (the “Warrants”) representing the Purchasers’ right to acquire 25% of the number of Shares being purchased on the Closing Date (the “Warrant Shares”) over a five year period at an exercise price of $5.60 per share during the first three (3) years following the Closing Date and of $6.06 per share during the fourth (4th) and fifth (5th) years following the Closing Date; and

     (iii) Evidence of listing of the Shares on the Amex.

4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

     The Company hereby represents and warrants to the Purchasers as follows:

     4.1 ORGANIZATION, STANDING AND QUALIFICATION

     The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. The Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted and to enter into and perform its obligations under this Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in any other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify would not, singly or in the aggregate, have a material adverse effect on the financial condition or the earnings or assets of the Company.

     4.2 DUE EXECUTION, DELIVERY AND PERFORMANCE

     (a) This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

     (b) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated in this Agreement and the fulfillment of the terms of this Agreement (i) have been duly authorized by all necessary corporate action on the part of the Company; (ii) will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any contract, indenture, mortgage, loan agreement, note, lease, sublease, voting agreement, voting trust or other agreement to which the Company is a party or by which it may be bound, or to which any of the property or assets of the Company is subject; (iii) will not trigger anti-dilution rights

or other rights to acquire additional equity securities of the Company; and (iv) will not result in any violation of the provisions of the certificate of incorporation or bylaws of the Company or any applicable statute, law, rule, regulation or order.

     4.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES

     (a) The Shares have been duly authorized for issuance and sale pursuant to this Agreement, and, when issued and delivered by the Company pursuant to this Agreement against payment by the Purchasers of the Purchase Price, they will be validly issued and fully paid and nonassessable and free and clear of all pledges, liens and encumbrances.

     (b) Issuance of the Shares is not subject to preemptive or other similar rights. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Shares as contemplated in this Agreement.

     (c) Subject to the accuracy of the Purchasers’ representations and warranties in Section 5 of this Agreement, the offer, sale, and issuance of the Shares in conformity with the terms of this Agreement constitutes a transaction exempt from the registration requirements of Section 5 of the Securities Act.

     4.4 CAPITALIZATION

     (a) The authorized capital stock of the Company consists of twenty five million (25,000,000) shares of Common Stock and three million (3,000,000) shares of Preferred Stock.

     (b) As of July 6, 2006, the issued and outstanding capital stock of the Company consisted of fourteen million three hundred twenty two thousand fifty one (14,322,051) shares of Common Stock. No shares of preferred stock are issued and outstanding. The shares of issued and outstanding Common Stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and have not been issued in violation of any preemptive or other similar rights.

     (c) The Company has reserved, and has available for future issuance, an aggregate of 686,559 shares of Common Stock under the Company’s stock option plan (i) for issuance of shares upon the exercise of stock options granted or available for future grant and (ii) for issuance of shares of restricted stock. With the exception of the foregoing, there are no outstanding subscriptions, options, warrants, convertible or exchangeable securities or other rights granted by the Company to purchase shares of Common Stock or other securities of the Company, and there are no commitments, plans or arrangements to issue any shares of Common Stock or any security convertible into or exchangeable for Common Stock.

     4.5 FINANCIAL STATEMENTS

     The January 31, 2006 financial statements of the Company filed with the Securities and Exchange Commission (“SEC”) as part of the Company’s Form 10-K dated April 13, 2006 present fairly the financial position of the Company as of the dates indicated and the results of the Company’s operations for the periods specified. These financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis and any supporting schedules included with the financial statements present fairly the information stated in the financial statements. The financial and statistical data set forth in the Company’s Form 10-K referred to above were prepared on an accounting basis consistent with such financial statements.

     4.6 NO MATERIAL CHANGE

     Since July 6, 2006,

     (a) there has been no material adverse change in the financial condition or in the earnings or assets of the Company, whether or not arising in the ordinary course of business;

     (b) there have been no transactions entered into by the Company other than those in the ordinary course of business which are material with respect to the Company;

     (c) there has been no issuance of additional shares of the Company’s Common Stock;

     (d) there has been no dividend or distribution of any kind declared, paid or made by the Company on its Common Stock; and

     (e) the Company has incurred no material liabilities or material contingent obligations.

