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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended January 31, 2009
Commission file number 0-16438



NATIONAL TECHNICAL SYSTEMS, INC.(Exact name of registrant as specified in its charter)

California

95-4134955(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)24007 Ventura Boulevard, Suite 200
Calabasas, CA

91302(Address of principal executive offices)

(Zip Code)


(818) 591-0776(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on
which registeredCommon stock-no par value

The NASDAQ Global Market


Securities registered pursuant to Section 12(g) of the Act:None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 ý    No o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company ý


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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal
quarter$35,199,000 (as of July 31, 2008).

The
number of shares of registrant's Common Stock outstanding on April 24, 2009 was 9,298,872.

Documents Incorporated by Reference

Portions of the Proxy Statement of the Company for the Annual Meeting of Shareholders to be held on July 8, 2009, are incorporated by reference into
Part III of this report.



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NATIONAL TECHNICAL SYSTEMS, INC.
FORM 10-K
FISCAL YEAR ENDED JANUARY 31, 2009



PART I

3ITEM 1.

BUSINESS

3ITEM 1A.

RISK FACTORS

7ITEM 1B

UNRESOLVED STAFF COMMENTS

9ITEM 2.

PROPERTIES

10ITEM 3.

LEGAL PROCEEDINGS

11ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

11PART II

11ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES

11ITEM 6.

SELECTED FINANCIAL DATA

12ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

13ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

22ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

23ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES

50ITEM 9A.

CONTROLS AND PROCEDURES

50ITEM 9A(T).

CONTROLS AND PROCEDURES

50ITEM 9B.

OTHER INFORMATION

51PART III

52ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

52ITEM 11.

EXECUTIVE COMPENSATION

52ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

52ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

53ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

53PART IV

53ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

53SIGNATURES

56


This report contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements can be identified by the use of forward-looking words such as "may", "will", "expect", "anticipate", "intend", "estimate", "continue", "behave" and similar words. Financial
information contained herein, to the extent it is predictive of financial condition and results of operations that would have occurred on the basis of certain stated assumptions may also be
characterized as forward-looking statements. Although forward-looking statements are based on assumptions made, and information believed by management to be reasonable, no assurance can be given that
such statements will prove to be correct. Such statements are subject to certain risks, uncertainties and assumptions. Actual outcomes are dependent upon National Technical Systems, Inc.'s
("NTS" or "the Company") successful performance of internal plans, NTS's ability to effectively integrate acquired companies, customer changes in short range and long range plans, competition in the
Company's services areas and pricing, continued acceptance of new services, performance issues with key customers, and general economic risks and uncertainties.

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NATIONAL TECHNICAL SYSTEMS, INC.
Annual Report (Form 10-K)
For Year Ended January 31, 2009

PART I

ITEM 1.BUSINESS.



National Technical Systems, Inc. ("NTS" or the "Company") is a diversified technical services company that supplies engineering
and evaluation services to a variety of industries including aerospace, defense, transportation, electronics, power, computers and telecommunications. NTS, utilizing its various testing facilities,
engineering solutions and certification services, helps its customers sell their products in world markets. NTS is accredited by numerous national and international technical organizations which allow
the Company to have its test data accepted in most countries.

The
Company was founded in 1961, incorporated in 1968 in California and subsequently was reincorporated in Delaware in 1987 to serve as a holding company for its subsidiaries. On
January 31, 1997, the Company was merged into a newly formed California corporation named National Technical Systems, Inc.

The
Company's principal executive offices are located at 24007 Ventura Boulevard, Suite 200, Calabasas, California 91302 (telephone: 818-591-0776).



NTS now operates in one segment: "Engineering and Evaluation." Certain assets of the "Technical Solutions" segment were sold this year.
The business of the Company is conducted by a number of operating units, all of which provide testing and engineering services. The management of each operating unit has responsibility for its
operations and for achieving sales and profit goals. The executive staff from the Company's corporate headquarters sets the strategy and maintains overall supervision, coordination and financial
control, and manages development of new services and acquisitions.

Overview

NTS is one of the largest independent conformity assessment and management system registration organizations in the U.S., with
facilities throughout the country and at locations in Japan, Vietnam, Germany and Canada. NTS provides highly trained technical personnel for product certification, product safety testing and product
evaluation to enable customers to sell their products in world markets. In addition, NTS performs management registration and certification services to ISO related standards. NTS is accredited by
numerous national and international technical organizations which allows the Company to have its test data accepted in most countries.

Markets

NTS serves customers primarily in the defense, aerospace, transportation, telecommunications, electronics, power and computers markets.
Defense and aerospace markets combined accounted for approximately 53% of revenues for the year ended January 31, 2009.

Defense.NTS plays an active role in numerous U.S. defense related programs, performing almost every type of test discipline, including
complete
functionality and performance, reliability, safety, life prediction, structural, mechanical, fluids, material science, vibration, shock, climatic exposure, radiation, acoustic noise and
electromagnetic interference and compatibility. Examples of items tested include

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components
for small fixed wing aircraft, helicopters, submarines, aircraft carriers and other naval ships, tanks and other tracked vehicles, trucks and road vehicles, command control communication
systems, electronics, weapons systems, body armor and complete ordnance and munitions testing. NTS has facilities that are specially constructed to handle munitions and hazardous materials where
routine testing includes vibration and cook-off of explosive materials, ballistics tests and hydraulic burst tests. NTS performs a broad variety of ballistics related testing, up to 155 mm
rounds. NTS's data acquisition systems are capable of collecting 1,000,000 data points and 22,000 photos per second. Additional instrumentation includes Doppler radar, 35 mm still cameras, digital
recording, data loggers and real-time color and IR video. NTS's customers in this market include various major defense contractors, as well as the U.S. Department of Defense (DOD) and
other government entities.

Aerospace.NTS performs a wide variety of tests required on civil aircraft, space, military and missiles. NTS offers acceleration test
facilities,
G-tables and centrifuges with diameters ranging from one foot to 102 feet, with weight capacities from a few grams to 20,000 pounds. In climatic testing, NTS utilizes
hundreds of test chambers to simulate nearly any environment: temperature, humidity, altitude, rain, salt spray, sand and dust, sunshine, explosive atmosphere or any combination. NTS designs and
builds custom facilities and advanced instrumentation and data acquisition systems to support all types of flow testing for gases, liquids and cryogenics. NTS is capable of performing structural
testing and analysis, and, in particular, structural loading of large objects such as entire airframes. It also performs fatigue testing of critical hardware items such as engine blades and
high-pressure fluid components. The Company also enables its customers to minimize their personnel, testing time and costs by utilizing the Company's on-site climatic, dynamic,
safety and electromagnetic compatibility test capabilities. NTS also has anechoic and reverberant chambers that are used for acoustic emission measurements or high level noise exposure.

NTS
is also building an engineering business to support the anticipated increased demand for integrated engineering services in the aerospace and defense markets as a result of continued
outsourcing activity. The initial aerospace focus will be developing capability and capacity to support large and regional commercial transport aircraft and business aircraft. The initial defense
focus will be developing capability and capacity around weapons systems. NTS's current capabilities in the engineering arena include EMC/EMI, structural stress, and thermal stress engineering support
services, prototyping, supply chain management and project management and support.