     4.7 USE OF PROCEEDS

     The Company intends to use the proceeds from sale of the Shares for working capital and other general corporate purposes.

     4.8 NO DEFAULTS

     The Company is not in violation of its certificate of incorporation or bylaws or in material default in the performance or observance of any obligation, agreement, covenant or condition contained in any material contract, indenture, mortgage, loan agreement, note, lease, sublease, voting agreement, voting trust, or other material agreement to which the Company is a party or by which it may be bound, or to which any of the property or assets of the Company is subject.

     4.9 NO ACTIONS

     There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against the Company which, singly or in the aggregate, would result in any material adverse change in the financial condition or in the earnings or business prospects of the Company, or which, singly or in the aggregate, might materially and adversely affect the properties or assets of the Company or which might materially and adversely affect the consummation of this Agreement, nor, to the best knowledge of the Company, is there any reasonable basis therefor. The Company is not in default with respect to any judgment, order or decree of any court or governmental agency or instrumentality which, singly or in the aggregate, would have a material adverse effect on the assets, properties or business of the Company.

     4.10 CONTRACTS

     All of the contracts filed with the SEC as part of the Company Documents are in full force and effect on the date hereof, except for contracts the termination or expiration of which would not, singly or in the aggregate, have a material adverse effect on the business, properties or assets of the Company. Neither the Company nor, to the best knowledge of the Company, any other party is in material breach of or default under any such contracts. The Company is in full compliance with all covenants, financial or otherwise, contained within its loan agreements and the Company has not received any correspondence from any of its lenders questioning or otherwise relating to the Company’s compliance with any such covenants.

     4.11 ENVIRONMENTAL MATTERS

     Except as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the financial condition or the earnings or assets of the Company,

     (a) the Company is in compliance with all applicable Environmental Laws (as defined below);

     (b) the Company has all permits, authorizations and approvals required under any applicable Environmental Laws and is in compliance with the requirements of such permits authorizations and approvals; and

     (c) there are no pending or, to the best knowledge of the Company, threatened Environmental Claims (as defined below) against the Company.

     For purposes of this Agreement, the following terms shall have the following meanings: “Environmental Law” means any United States (or other applicable jurisdiction’s) Federal, state, local or municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or any chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. “Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law.

     4.12 LABOR MATTERS

     No labor dispute with the employees of the Company exists or, to the best knowledge of the Company, is threatened. To the best knowledge of the Company, no management level or other significant employee has indicated that he or she intends to terminate his or her employment with the Company and the Company has no plans to terminate any management level or other significant employee.

     4.13 PROPERTIES

     The Company has good and marketable title to its properties, free and clear of any material security interests, mortgages, pledges, liens, charges, encumbrances and claims of record, except for the lien on substantially all of the assets and properties of the Company held by Wells Fargo Bank. The properties of the Company are, in the aggregate, in good repair (reasonable wear and tear excepted) and suitable for their respective uses. All real property held under lease by the Company is held under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the conduct of the business of the Company. The Company owns or leases all such properties as are necessary to its business or operations as now conducted.

     4.14 INTELLECTUAL PROPERTY

     (a) The Company owns or is licensed to use all patents, patent applications, inventions, trademarks, trade names, applications for registration of trademarks, service marks, service mark applications, copyrights, know-how, manufacturing processes, formulae, trade secrets, licenses and rights in any thereof and any other intangible property and assets that are material to the business of the Company as now conducted and as proposed to be conducted (in this Agreement called the “Proprietary Rights”).

     (b) The Company does not have any knowledge of, and the Company has not given or received any notice of, any pending conflicts with or infringement of the rights of others with respect to any Proprietary Rights or with respect to any license of Proprietary Rights which are material to the business of the Company.