Transportation.NTS performs fluids and gas tests that measure the flow of fuels, propellants, chemicals, water, steam and others. It
also provides
tests that measure temperature, thermal shock, leak detection and efficiencies in objects like filters and other components. Other more specialized tests include cryogenic protocols for elements such
as liquid nitrogen, liquid hydrogen and liquid oxygen, as well as liquefied natural gas. NTS also performs dynamometer testing to measure the performance and power output of engines drive trains or
any other rotating machinery. It also performs HALT/HASS (Highly Accelerated Stress Screen). These tests combine extremes of temperature, rapid temperature change, and multi-axis vibration
to rapidly expose design weaknesses and process flaws. NTS is accredited to ISO 17025 through the American Accreditation of Laboratories Association (A2LA). This accreditation allows NTS
automotive test reports to be accepted in the USA and internationally.

Telecommunications.NTS provides certification and evaluation of a broad array of telecommunications equipment and systems for
manufacturers of
central office equipment and the carriers. NTS's services are performed in accordance with the Network Equipment Building Systems specifications (NEBS) and fiber optics General Requirements (GRs) as
required by the telecommunications industry. NTS is also an independent test laboratory certified and recognized by most carriers, which allows manufacturers to use NTS as a market channel for
products tested at Original Equipment Manufacturers' ("OEM") facilities that are being developed for use in the regional bell operating companies' ("RBOCs") central offices. The Company has been
approved as an Independent Test Laboratory (ITL) by the carriers to test and certify central office equipment developed by

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manufactures
to the NEBS specifications. The Company is currently providing this service at laboratories in California, Massachusetts, Texas, Calgary, Canada and Germany. The Company has been approved
as an ITL to offer Digital Subscriber Line (DSL) certification, Video Electronics Standard Association (VESA) certification and Multimedia over Coax (MoCA) certification. The Company is in the process
of developing certifications programs for XM Radio and High Definition Audio-Video Networks (HANA).

Electronics.As a Nationally Recognized Test Lab (NRTL), NTS provides electrical safety product certification, in the US and many other
countries.
NTS has been designated as a Conformity Assessment Body (CAB) for the EMC directive through the US-EU Mutual Recognition Agreement (MRA). NTS conducts EMC testing and provides customers
with certification in the US and many other countries, including particularly, Japan, Taiwan, Europe, Australia and several countries in Europe.

Power.NTS conducts a variety of tests relevant to the ongoing operations, safety and maintenance of
nuclear facilities. These tests include mechanical aging, normal or accident radiation exposure, reliability simulation, evaluation, thermal aging, analysis, vacuum testing, leak detection, Nuclear
Steam Accident, Loss Of Cooling Accident (LOCA), High Expansion Line Break (HELB) to 600F/300psig. NTS also performs seismic simulation tests up to 100,000 force-lbs, single axis,
dependent and independent biaxial systems, vibration aging and fatigue studies, up to 45,000 force-lbs. NTS is active in industry task groups that influence the latest dedication
guidelines. Through direct participation, NTS is involved in resolution of key Nuclear Regulatory Commission (NRC) questions such as selection and verification of critical characteristics, sampling,
traceability, surveys, and like-for-like replacements. NTS engineers and technicians involved in the dedication process meet ANSI N45.2.6 Level II Inspectors guidelines.
The Company's dedication programs utilize the best approach for each specified product. NTS also provides technical evaluations, critical characteristics and safety class determinations and focuses on
solving plant needs in areas such as motor rewinds, governor rebuilds, modifications or design of replacement systems and instrumentation panel and component design.

Computer.NTS performs computer product testing, providing compatibility, stress/performance, functionality and compliance testing
services for
hardware, software, telecommunications and networking companies worldwide. NTS performs software game and game console testing including Microsoft Xbox compliance testing. NTS is the exclusive test
center for Microsoft Xbox third party peripheral compatibility testing. NTS also provides testing for Data Over Cable Service Interface Specification (DOCSIS) cable modem, DSL modem, Set Top Box,
Residential Gateway and Fiber Optics GR-253 testing, interoperability testing of broadband and network products such as cable modems, DSL modems, Cable Modem Termination System (CMTS),
Digital Subscriber Line Access Multiplexer (DSLAM), Routers, Home PNA Gateways, Wireless Wi-Fi devices, Media Servers, Fiber Optics SONET switches, and systems network testing. NTS also
performs Universal Serial Bus (USB) certification testing and has successfully transferred its USB technology to Japan.

Industry Overview

Manufacturers often fulfill their evaluation testing needs on an outsourcing basis in order to reduce costs, avoid large capital
expenditures, save time and remain competitive. Due to regulations requiring third party certification, manufacturers use third party certifiers to position their products for sale in world markets.
NTS is geographically located to serve customers at locations close to their plants and NTS facilities are capable of providing the conformity assessment activity necessary to reduce product-handling
costs and serve as a market gateway for manufacturers to sell products globally. NTS provides a "one stop" resource and single source responsibility for all conformity assessment requirements in the
several markets it serves.

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Geographic Locations

In the United States, NTS's facilities are located in: Acton and Boxborough, Massachusetts; Tinton Falls, New Jersey; Rustburg,
Virginia; Camden, Arkansas; Detroit, Michigan; Plano, Texas; Tempe, Arizona; Los Angeles, Fullerton, Culver City, Santa Clarita, Fremont, Sunnyvale and Ventura, California; Albuquerque, New
Mexico; Elkhart, Indiana; Wichita, Kansas; and internationally, in Yokohama, Japan; Ho Chi Minh, Vietnam; Calgary, Canada; and Munich, Germany.

Business Strategy

To meet its customers' needs, NTS continuously upgrades its facilities, equipment, accreditations, partnerships and personnel in line
with market requirements. In addition, NTS's continuing expansion into new areas of technology will require it to invest in equipment needed to adequately service customers' needs. Through close
consultation with its existing and prospective customers to ascertain their needs for the future, NTS is able to better determine its equipment needs. In fiscal 2009, the Company made additional
investments to enhance both its capacity and capability. The Company acquired Elliot Laboratories, Inc., a leading San Francisco Bay Area (EMC) product safety and wireless regulatory
testing laboratory with two full-service facilities. The addition of Elliott Laboratories to the NTS organization creates one of the largest independent providers of EMC design, test and
evaluation services in North America. The Company also acquired International Management Systems, Inc., ("IMS") located in Tampa, Florida. IMS has been in business for over ten years and is
well branded in the registration industry. The IMS location provides NQA a strategic presence for the support of its current and new customers in the Southeast region.

Competition

In the aerospace and defense markets, the main competition for independent laboratories is the customers' own laboratories, including
government laboratories. NTS also competes with a small number of large conformity assessment organizations, within each of the markets it serves. It also competes with a large number of small niche
oriented test laboratories. It has
competitive advantages in several areas which include the following: (i) ability to service customers at facilities close to their locations; (ii) ability to provide complete conformity
assessment activities at a single location, which reduces product-handling cost for the customers and enhances timeliness of service; (iii) diverse and technically competent employees; and
(iv) accreditations that allow NTS test data to be accepted worldwide. Customers can use the Company's complete services, including quality registration, to position their products for the
world markets.

Backlog

The Company's backlog was $45,633,000 and $45,153,000 for the years ended January 31, 2009 and 2008, respectively.

The
Company estimates that approximately 85% of the backlog at January 31, 2009 will be completed by January 31, 2010.

General

a.Service Marks

The
Company has registered its service marks "NTS" and "XXCAL" with the U.S. Patent and Trademark Office.

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b.Environmental Effect

We
are subject to various federal, state, local and foreign government requirements regulating the discharge of materials into the environment or otherwise relating to the protection of
the environment. It is our policy to comply with these requirements, and we believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk
of environmental damage, and of resulting financial liability, in connection with our business. Some risk of environmental impact, however, is inherent in some of our operations, as it is with other
companies engaged in similar businesses.