     (c) No action, suit, arbitration, or legal, administrative or other proceeding, or investigation is pending, or, to the best knowledge of the Company, threatened, which involves any Proprietary Rights, nor, to the best knowledge of the Company, is there any reasonable basis therefor.

     (d) The Company is not subject to any judgment, order, writ, injunction or decree of any court or any Federal, state, local, foreign or other governmental department, commission or board, domestic or foreign, or any arbitrator, and has not entered into or is not a party to any contract which restricts or impairs the use of any such Proprietary Rights in a manner which would have a material adverse effect on the use of any of the Proprietary Rights.

     (e) The Company has not received written notice of any pending conflict with or infringement upon any third-party proprietary rights.

     (f) The Company has not entered into any consent, indemnification, forbearance to sue or settlement agreement with respect to Proprietary Rights. No claims have been asserted by any person with respect to the validity of the Company’s ownership or right to use the Proprietary Rights and, to the best knowledge of the Company, there is no reasonable basis for any such claim to be successful.

     (g) The Company has complied, in all material respects, with its obligations relating to the protection of the Proprietary Rights which are material to the business of the Company pursuant to licenses.

     (h) To the best knowledge of the Company, no person is infringing on or violating the Proprietary Rights.

     4.15 PERMITS

     The Company possesses and is operating in compliance with, all material licenses, certificates, consents, approvals and permits from all state, federal, foreign and other regulatory agencies or bodies necessary to conduct the businesses now operated by it, and the Company has not received any notice of proceedings relating to revocation or modification of any such permit or any circumstance which would lead it to believe that such proceedings are reasonably likely which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the financial condition or the earnings, assets or business prospects of the Company.

     4.16 TAXES

     The Company has filed all tax returns required to be filed, which returns are true and correct in all material respects, and the Company is not in default in the payment of any taxes, including penalties and interest, assessments and fees, shown thereon due or otherwise assessed, other than those being contested in good faith and for which adequate reserves have been provided or those currently payable without interest which were payable pursuant to said returns or any assessments with respect thereto.

     4.17 COMPLIANCE

     The Company has conducted, and is conducting, its business in compliance with all applicable Federal, state, local and foreign statutes, laws, rules and regulations, except where the failure to do so would not, singly or in the aggregate, have a material adverse effect on the financial condition, earnings or assets, of the Company.

     4.18 INSURANCE

     The Company maintains insurance of the type and in the amount that the Company reasonably believes is adequate for its business, including, but not limited to, insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect.

     4.19 GOVERNMENTAL/ REGULATORY CONSENTS

     No registration, authorization, approval, qualification or consent with or required by any court or governmental/ regulatory authority or agency is necessary in connection with the execution and delivery of this Agreement or the offering, issuance or sale of the Shares under this Agreement, except for the filings disclosed in this Agreement to be made with the SEC and the Amex.

     4.20 SECURITIES AND EXCHANGE COMMISSION FILINGS

     (a) The Company has timely filed with the SEC all documents required to be filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

     (b) The information contained in the following documents (the “Company Documents”), is true and correct in all material respects as of their respective filing dates and as of the date of this Agreement:

(i)	the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006; and
(ii)	the Company’s Proxy Statement for its 2006 Annual Meeting of Stockholders.

     (c) As of their respective filing dates, the Company Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, and none of the Company Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

     4.21 NO INTEGRATED OFFERING

     Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Shares to the Purchasers. The issuance of the Shares to the Purchasers will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of the Securities Act or any applicable rules of the Amex. The Company will not make any offers or sales of any security that would cause the offering of the Shares to be integrated with any other offering of securities by the Company for purposes of any registration requirements under the Securities Act or any applicable rules of the Amex.

     4.22 NO MANIPULATION OF STOCK

     The Company has not taken, and will not take, any action that might reasonably be expected to cause or result in unlawful manipulation of the price of the Common Stock to facilitate the sale of the Shares.

     4.23 RELATED PARTY TRANSACTIONS

     Except (a) as disclosed in the Company’s Form 10-K dated April 13, 2006, and (b) as set forth in the Virtue Family Agreement, the Company does not have any oral or written contracts, arrangements or other agreements with any officer, director or 5% or greater stockholder of the Company or any affiliate of any such person.

5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS

     5.1 SECURITIES LAW REPRESENTATIONS AND WARRANTIES

     Each Purchaser represents, warrants and covenants to the Company as follows:

     (a) Such Purchaser has a preexisting business relationship with the Company and by reason of his business or financial experience has the capacity to protect his own interests in connection with purchase of the Shares.

     (b) Such Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act and is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in shares representing an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company. Such Purchaser has requested, received, reviewed and considered all information deems relevant in making an informed decision to purchase the Shares.

     (c) Such Purchaser is acquiring the Shares for his own account for investment only and, except as contemplated by this Agreement, has no present intention of distributing any of the Shares nor any arrangement or

understanding with any other persons regarding the distribution of such Shares within the meaning of Section 2(11) of the Securities Act, other than as contemplated in Section 7 of this Agreement.

     (d) Such Purchaser has, in connection with its decision to purchase the Shares, relied solely upon the representations and warranties of the Company contained in this Agreement, review of the Company Documents and his own due diligence examination of the Company.

     (e) Such Purchaser acknowledges that an investment in the Shares is a speculative investment and has a high degree of risk. Such Purchaser acknowledges that he has had the opportunity to obtain and review all information from the Company necessary to make a reasonably informed investment decision and he has had all questions asked of the Company answered to his reasonable satisfaction. Such Purchaser is able to bear the economic risk of an investment in the Shares.

     5.2 DUE EXECUTION, DELIVERY AND PERFORMANCE

     This Agreement has been duly executed and delivered by such Purchaser and constitutes a valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms.

     5.3 RESALES OF SHARES

     (a) Such Purchaser will not make any sale of the Shares without satisfying the requirements of the Securities Act and the Rules and Regulations, including, in the event of any resale under the Registration Statement, the prospectus delivery requirements under the Securities Act, and such Purchaser acknowledges and agrees that such Shares are not transferable on the books of the Company pursuant to a resale under the Registration Statement unless the stock certificate submitted to the Company’s transfer agent evidencing the Shares is accompanied by a certificate from such Purchaser to the effect that (i) the Shares have been sold in accordance with the Registration Statement and (ii) the requirement of delivering a current prospectus has been satisfied.

     (b) Such Purchaser will notify the Company promptly of the sale of any of the Shares, other than sales pursuant to a Registration Statement contemplated in Section 7 of this Agreement or sales upon termination of the transfer restrictions pursuant to Section 7 of this Agreement.

6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

     Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Purchasers in this Agreement shall survive the execution of this Agreement, the delivery to the Purchasers of the Shares being purchased and the payment therefor.

7. EXPENSES

     Except as otherwise expressly provided in this Agreement, the Company and the Purchasers shall each pay their own respective fees and expenses (including, without limitation, the fees of any attorneys, accountants or others engaged by such party) incurred in connection with the preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated.

8. ENTIRE AGREEMENT

     This Agreement constitutes the complete and exclusive statement of the terms of the agreement between the Company and the Purchasers with respect to sale and purchase of the Shares and supersedes all prior agreements, understandings, promises, and arrangements, oral or written, between the parties with respect to the subject matter hereof.

9. NOTICES

     All notices, requests, consents and other communications under this Agreement shall be in writing, shall be mailed by first-class registered or certified airmail, confirmed facsimile or nationally recognized overnight express courier postage prepaid, and shall be delivered as addressed as follows:

     (a) if to the Company, to:

Virco Mfg. Corporation
2027 Harpers Way
Torrance, CA 90501
Attn: Chief Executive Officer

or to such other person at such other place as the Company shall designate to the Purchaser in writing; and

     (b) if to any Purchaser, at its address as set forth on the signature page hereto, or at such other address or addresses as may have been furnished to the Company in writing.