The
Company's Santa Clarita, California test facility is located immediately adjacent to property owned by a third party which has been the subject of extensive environmental
remediation. Environmental testing was conducted at the Company's facility in the fall of 2008, in cooperation with the government agency having oversight responsibility for the adjacent site. The
government has required no further investigation or remedial action at the Company's facility at this time, other than performing additional soil vapor testing and two more rounds of water sampling to
be conducted over the next six months.

The
Company believes that in the event it incurs future remediation costs for perchlorate on the western portion of the property, that it will have valid claims for indemnification
against the owner of the adjacent site and the municipality that built a road between the adjacent site and the Santa Clarita property that appears to have contributed to the runoff from the adjacent
site.

c.Seasonal Effect

The
Company experiences no material seasonal effects.

d.Employees

The
Company employed 780 individuals at January 31, 2009 and 891 at January 31, 2008.

AVAILABLE INFORMATION

Our website address is http://www.ntscorp.com. We make available, free of charge through our website, our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission
(the "SEC").

Our
filings may also be read and copied at the SEC's Public Reference Room at 100 F Street NE, Room 1580 Washington, DC 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC. The address of that website is www.sec.gov. References to our website addressed in this report are provided
as a convenience and do not constitute, or should be viewed as, an incorporation by reference of the information contained on, or available through, the website. Therefore, such information should not
be considered part of this report.

ITEM 1A.RISK FACTORS.

The factors discussed below are cautionary statements that identify important factors that could cause actual results to differ
materially from those anticipated in the forward-looking statements in this Form 10-K. Any of the following risks may have a material negative impact on the Company's financial
condition.

The
Company is subject to the effects of general economic and market conditions (including economic disruption caused by terrorist acts). A severe and/or prolonged economic downturn or a
negative

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or
uncertain political climate could adversely affect the Company's operating results and financial condition.

The
Company experienced significant growth in recent years, partly due to domestic and worldwide political and economic developments that have positively affected the markets for defense
and advanced technology systems. Homeland security and defeating terrorism have been among the Department of Defense's main initiatives. A slowing in defense spending due to political or budget shifts
will put downward pressure on the Company's revenues and gross margins.

Results
may be adversely affected by:



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ITEM 1BUNRESOLVED STAFF COMMENTS.

N/A

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ITEM 2.PROPERTIES.

OperationsThe Company owns/leases and operates the following properties:

State

Owned Properties
City

Buildings
(Sq.Ft.)

Land
(Acres)California

Fullerton


36,000


3Santa Clarita (a), (b)


60,000


145Massachusetts

Acton


30,000


5Boxborough


25,000


4Texas

Plano


1,000


1Virginia

Fredericksburg


66,000


87Total owned properties


218,000


245State

Leased Properties
City

Buildings
(Sq.Ft.)

Land
(Acres)Arizona

Tempe


17,000


n/aArkansas

Camden


30,000


561California

Anaheim Hills


2,000


n/aCalabasas


7,000


n/aCulver City


24,000


n/aDana Point


900


n/aFremont


26,400


n/aFullerton


20,000


n/aLos Angeles (LAX)


16,000


2Santa Rosa


18,000


n/aSunnyvale


16,642


n/aVentura


870


n/aIndiana

Elkhart


500


n/aKansas

Wichita


14,632


n/aFlorida

Tampa


600


n/aMassachusetts

Lowell


1,000


n/aBoxborough


12,000


n/aMichigan

Detroit


65,000


n/aNew Jersey

Tinton Falls


17,000


n/aNew Mexico

Albuquerque


13,060


n/aTexas

Plano


24,000


n/aVirginia

Rustburg


8,000


33Alexandria


1,342


n/aInternationalCalgary

Canada


14,000


n/aGermany

Munich


300


n/aJapan

Yokohama


500


n/aVietnam

Ho Chi Minh


1,000


n/aTotal leased properties


351,746


596


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The
Company believes that the space occupied by all of its operations is adequate for its current and near-term requirements. Should additional space be required, the Company
does not anticipate problems in securing such additional space.



The Company is still pursuing efforts to sell approximately 118 acres of its Santa Clarita, California land, but the
deterioration in the commercial real estate market has impacted the interest of potential investors. Since this property does not meet all the criteria for accounting classification as an "asset held
for sale" as defined in Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets," it was not classified as such
in the accompanying consolidated financial statements.

ITEM 3.LEGAL PROCEEDINGS.

The Company is, from time to time, the subject of claims and suits arising out of matters occurring during the operation of the
Company's business. In the opinion of management, no pending claims or suits would materially affect the financial position or the results of the operations of the Company.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.



The Company's common stock is traded on the Nasdaq Global Market under the symbol "NTSC". The range of high and low sales prices as reported by the Nasdaq Global
Market for each of the quarters of the fiscal years ended January 31, 2009 and 2008 is presented below:

2009

2008High

Low

High

LowFirst Quarter

$
6.37

$
5.44

$
6.35

$
5.00Second Quarter

$
6.10

$
4.55

$
7.09

$
5.50Third Quarter

$
5.69

$
3.60

$
7.48

$
6.36Fourth Quarter

$
4.31

$
3.02

$
7.35

$
5.71




As of the close of business on April 24, 2009, there were 724 holders of record of the Company's common stock. The number of holders of record is based on
the actual number of holders registered on the books of the Company's transfer agent and does not reflect holders of shares in "street name" or persons, partnerships, associations, corporations or
other entities identified in security position listings maintained by depository trust companies.



The Company paid a special $0.02 cash dividend per common share on August 25, 2008 to shareholders of record on August 11, 2008. Future dividends
may be paid at the discretion of The NTS board.

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None.



No purchases for the fiscal year ended January 31, 2009.

ITEM 6.SELECTED FINANCIAL DATA.

The following selected consolidated financial data are derived from and should be read in conjunction with the Company's consolidated
financial statements and related notes set forth in Item 8 below. Certain amounts in prior year numbers have been reclassified to conform with the current year presentation.

Year Ended January 31,2009

2008

2007

2006

2005(in thousands except per share amounts)INCOME STATEMENT DATA:Net revenues

$
119,920

$
100,857

$
91,004

$
82,269

$
73,943Gross profit


32,081


26,223


23,006


22,105


18,161Operating income


7,470


5,941


5,102


5,348


2,589Interest expense, net


2,053


1,950


1,801


1,298


1,091Income before income taxes and minority interest


5,402


4,405


3,412


4,226


1,660Income taxes


2,342


1,709


1,500


1,677


583Income from continuing operations before minority interest


3,060


2,696


1,912


2,549


1,077Minority interest in earnings


(82
)

(84
)

(88
)

(50
)

Income from continuing operations


2,978


2,612


1,824


2,499


1,077Income from discontinued operations, net of tax


662


3


(243
)

440


605Net income

$
3,640

$
2,615

$
1,581

$
2,939

$
1,682Basic earnings per common shareIncome from continuing operations

$
0.33

$
0.30

$
0.21

$
0.27

$
0.12Income from discontinued operations


0.07


0.00


(0.03
)

0.05


0.07Net income

$
0.40

$
0.30

$
0.18

$
0.32

$
0.19Diluted earnings per common shareIncome from continuing operations

$
0.31

$
0.28

$
0.19

$
0.26

$
0.11Income from discontinued operations


0.07


0.00


(0.03
)

0.05


0.06Net income*

$
0.38

$
0.28

$
0.17

$
0.30

$
0.18Weighted average common shares outstanding


9,141


8,795


8,705


9,125


8,946Dilutive effect of stock options


456


662


800


537


620Weighted average common shares outstanding,assuming dilution


9,597


9,457


9,505


9,662


9,566Cash dividends paid per common share

$
0.02

$


$


$


$
BALANCE SHEET DATA:Working capital

$
23,379

$
19,145

$
15,087

$
16,276

$
20,481Total assets


106,522


90,892


74,839


69,133


66,669Long-term debt, excluding current installments


33,913


32,274


19,238


15,579


20,557Shareholders' equity


43,251


37,355


33,779


34,378


30,951


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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Except for the historical information contained herein, the matters addressed in this Item 7 contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking words such as "may", "will", "expect", "anticipate",
"intend", "estimate", "continue", "behave" and similar words. Financial information contained herein, to the extent it is predictive of financial condition and results of operations that would have
occurred on the basis of certain stated assumptions, may also be characterized as forward-looking statements. Although forward-looking statements are based on assumptions made, and information
believed by management to be reasonable, no assurance can be given that such statements will prove to be correct. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated.