     Notice shall be deemed effectively given upon confirmation of receipt by facsimile, one business day after deposit with such overnight courier or three days after deposit of such registered or certified airmail with the U.S. Postal Service, as applicable.

10. MODIFICATION; AMENDMENT

     This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Purchasers.

11. HEADINGS

     The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

12. SEVERABILITY

     If any provision contained in this Agreement should be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby.

13. GOVERNING LAW

     This Agreement shall be governed by and construed in accordance with the laws of the state of California and the federal law of the United States of America.

14. COUNTERPARTS

     This Agreement is being executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by the party to this Agreement and delivered to the other parties.

[Signature Page Follows]

     IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.

VIRCO MFG. CORPORATION
By:	/s/ Robert E. Dose
	Robert E. Dose
Its:	Vice President Finance

The “Purchasers”

/s/ Steve Presley 

Steve Presley

/s/ Ed Gyenes 

Ed Gyenes

/s/ Nick Wilson 

Nick Wilson

/s/ Scotty Bell 

Scotty Bell

/s/ Patty Quinones 

Patty Quinones

/s/ Eric Nordstrom 

Eric Nordstrom

/s/ Larry Maddox 

Larry Maddox

/s/ James Simms 

James Simms

/s/ Bassey Yau 

Bassey Yau

/s/ Robert Virtue 

Robert Virtue

/s/ Doug Virtue 

Doug Virtue

/s/ Evan Gruber 

Evan Gruber

Schedule A

	No. of Shares and		Share Purchase
Name and Address of Purchaser	Warrants Purchased		Price
Steve Presley		996	$	4,999.92
		249
Ed Gyenes		929	$	4,663.58
		232
Nick Wilson		2,787	$	13,990.74
		697
Scotty Bell		1,992	$	9,999.84
		498
Patty Quinones		398	$	1,997.96
		100

Schedule A

	No. of Shares and		Share Purchase
Name and Address of Purchaser	Warrants Purchased		Price
Eric Nordstrom		7,968	$	39,999.36
		1,992
Larry Maddox		3,300	$	16,566.00
		825
James Simms		1,998	$	10,029.96
		500
Bassey Yau		4,000	$	20,080.00
		1,000
Robert Virtue		5,000	$	25,100.00
		1,250
Doug Virtue		8,576	$	43,051.52
		2,114

Schedule A

	No. of Shares and		Share Purchase
Name and Address of Purchaser	Warrants Purchased		Price
Evan Gruber		19,511	$	97,945.22
		4,878

Schedule B

FORM OF WARRANT AGREEMENT

     THIS WARRANT AND THE UNDERLYING COMMON STOCK MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.

     This certifies that, for good and valuable consideration, receipt of which is hereby acknowledged,                                                              (the “Holder”) is entitled to purchase, subject to the terms and conditions of this Warrant, from Virco Mfg. Corporation, a Delaware corporation (the “Company”), an aggregate of                                          (                    ) fully paid and nonassessable shares of the common stock, $.01 par value per share (the “Common Stock”), of the Company during the period commencing on the date of this Warrant and ending at 5:00 p.m. California time five (5) years from such date (the “Expiration Date”), at which time this Warrant will expire and become void unless earlier terminated as provided herein. The shares of Common Stock of the Company for which this Warrant is exercisable, as may be adjusted from time to time pursuant to the terms hereof, are hereinafter referred to as the “Warrant Shares”.

     1. Exercise Price. The exercise price for the Warrant Shares shall be $6.02 per share during the first three (3) years from the date of this Warrant and $6.53 per share during the two (2) years preceding the Expiration Date. The prevailing exercise price is subject to adjustment pursuant to the terms hereof (such price, as adjusted from time to time, is hereinafter referred to as the “Exercise Price”).

     2. Exercise and Payment. This Warrant may be exercised, in whole or in part, from time to time by the Holder prior to the Expiration Date by surrender to the Company, at the principal executive offices of the Company, of this Warrant and the Notice of Exercise attached hereto duly completed and executed by the Holder, together with payment in the amount obtained by multiplying the Exercise Price then in effect by the number of Warrant Shares being purchased as designated in the Notice of Exercise. In no event, however, shall this Warrant be exercised with respect to less than 5,000 Warrant Shares (unless it is exercised for a lesser number representing all of the remaining warrants owned by the Holder). Payment shall be made in readily available, same day funds.

     3. Reservation of Shares. The Company shall at all times reserve for issuance and delivery upon exercise of this Warrant such number of shares of its Common Stock from time to time issuable as Warrant Shares. All such Warrant Shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights.

     4. Delivery of Stock Certificates. Promptly following the exercise, in whole or in part, of this Warrant, the Company shall issue in the name of, and deliver to, the Holder a certificate or certificates for the number of fully paid and nonassessable Warrant Shares which the Holder shall have requested and paid for pursuant to the Notice of Exercise. If this Warrant is exercised in part, the Company shall deliver to the Holder a new Warrant for the unexercised portion of the Warrant Shares at the time of delivery of the stock certificate or certificates evidencing the Warrant Shares.

     5. No Fractional Shares. No fractional Warrant Shares shall be issued upon exercise of this Warrant. If upon any exercise of this Warrant a fraction of a share results, the Company will pay the Holder the difference between the cash value of the fractional share and the portion of the Exercise Price allocable to the fractional share.

     6. Charges, Taxes and Expenses. The Company shall pay all transfer taxes or other incidental charges, if any, in connection with the issuance of the Warrant Shares to the Holder.

     7. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or

Schedule B

destruction, of indemnity or security reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall make and deliver a new replacement Warrant and dated as of such cancellation, in lieu of this Warrant.

     8. Saturdays, Sundays, Holidays. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding weekday that is not a legal holiday.

     9. Adjustment of Exercise Price and Number of Shares. The Exercise Price and the number of Warrant Shares purchasable upon exercise of this Warrant shall be subject to adjustment from time to time as follows:

          (a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time prior to the Expiration Date subdivide its shares of Common Stock by split-up or otherwise, or combine its shares of Common Stock, then the number of Warrant Shares as to which this Warrant is exercisable as of the date of such subdivision, split-up or combination shall be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. Appropriate, corresponding adjustment shall also be made to the Exercise Price so that the aggregate purchase price payable for the total number of Warrant Shares purchasable under this Warrant as of such date remains the same.

          (b) Stock Dividend. If at any time the Company declares a dividend or other distribution on its Common Stock payable in Common Stock or Convertible Securities without payment of any consideration by the then-existing stockholders for the additional shares of Common Stock or the Convertible Securities (including the additional shares of Common Stock issuable pursuant to the terms thereof), then the number of Warrant Shares as to which this Warrant may be exercised shall be increased as of the record date for determining which holders of Common Stock shall be entitled to receive such dividend, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable pursuant to the terms of the Convertible Securities) of Common Stock as a result of such dividend, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all the Warrant Shares issuable hereunder immediately after the record date (or on the date of such distribution, if applicable) for such dividend shall equal the aggregate amount so payable immediately before such record date. As used herein, “Convertible Securities” means evidences of indebtedness, shares of stock or other securities, which are convertible into, exchangeable for, with or without payment of additional consideration, shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event or both.

          (c) Other Distributions. If at any time after the date hereof the Company distributes to its stockholders, other than as part of its dissolution or liquidation or the winding up of its affairs, any shares of its Common Stock, any evidence of indebtedness or any of its assets (other than cash, Common Stock or Convertible Securities), then the Company may, at its option, either (i) decrease the Exercise Price of this Warrant by an appropriate amount based upon the value distributed on each share of Common Stock as determined in good faith by the Company’s Board of Directors or (ii) provide by resolution of the Company’s Board of Directors that on exercise of this Warrant, the Holder hereof shall thereafter be entitled to receive, in addition to the Warrant Shares otherwise receivable on exercise hereof, the number of shares or other securities or property which would have been received had this Warrant at the time been exercised.