OVERVIEW

The Company is a diversified business to business services organization that supplies technical services to the aerospace, defense,
automotive, power, electronic, computer and telecommunication industries. Through its wide range of testing facilities and certification services, the Company's services allow its customers the
ability to sell their products globally and enhance their overall competitiveness. NTS is accredited by numerous national and international technical organizations which allow the Company to have its
test data accepted in most countries. The Company operates facilities throughout the United States and in Japan, Vietnam, Canada and Germany. providing highly trained technical personnel for
engineering services, product certification, product safety testing and product evaluation. In addition, it performs management registration and certification services to ISO related standards.

The
Company is now reporting as one segment as a result of the sale of its information technology services, which was previously included in the Technical Solutions segment. The
remaining business of the Technical Solutions segment is more closely related to engineering services and has been merged with and into the Engineering & Evaluation segment.

In
fiscal 2009, total revenues increased 18.9% to approximately $120 million.

Summary
of Revenues for fiscal years 2009 and 2008:

FY 2009

FY 2008

Change

% Change(Dollars in thousands)Total Revenues

$
119,920

$
100,857

$
19,063


18.9
%


Revenues
increased 18.9% primarily due to organic growth combined with revenues from new acquisitions. Revenues are generated from physical testing services which include simulation of
harsh environments such as high/low temperature, shock, vibration, seismic and electromagnetic interference, and functional testing which requires equipment such as environmental chambers, shakers,
switches, routers, servers and high bandwidth access to the Internet to subject telecommunication equipment to a full spectrum of performance type testing. Revenues also include registration services
which perform quality management audits to ISO 9000, quality training and laboratory accreditation. The Company is one of the largest independent conformity assessment organizations in
theUnited States.

On
June 6, 2008, the Company acquired Elliott Laboratories, Inc., a leading San Francisco Bay Area Electromagnetic Compatibility (EMC), product safety and wireless
regulatory testing laboratory with two full-service facilities. The total purchase price consideration through January 31, 2009 was $7,327,000, of which $3,600,000 was paid in cash
at closing and $1,974,000 was paid in Company stock, $1,000,000 in cash and stock was deferred and is payable 18 months after closing. An additional $75,000 in cash was paid

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subsequently
for working capital adjustment and $61,000 was paid in common stock. In addition, the Company agreed to pay to the sellers up to a maximum of $1,275,000 in earn-out
consideration, payable in Company stock, contingent upon the achievement by Elliott Laboratories of certain targets over the 24 months immediately following the closing of the agreement. This
will be added to the purchase price and result in an increase to goodwill if and when the requirements are met and the contingency is removed. The results of operations for Elliott Laboratories are
included in the Company's condensed consolidated statements of income from June 6, 2008 to January 31, 2009.

Summary
of Cash Flows for fiscal years 2009 and 2008:

FY 2009

FY 2008

Change(Dollars in thousands)Net cash provided by operating activities

$
11,255

$
6,022

$
5,233Net cash used in investing activities


(7,709
)

(18,387
)

10,678Net cash provided by financing activities


3,026


11,991


(8,965
)Effect of exchange rate changes on cash


(71
)

16


(87
)Net increase (decrease) in cash

$
6,501

$
(358
)
$
6,859


The
decrease in net cash used in investing activities from FY 2008 to FY 2009 was primarily due to a lower amount of cash spent on acquisitions in FY 2009 when compared to FY 2008. The
decrease in net cash provided by financing activities was due to lower borrowings, related to the lower spending on acquisitions.

Critical Accounting Policies

The consolidated financial statements of the Company are prepared in accordance with U.S. generally accepted accounting principles
("GAAP"), which require the Company to make certain estimates and assumptions (see Note 1 to the consolidated financial statements in Item 8). Estimates are based on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.

Management
believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial
statements.

Recognition of Revenue and Related Costs

Revenues are derived from development, qualification and production testing and engineering services for commercial products, space
systems and military equipment of all types. The Company also provides qualification of safety related systems and components and ISO 9000 certification services.

Revenues
from fixed price testing contracts is generally recorded upon completion of the contracts, which are generally short-term, or upon completion of identifiable
contractual tasks. At the time the Company enters into a contract that includes multiple tasks, the Company estimates the amount of actual labor and other costs that will be required to complete each
task based on historical experience. Revenues are recognized which provide for a profit margin relative to the testing performed. Revenues relative to each task and from contracts which are time and
materials based is recorded as effort is expended. Billings in excess of amounts earned are deferred. Any anticipated losses on contracts are charged to income when identified and can be reasonably
estimated. To the extent management does not accurately forecast the level of effort required to complete a contract, or individual tasks within a contract, and the Company is unable to negotiate
additional billings with a customer for cost over-runs, the Company may incur losses on individual contracts. All selling, general and administrative costs are treated as period costs and
expensed as incurred.

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Reimbursements
made to the Company by customers under contract provisions, including those related to travel and other out-of-pocket expenses are recorded as
revenues. An equivalent amount of reimbursable expenses is recorded as cost of sales.

Allowance for Uncollectible Receivables

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make
required payments. The Company uses a combination of write-off history, aging analysis and identification of any specific known troubled accounts in determining the allowance. If the
financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required.

Inventories

Inventories consist of accumulated costs including direct labor, material and overhead applicable to uncompleted contracts and are
stated at actual cost, which is not in excess of estimated net realizable value. Such inventories for each contract are reviewed on a monthly basis over the life of the contract and additional
write-downs of inventories are made if there are insufficient revenues remaining on the contract.

Accounting for Income Taxes

We account for income taxes under the liability method in accordance with SFAS No. 109 "Accounting for Income Taxes." Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. We record a valuation allowance, if necessary, to reduce deferred tax assets to an amount management believes is more likely than not to be realized.

To
the extent that we have deferred tax assets, we must assess the likelihood that our deferred tax assets will be recovered from taxable temporary differences, tax strategies or future
taxable income and to the extent that we believe that recovery is not likely, we must establish a valuation allowance. As of January 31, 2009 and 2008, we have not established a valuation
allowance against our deferred tax assets. In the future, we may adjust our estimates of the amount of valuation allowance needed and such adjustment would impact our provision for income taxes in the
period of such change.

Intangible Assets

The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets."

Under
SFAS No. 142, goodwill and intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment. The goodwill test for
impairment consists of a two-step process that begins with an estimation of the fair value of the reporting unit. The first step of the test is a screen for potential impairment and the
second step measures the amount of impairment, if any. The first step of the goodwill impairment test includes a comparison of the fair value of each reporting unit that has associated goodwill with
the carrying value of the reporting unit. The Company has identified seven reporting units, which constitute components of its business that include goodwill. The Company completed its annual goodwill
impairment test and has determined that the fair value of each of the reporting units exceeded the reporting unit's carrying amount, and no impairment was indicated.

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Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"), which clarifies the
definition of fair value, establishes guidelines for measuring fair value, and expands disclosures regarding fair value measurements. On February 12, the FASB issued FSP
FAS 157-2 which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value
in the financial statements on a recurring basis (at least annually). The Company adopted SFAS 157 except as it applies to those nonfinancial assets and nonfinancial liabilities as noted in FSP
FAS 157-2. The adoption of SFAS 157 as amended did not have a material impact on our consolidated financial position, cash flows, or results of operations.

In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities"("SFAS 159") which permits entities to choose
to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 was effective for the Company on
February 1, 2008 and the adoption by the Company had no material impact on our consolidated financial position, cash flows, or results of operations.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R") and SFAS No. 160, "Accounting and Reporting of
Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB 51" ("SFAS 160"), which will change the accounting for and reporting of business combination transactions and
noncontrolling interests in consolidated financial statements. SFAS 160 requires changes in classification and presentation of minority interests in the consolidated balance sheets, statements
of income, and statements of shareholders' equity. SFAS 141R and SFAS 160 will be effective for the Company on February 1, 2009.
We are currently evaluating the impact of adopting SFAS 141R and SFAS 160 on our consolidated financial position, cash flows, and results of operations.

SFAS 141(R)
amends SFAS No. 109, "Accounting for Income Taxes," to require the acquirer to recognize changes in the amount of its deferred tax benefits that are
recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances.
SFAS 141(R) also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination.

In
April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS 142-3"), to improve the
consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R.
The provisions of FSP FAS 142-3 will be effective for the Company on February 1, 2009. We are currently evaluating the impact on our consolidated financial position, cash
flows, and results of operations.

In
May 2008, the FASB issued SFAS No. 162 ("SFAS 162"), "The Hierarchy of Generally Accepted Accounting Principles." SFAS 162 is intended to improve financial
reporting by identifying a consistent hierarchy for selecting accounting principles to be used in preparing financial statements that are prepared in conformity with generally accepted accounting
principles. Unlike Statement on Auditing Standards No. 69, "The Meaning of Present Fairly in Conformity With GAAP," SFAS 162 is directed to the entity rather than the auditor.
SFAS 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission of the Public Company Accounting Oversight Board's amendments to AU Section 411,
"The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." The Company does not expect SFAS 162 to have a material impact on its financial position, cash
flows, or results of operations.

In
November 2008, the FASB ratified the consensus reached by the EITF on Issue EITF No. 08-6, "Equity Method Investment Accounting Considerations"
("EITF 08-6"), which clarifies the accounting for certain transactions and impairment considerations involving equity method investments. The prospective

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provisions
of EITF 08-6 will be effective for the Company on February 1, 2009. The adoption of EITF 08-6 is not expected to have a material impact on the
Company's consolidated financial position, cash flows, or results of operations.

Off-Balance Sheet Arrangements

The Company does not have any special purpose entities or off-balance sheet financing arrangements.

Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto.

REVENUES

Twelve months ended January 31,2009

% Change

2008(Dollars in thousands)Total revenues

$
119,920


18.9
%
$
100,857


For
the year ended January 31, 2009, revenues increased by $19,063,000 or 18.9% as compared to the prior year, primarily due to an increase in revenues from the aerospace and
power markets, additional revenues of approximately $8,993,000 from new acquisitions, and an increase in engineering services revenues from a major customer. The increases were partially offset by a
decrease in revenues in the automotive market.

GROSS PROFIT

Twelve months ended January 31,2009

% Change

2008(Dollars in thousands)Total

$
32,081


22.3
%
$
26,223% to total revenue


26.8
%




26.0
%


For
the year ended January 31, 2009, gross profit increased by $5,858,000 or 22.3%. This was primarily due to additional gross profit from new acquisitions and the increase in
revenues discussed above. The gross margin as a percent of revenue was 0.8% higher than the prior year, primarily due to an increase in higher margin contracts from the USTL acquisition, partially
offset by a decrease in gross margin at some existing facilities, including the automotive group.

SELLING, GENERAL & ADMINISTRATIVE

Twelve months ended January 31,2009

% Change

2008(Dollars in thousands)Total

$
24,655


20.7
%
$
20,424% to total revenue


20.6
%




20.3
%


For
the year ended January 31, 2009, selling, general and administrative expenses increased by $4,231,000 or 20.7%, when compared to fiscal 2008. This increase was primarily due
to higher compensation costs associated with the increased revenues discussed above, additional sales and marketing costs related to the development of the engineering services group, higher bad debt
expense, and higher amortization expense related to the USTL and Elliott Laboratories acquisitions.

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Equity Income from Non-Consolidated Subsidiary:

For the year ended January 31, 2009, equity income from XXCAL Japan was $44,000, compared to $142,000 in the prior year. The
decrease of $98,000 was primarily due to generally weaker economic conditions in Japan. XXCAL Japan is 50% owned by NTS and is accounted for under the equity method since NTS does not have management
or board control.

OPERATING INCOME

Twelve months ended
January 31,2009

% Change

2008(Dollars in thousands)Total

$
7,470


25.7
%
$
5,941% to total revenue


6.2
%




5.9
%


For
the year ended January 31, 2009, operating income increased by $1,529,000 or 25.7%, as compared to the prior year. The increase was primarily a result of the increase in gross
profit, partially offset by the increase in selling, general and administrative expenses and the decrease in equity income from a non-consolidated subsidiary.

Interest Expense

Interest expense increased by $103,000 in fiscal 2009 when compared to fiscal 2008 primarily due to additional borrowings for the USTL
and Elliott Laboratories acquisitions, partially offset by lower interest rates in the current year.

Other Income

Other expense was $15,000 in fiscal 2009, compared to other income of $414,000 in fiscal 2008. Other expense in the current year
includes certain acquisition related expenses, partially offset by a gain from securities sold.

Income Taxes

The provisional income tax rate for fiscal year 2009 is 43.3%, compared to 38.8% in the prior year. The increase in the income tax rate
in fiscal 2009 was primarily due to an increase in non-tax deductible expenses, taxes paid on foreign dividends received, and a lower effective tax rate at the Calgary facility, which
resulted in a lower tax reduction due to its operating loss in the current year. See Note 4 to the consolidated financial statements for a reconciliation of the provision for income taxes from
continuing operations at the statutory rate to the provision for income taxes from continuing operations.

Management
has determined that it is more likely than not that the Company's deferred tax asset will be realized on the basis of offsetting it against deferred tax liabilities and future
income. The Company analyzes the value of the deferred income tax asset quarterly in conjunction with external reporting.

Discontinued Operations

On November 3, 2008, the Company sold to Strategic Staffing Solutions, L.C., a Florida limited liability company, contracts and
certain other assets of its Technical Solutions segment that were associated with information technology services and information technology consulting. The sale price for the assets was $5,000,000,
subject to working capital adjustment.

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On January 31, 2009, the Company discontinued operations at its Santa Rosa facility. Anticipated rent and decommissioning expenses were accrued in the
current year. The gain from the sale and the loss from operations are presented net of tax as "Income (loss) from discontinued operations."