          (d) Merger. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into another corporation when the Company is not the surviving corporation, then the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the aggregate Exercise Price then in effect, the number of shares or other securities or property of the successor corporation resulting from such merger or consolidation, which would have been received by the Holder for the Warrant Shares had this Warrant been exercised at such time.

          (e) Reclassification. If at any time after the date hereof there shall be a change or reclassification of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the Holder shall thereafter be entitled to receive upon

Schedule B

exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares or other securities or property resulting from such change or reclassification, which would have been received by Holder for the Warrant Shares had this Warrant been exercised at such time.

     10. Notice of Adjustments; Notices. Whenever the Exercise Price or number or kind of securities purchasable hereunder is adjusted pursuant to Section 9 hereof, the Company shall execute and deliver to the Holder a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of and kind of securities purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the Holder.

     11. Rights As Stockholder; Notice to Holders. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or of any other matter, or any rights whatsoever as stockholders of the Company. The Company shall notify the Holder by registered mail if at any time prior to the expiration or exercise in full of the Warrant, any of the following events occur:

          (a) a dissolution, liquidation or winding up of the Company shall be submitted to the stockholders of the Company for approval; or

          (b) a capital reorganization or reclassification of the Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock) or any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or change of Common Stock outstanding) or in the case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety; or

          (c) a taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other rights.

This notice to Holder shall be given simultaneously with the giving of notice to holders of Common Stock. Such notice shall specify the record date or the date of closing the stock transfer books, as the case may be. Failure to provide such notice will not affect the validity of any action taken in connection with such dividend, distribution or subscription rights, or proposed merger, consolidation, sale, conveyance, dissolution, liquidation or winding up.

     12. Restricted Securities. The Holder understands, confirms and acknowledges that this Warrant and the Warrant Shares constitute “restricted securities” under the federal securities laws inasmuch as they are, or will be, acquired directly from the Company in transactions not involving a public offering and accordingly may not, under applicable laws and regulations, be resold or transferred without registration under the Securities Act of 1933, as amended (the “1933 Act”) or availability of an applicable exemption from such registration. The Holder further acknowledges that a securities legend substantially similar to that on the first page hereof shall be placed on any Warrant Shares issued to the Holder upon exercise of this Warrant.

     13. Certification of Investment Purpose. The Holder covenants and agrees that at any time that this Warrant is exercised, in whole or in part, and as a condition thereto, a written certification of investment intent shall be delivered to the Company by the Holder.

     14. Disposition of Warrant and Warrant Shares; Transfer of Warrant. This Warrant and any Warrant Shares purchased hereunder may not be sold, transferred, assigned, pledged or hypothecated (any such action, a “Transfer”) by the Holder except in compliance with this Agreement. The Company shall not be required (i) to transfer on its books this Warrant or any Warrant Shares which have been Transferred in violation of the provisions of this Agreement or (ii) to treat as the owner of the Warrant or the Warrant Shares or otherwise to accord voting or

Schedule B

dividend rights to any transferee to whom this Warrant or the Warrant Shares have been Transferred in contravention of the terms of this Warrant. This Warrant may be divided or combined, upon request to the Company by the Holder, into a certificate or certificates representing the right to purchase the same aggregate number of Warrant Shares. If at the time of a Transfer, a registration statement is not in effect to register the Warrant Shares, the Company may require the Holder to make such representations, and may place such legends on certificates representing this Warrant, as may be reasonably required in the opinion of counsel to the Company to permit a Transfer without such registration.

     15. Miscellaneous.

          (a) Construction. Unless the context indicates otherwise, the term “Holder” shall include any successor transferee or transferees of this Warrant, and the term “Warrant” shall include any and all warrants outstanding pursuant to this Agreement, including those evidenced by one or more instruments or certificates issued upon division, exchange, substitution or transfer pursuant to Section 14.