Sale of IT Staffing

Santa Rosa Disposal2009

2008

2009

2008Net revenues

$
15,693,000

$
20,342,000

$
935,000

$
1,177,000Income from discontinued operations before income taxes


596,000


342,000


(1,874,000
)

(337,000
)Income taxes


259,000


133,000


(813,000
)

(131,000
)Net income from discontinued operations


337,000


209,000


(1,061,000
)

(206,000
)Gain from sale of discontinued operations before income tax


2,447,000








Income taxes


1,061,000








Net income from sale of discontinued operations


1,386,000








Total net income from discontinued operations

$
1,723,000

$
209,000

$
(1,061,000
)
$
(206,000
)


Net Income

For the year ended January 31, 2009, net income was $3,640,000 compared to $2,615,000 in the prior year, an increase of
$1,025,000 or 39.2%. This increase was primarily due to the higher operating income and income from discontinued operations, partially offset by higher interest expense and higher taxes.

Business Environment

The defense and aerospace markets generate approximately 53% of the Company's overall revenues. The U.S. commercial airline industry
projects an increase from 19,000 aircraft in 2007 to 35,000 aircraft in 2027, an annual growth rate of 4.4%. In addition, 82% of the world fleet will consist of new airplanes. NTS anticipates the
demand for testing aerospace components and systems will remain strong. NTS also anticipates the demand for engineering services will increase significantly as new large and regional commercial
aircraft and business aircraft are being designed and built. The defense budget projected for 2009 reflects a decrease of 9% overall. However, R&D spending, the funding relevant to NTS, is projected
to increase by 4%. NTS anticipates an increase in demand for engineering and test work specifically in munitions and ordnance as well as component and system qualification and acceptance testing. The
Company continues to enhance its capabilities and capacity to support this activity in its laboratories.

The
trend in the telecommunications market appears to be stable in the short term and is expected to grow in the future. Carriers are delivering voice, video and data using fiber
networks. New means of delivery may increase the demand for certification of suppliers' premises equipment, and certification of new central office equipment. The Company expects an increase in demand
for its services as carriers upgrade their packet-based Voice Over Internet Protocol (VOIP) devices. The Company is currently evaluating the overall compliance requirements for the deployment of
broadband wireless products and how best to position NTS to service the anticipated growth of this technology. The Company anticipates a moderate increase in the telecom business and the acquisition
of Elliott Laboratories has provided additional capacity and capability to grow in this market.

The
computer and electronics markets have been sluggish because the demand for consumer products has been declining due to the current challenging economic conditions. The Company's
growth in these markets will depend on its ability to capture additional market share and/or expand geographically. Currently, NTS is developing compliance and interoperabiltiy testing for emerging
technologies; Multimedia over Coax Cable (MoCA), USB 3.0 and Wireless USB, "ZigBee" smart energy. The Company

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believes
demand will increase for certification of "ZigBee" platforms and "ZigBee" Alliance-recognized products and the Company has developed a smart energy test harness to perform the testing and
certification. The Company believes these compliance activities will have applicability in both U.S. and international markets.

NTS
is building an engineering business to support the anticipated increased demand for integrated engineering services in the aerospace and defense markets as a result of continued
outsourcing activity. The Company's initial aerospace focus will be developing capability and capacity to support large and regional commercial transport aircraft and business aircraft. The initial
defense focus will be developing capability and capacity around weapons systems. We also anticipate a growing demand for engineering services for military aircraft, general aviation, space craft and
unmanned vehicles. NTS plans to develop capability and capacity to support these activities once we establish a stronger overall engineering support service.

The
power market, particularly the dedication and certification work the Company provides, has been increasing. The Company believes there is a positive outlook for this market as the
government and industry search for alternative energy solutions.

The
automotive industry has been declining and it is projected to continue to decline. The Company has experienced a decrease in both revenues and earnings as a result of this decline in
demand.

Notwithstanding
the foregoing, and because of factors affecting the Company's operating results, past financial performance should not be considered to be a reliable indicator of future
performance.

Liquidity and Capital Resources last line in table should be Net increase (decrease) in cash

Summary of cash flows:

FY 2009

FY 2008(Dollars in thousands)Net cash provided by operating activities

$
11,255

$
6,022Net cash used in investing activities


(7,709
)

(18,387
)Net cash provided by financing activities


3,026


11,991Effect of exchange rate changes on cash


(71
)

16Net increase (decrease) in cash

$
6,501

$
(358
)


Net
cash provided by operating activities of $11,255,000 in fiscal 2009 consisted of net income of $3,640,000, adjusted for non-cash items of $7,298,000 in depreciation and
amortization, loss on disposal of business of $1,669,000, write-off of receivables of $367,000, deferred income taxes of $724,000, share-based compensation of $294,000, and $324,000 in
other non-cash items, partially offset by a $2,447,000 gain on sales of assets, $419,000 of changes in working capital, and $195,000 in gain on sale of securities. Net cash provided by
operating activities of $6,022,000 in fiscal 2008 consisted of net income of $2,615,000, adjusted for non-cash items of $6,155,000 in depreciation and amortization, share-based
compensation of $388,000, and $422,000 in other non-cash items, partially offset by $2,908,000 of changes in working capital, $291,000 in deferred income taxes and $359,000 in net gain on
insurance claim.

Net
cash used in investing activities in fiscal 2009 of $7,709,000 was primarily attributable to capital spending of $6,417,000, cash used for acquisitions of $5,267,000, cash used for
investment in retirement funds of $694,000 and investment in life insurance of $89,000, partially offset by proceeds from the sale of business of $4,563,000 and proceeds from sale of securities of
$195,000. Capital spending is generally comprised of purchases of machinery and equipment, building, leasehold improvements, computer hardware, software and furniture and fixtures. Cash used in
investing activities decreased from fiscal 2008 to fiscal 2009 by $10,678,000 primarily as a result of the decrease in cash used for acquisitions, partially offset by an increase of $1,317,000 in
capital spending on property, plant and equipment, and the gain from

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sale
of business of $4,563,000 in the current year. Net cash used in investing activities in fiscal 2008 of $18,387,000 was primarily attributable to capital spending of $5,100,000, total cash used
for acquisitions of $13,082,000, which consisted of cash used to acquire TRA Certification, Inc. ("TRA") of $471,000 and cash used to acquire United States Test Laboratory, LLC
("USTL") of $12,611,000, and cash used for investment in retirement funds of $363,000.

Net
cash provided by financing activities in fiscal 2009 of $3,026,000, consisted primarily of proceeds from borrowings of $11,885,000 and proceeds from stock options exercised of
$222,000, partially offset by repayment of debt of $8,895,000 and cash dividends paid of $186,000. Net cash provided by financing activities in fiscal 2008 of $11,991,000, consisted primarily of
proceeds from borrowings of $24,697,000 and proceeds from stock options exercised of $402,000, partially offset by repayment of debt of $13,058,000.

On
December 5, 2007, the Company entered into an Amendment No. 9 to the Revolving Credit Agreement with Comerica Bank, as agent and lender, holding 60%, and First Bank, as
lender, holding 40% (the "Amendment"). This agreement matures on December 1, 2012. The amendment included:



On
June 5, 2008, the Company entered into Amendment No. 10 to the Revolving Credit Agreement to add Term Loan C in the amount of $6,000,000. Proceeds from Term
Loan C were used to finance the acquisition of Elliott Laboratories and pay off two existing mortgage notes with other banks. The outstanding balance on Term Loan C at January 31,
2009 was $5,253,000. The interest rate is at the
agent's prime rate with an option for the Company to convert to loans at the Libor rate plus 250 basis points for periods ranging from 30 days to 365 days, with minimum advances of
$1,000,000. The principal amount is amortized over a seven-year period. This agreement matures on May 30, 2013.

The
Company has an additional $802,000 in equipment line balances which was used to finance various test equipment with terms of 60 months for each equipment schedule at interest
rates ranging from 5.56% to 7.47%. The Company was in compliance with all of the covenants with its banks at January 31, 2009.

The
Company's 50% owned subsidiary, NQA, Inc., has total borrowings of $415,000 at January 31, 2009, for the acquisitions of TRA Certification Inc. and International
Management Systems, Inc. (IMS).

Management
is not aware of any significant demands for capital funds that may materially affect short or long-term liquidity in the form of large fixed asset acquisitions,
unusual working capital commitments or

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contingent
liabilities. In addition, the Company has made no material commitments for capital expenditures however, the Company expects to make capital expenditures at levels similar to prior years.
The Company's long-term debt may be accelerated if the Company fails to meet its covenants with its banks. The Company believes that the cash flow from operations and the revolving line of
credit will be sufficient to fund its operations for the next twelve months.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

The Company is exposed to changes in interest rates primarily from its long-term revolving line of credit arrangement.
Under its current policies, the Company
does not use interest rate derivative instruments to manage exposure to interest rate changes. A hypothetical one percentage point adverse move in interest rates along the entire interest rate yield
curve would adversely affect interest expense by $359,000 at January 31, 2009 as compared to $312,000 at January 31, 2008.

Impact of Inflation

The Company continues to incur increased costs in the areas of wages, insurance, workers compensation, and utilities which it cannot
pass along to customers in the current economic environment. To date, these increases have been partially offset by reductions in other operating areas through improved efficiencies. The Company can
give no assurances, however, that in the future it can offset such increased costs.

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements and Schedule



Report of Independent Registered Public Accounting Firm


24Financial Statements:Consolidated Balance SheetsJanuary 31, 2009 and 2008


25Consolidated Statements of IncomeYears ended January 31, 2009 and 2008


26Consolidated Statements of Shareholders' EquityYears ended January 31, 2009 and 2008


27Consolidated Statements of Cash FlowsYears ended January 31, 2009 and 2008


28Notes to Consolidated Financial Statements


29ScheduleSchedule Supporting Financial Statements:Valuation and Qualifying Accounts and Reserves


II


---

All
other schedules are omitted as inapplicable or because the required information is contained in the financial statements or the notes thereto.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Board of Directors and Shareholders
National Technical Systems, Inc.

We
have audited the accompanying consolidated balance sheets of National Technical Systems, Inc. and Subsidiaries as of January 31, 2009 and 2008, and the related
consolidated statements of income,
shareholders' equity, and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. The financial statements of
NQA, Inc., a corporation in which the Company has a 50% interest and whose financial statements are consolidated with those of the Company, have been audited by other auditors whose report has
been furnished to us, and our opinion on the consolidated financial statements, insofar as it relates to the amounts included for NQA, is based solely on the report of the other auditors. In the
consolidated financial statements, NQA's total assets constitute $3,872,000 at January 31, 2009 and $3,044,000 at January 31, 2008 and total revenues constitute $10,024,000 for the year
ended January 31, 2009 and $8,419,000 for the year ended January 31, 2008 of the related consolidated totals.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In
our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of National Technical Systems, Inc. and Subsidiaries at January 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for the years then ended
in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP


Los Angeles,
California
April 25, 2009

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Table of Contents



NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES        Consolidated Balance Sheets        January 31,

2009

2008ASSETSCURRENT ASSETS:Cash and cash equivalents

$
9,364,000

$
2,863,000Investments


958,000


363,000Accounts receivable, less allowance for doubtful accounts of $1,274,000 at January 31, 2009 and $907,000 at January 31, 2008


23,973,000


23,925,000Income taxes receivable


137,000


327,000Inventories, net


3,473,000


2,915,000Deferred income taxes


3,983,000


2,216,000Prepaid expenses


1,462,000


1,330,000Total current assets


43,350,000


33,939,000Property, plant and equipment, at costLand


1,677,000


1,415,000Buildings


9,164,000


10,241,000Machinery and equipment


80,634,000


83,423,000Leasehold improvements


12,556,000


11,886,000Total property, plant and equipment


104,031,000


106,965,000Less: accumulated depreciation


(65,709,000
)

(71,914,000
)Net property, plant and equipment


38,322,000


35,051,000Goodwill


12,070,000


10,471,000Intangible assets, net


8,656,000


6,677,000Other assets


4,124,000


4,754,000TOTAL ASSETS

$
106,522,000

$
90,892,000LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Accounts payable

$
6,731,000

$
6,090,000Accrued expenses


7,938,000


5,857,000Income taxes payable


1,088,000


Deferred income


975,000


959,000Current installments of long-term debt


3,239,000


1,888,000Total current liabilities


19,971,000


14,794,000Long-term debt, excluding current installments


33,913,000


32,274,000Deferred income taxes


7,958,000


5,148,000Deferred compensation


1,012,000


986,000Minority interest


417,000


335,000Commitments and contingenciesSHAREHOLDERS' EQUITY:Preferred stock, no par value, 2,000,000 shares authorized; none issued





Common stock, no par value. Authorized, 20,000,000 shares; issued and outstanding, 9,299,000 as of January 31, 2009 and 8,846,000 as of January 31,
2008


16,421,000


13,769,000Retained earnings


26,940,000


23,486,000Accumulated other comprehensive (loss) income


(110,000
)

100,000Total shareholders' equity


43,251,000


37,355,000TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$
106,522,000

$
90,892,000


See accompanying notes.

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Table of Contents



NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES        Consolidated Statements of Income        Years Ended January 31,

2009

2008Net revenues

$
119,920,000

$
100,857,000Cost of sales


87,839,000


74,634,000Gross profit


32,081,000


26,223,000Selling, general and administrative expense


24,655,000


20,424,000Equity income from non-consolidated subsidiary


(44,000
)

(142,000
)Operating income


7,470,000


5,941,000Other income (expense):Interest expense, net


(2,053,000
)

(1,950,000
)Other (expense) income, net


(15,000
)

414,000Total other expense, net


(2,068,000
)

(1,536,000
)Income before income taxes and minority interest


5,402,000


4,405,000Income taxes


2,342,000


1,709,000Income before minority interest


3,060,000


2,696,000Minority interest


(82,000
)

(84,000
)Income from continuing operations


2,978,000


2,612,000Income from discontinued operations, net of tax


662,000


3,000Net income

$
3,640,000

$
2,615,000Basic earnings per common shareIncome from continuing operations

$
0.33

$
0.30Income from discontinued operations


0.07


Net income

$
0.40

$
0.30Diluted earnings per common shareIncome from continuing operations

$
0.31

$
0.28Income from discontinued operations


0.07


Net income

$
0.38

$
0.28Weighted average common shares outstanding


9,141,000


8,795,000Dilutive effect of stock options and nonvested shares


456,000


662,000Weighted average common shares outstanding, assuming dilution


9,597,000


9,457,000Cash dividends per common share

$
0.02

$



See
accompanying notes.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES        Consolidated Statements of Shareholders' Equity

Number of
Shares

Common
Stock Amount

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income

Total
Shareholders'
EquityBalance at January 31, 2007


8,717,000

$
12,863,000

$
20,971,000

$
(55,000
)
$
33,779,000Net income








2,615,000





2,615,000Foreign currency translation











16,000


16,000Unrealized gain on securities available for sale, net of tax effect of $78,000











139,000


139,000Comprehensive income














2,770,000Stock options exercised


123,000


430,000








430,000Stock retired for option exercise


(5,000
)

(28,000
)







(28,000
)Vesting of restricted stock


11,000











Issuance of restricted stock





123,000








123,000Share-based compensation





236,000








236,000Tax benefit from stock options exercise





116,000








116,000Tax benefit from distribution of restricted stock





29,000








29,000Cash dividends paid by NQA, Inc.