          (b) Restrictions. By receipt of this Warrant, the Holder is making the same investment representations with respect to the acquisition of this Warrant as the Holder is required to make upon the exercise of this Warrant and acquisition of the Warrant Shares. The Company acknowledges that the Holder may transfer some of these securities to accredited investors in valid private placements exempt from the registration requirements of the 1933 Act, provided that, if requested by the Company, the Holder shall furnish a legal opinion concerning the Transfer in form and substance reasonably satisfactory to the Company.

          (c) Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or three days following deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified (or one (1) day following timely deposit with a reputable overnight courier with next day delivery instructions), or upon confirmation of receipt by the sender of any notice by facsimile transmission, at the address indicated below or at such other address as such party may designate by ten days’ advance written notice to the other party.

To Holder:
To the Company:	Virco Mfg. Corporation
	2027 Harper’s Way
	Torrance, CA 90501
	Attention: CEO

          (d) Governing Law. This Warrant shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.

          (e) Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision were so excluded and the balance shall be enforceable in accordance with its terms.

          (f) Entire Agreement. This Warrant constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, whether oral or written, between the parties hereto with respect to the subject matter hereof.

Schedule B

          (g) Binding Effect. This Warrant and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the Company and its successors and assigns, and Holder and its successors and assigns.

          (h) Waiver; Consent. This Warrant may not be changed, amended, terminated, augmented, rescinded or discharged (other than by performance), in whole or in part, except by a writing executed by the parties hereto, and no waiver of any of the provisions or conditions of this Warrant or any of the rights of a party hereto shall be effective or binding unless such waiver shall be in writing and signed by the party claimed to have given or consented thereto.

          (i) Counterparts. This Warrant is being executed in two or more counterparts, each of which shall constitute an original.

     IN WITNESS WHEREOF, the parties hereto have executed this Warrant effective as of the date hereof.

THE COMPANY:
VIRCO MFG. CORPORATION
By:
	Robert E. Dose
Its:	Vice President Finance
THE HOLDER:
DATED: August 29, 2006

Schedule B

NOTICE OF EXERCISE

To: VIRCO MFG. CORPORATION

     1. The undersigned hereby elects to purchase                      shares of Common Stock, $.01 par value per Share (“Warrant Shares”) of Virco Mfg. Corporation, a Delaware corporation (the “Company”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price pursuant to the terms of the Warrant.

     2. Please issue certificates representing the Warrant Shares purchased hereunder in the names and addresses and in the denominations indicated below.

     3. Please issue a new Warrant for the unexercised portion of the attached Warrant, if any, in the name of the undersigned.

Issuee Information:

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Robert A. Virtue, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Virco Mfg. Corporation;

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;

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;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 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:

a.	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;
b.	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;
c.	Evaluated the effectiveness of the registrant’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
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	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’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 8, 2006	/s/ Robert A. Virtue
	Robert A. Virtue
	President and Chief Executive Officer of Virco Mfg. Corporation
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Robert E. Dose, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Virco Mfg. Corporation;

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;

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;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 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:

a.	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;
b.	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;
c.	Evaluated the effectiveness of the registrant’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
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	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’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 8, 2006	/s/ Robert E. Dose
	Robert E. Dose
	Vice President of Finance of Virco Mfg. Corporation (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. § 1350 ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Virtue, President of Virco Mfg. Corporation (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. the Quarterly Report of the Company on Form 10-Q for the quarter ended October 31, 2006, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 8, 2006	/s/ Robert A. Virtue
	Robert A. Virtue
	President and Chief Executive Officer of Virco Mfg. Corporation (Principal Executive Officer)

I, Robert E. Dose, Vice President of Finance of Virco Mfg. Corporation (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. the Quarterly Report of the Company on Form 10-Q for the quarter ended October 31, 2006, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 8, 2006	/s/ Robert E. Dose
	Robert E. Dose
	Vice President of Finance of Virco Mfg. Corporation (Principal Financial Officer)

These certifications accompany the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

End of Filing