(100,000
)




(100,000
)Balance at January 31, 2008


8,846,000

$
13,769,000

$
23,486,000

$
100,000

$
37,355,000Net income








3,640,000





3,640,000Foreign currency translation











(71,000
)

(71,000
)Sale of securities available for sale, net of tax effect of $78,000











(139,000
)

(139,000
)Comprehensive income














3,430,000Stock retired for option exercise


(56,000
)

(287,000
)







(287,000
)Stock options exercised


129,000


509,000








509,000Stock issued for acquisition of Elliott Laboratories, Inc.


358,000


2,035,000








2,035,000Vesting of restricted stock


22,000











Issuance of restricted stock





200,000








200,000Share-based compensation





94,000








94,000Tax benefit from stock options exercise





101,000








101,000Dividends paid








(186,000
)




(186,000
)Balance at January 31, 2009


9,299,000

$
16,421,000

$
26,940,000

$
(110,000
)
$
43,251,000


See
accompanying notes.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES        Consolidated Statements of Cash Flows        for the Tweleve Months Ended January 31, 2009 and 2008

2009

2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
3,640,000

$
2,615,000Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


7,298,000


6,155,000Write-off of receivables


367,000


217,000Gain on sale of assets


(2,447,000
)

Loss on discontinued operations


1,669,000


Loss on retirement of assets


42,000


5,000Loss on investments


99,000


Undistributed earnings of affiliate


82,000


84,000Deferred income taxes


724,000


(291,000
)Tax benefit from stock option exercises


101,000


116,000Share based compensation


294,000


388,000Net gain on insurance claim





(359,000
)Gain on sale of securities


(195,000
)

Changes in operating assets and liabilities (net of acquisitions):Accounts receivable


(1,607,000
)

(2,242,000
)Inventories


(558,000
)

(23,000
)Prepaid expenses


(270,000
)

(369,000
)Other assets & intangibles


518,000


(230,000
)Accounts payable


89,000


(106,000
)Accrued expenses


990,000


623,000Income taxes


1,088,000


(401,000
)Deferred income


(885,000
)

127,000Deferred compensation


26,000


40,000Income taxes receivable


190,000


(327,000
)Net cash provided by operating activities


11,255,000


6,022,000CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, plant and equipment


(6,417,000
)

(5,100,000
)Investment in life insurance


(89,000
)

(201,000
)Proceeds from sale of securities


195,000


Acquisitions of businesses, net of cash acquired


(5,267,000
)

(13,082,000
)Proceeds from sale of business, net of costs


4,563,000


Net proceeds from insurance claim





359,000Investment in retirement funds


(694,000
)

(363,000
)Net cash used in investing activities


(7,709,000
)

(18,387,000
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from current and long-term debt


11,885,000


24,697,000Repayments of current and long-term debt


(8,895,000
)

(13,058,000
)Net cash dividends paid by NQA, Inc.





(50,000
)Cash dividends paid


(186,000
)

Proceeds from stock options exercised


222,000


402,000Net cash provided by financing activities


3,026,000


11,991,000Effect of exchange rate changes on cash


(71,000
)

16,000Net increase (decrease) in cash


6,501,000


(358,000
)Beginning cash balance


2,863,000


3,221,000ENDING CASH BALANCE

$
9,364,000

$
2,863,000SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash payments during the year for:Interest

$
2,056,000

$
1,637,000Income taxes

$
2,082,000

$
2,211,000


See accompanying notes.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES        Notes to Consolidated Financial Statements        January 31, 2009

(1)    Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of National Technical Systems, Inc. ("NTS" or the "Company") and its
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The
Company has consolidated NQA, Inc., a 50% owned subsidiary for which the distribution of profits and losses is 50.1% to the Company, and 49.9% to the other shareholder. NTS
controls the management decisions and elects the president of NQA, Inc. and therefore has operating control of the subsidiary.

XXCAL
Japan is a 50% owned subsidiary which started in fiscal 1999 and is accounted for under the equity method since NTS does not have operating control. XXCAL Japan's financial
statements are prepared in accordance with generally accepted accounting principles in Japan. There are no material adjustments that need to be made to XXCAL Japan's financial statements for them to
be in conformity with U.S. generally accepted accounting principles. The equity investment recorded in the accompanying balance sheets is $985,000 and $1,362,000 at January 31, 2009 and 2008,
respectively. The Company's equity earnings recorded in the accompanying income statements totaled $44,000 and $142,000 for the years ended January 31, 2009 and 2008, respectively.

The
Company did not have any revenues from a single customer which represented in excess of 10% of total revenues. Total revenues from customers in foreign countries were $5,971,000 in
fiscal 2009 and $6,236,000 in fiscal 2008.

Certain
amounts in previously issued financial statements have been reclassified to conform to the fiscal year 2009 presentation.

Risks and Uncertainties

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates made by the Company relate primarily to the recognition of revenue under
long-term contracts, the valuation of goodwill and other intangible assets useful lives for depreciation and amortization, share-based compensation and accounting for income taxes. Actual
results could differ from those estimates.

The
Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral.

Revenue Recognition

Revenues are derived from development, qualification and production testing and engineering services for commercial products, space
systems and military equipment of all types. The Company also provides qualification of safety related systems and components, and ISO 9000 certification services.

Revenue
from fixed price testing contracts is generally recorded upon completion of the contracts, which are generally short-term, or upon completion of identifiable
contractual tasks. At the time the Company enters into a contract that includes multiple tasks, the Company estimates the amount of actual

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(1)    Summary of Significant Accounting Policies (Continued)

labor
and other costs that will be required to complete each task based on historical experience. Revenues are recognized which provide for a profit margin relative to the testing performed. Revenue
relative to each task and from contracts which are time and materials based is recorded as effort is expended. Revenue on billings in excess of amounts earned are deferred. Any anticipated losses on
contracts are charged to income when identified and can be reasonably estimated. To the extent management does not accurately forecast the level of effort required to complete a contract, or
individual tasks within a contract, and the Company is unable to negotiate additional billings with a customer for cost over-runs, the Company may incur losses on individual contracts. All
selling, general and administrative costs are treated as period costs and expensed as incurred.

Reimbursements
made to the Company by customers under contract provisions, including those related to travel and other out-of-pocket expenses are recorded as
revenues. An equivalent amount of reimbursable expenses is recorded as cost of sales.

Inventories

Inventories consist of accumulated costs including direct labor, material and overhead applicable to uncompleted contracts and are
stated at actual cost, which is not in excess of estimated net realizable value. Such inventories for each contract are reviewed on a monthly basis over the life of the contract and additional
write-downs of inventories are made if there are insufficient revenues remaining on the contract.

Property Held for Sale

The Company is pursuing efforts to sell its approximately 118 acres of its Santa Clarita, California land. However, the
deterioration in the commercial real estate market has impacted the interest of potential investors. Since this property does not meet all the criteria for accounting classification as an "asset held
for sale" as defined in Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets," it was not classified as such
in the accompanying consolidated financial statements.

Property, Plant and Equipment

Property, plant, and equipment is stated at actual cost and is depreciated or amortized using the straight-line method over
the following estimated useful lives:

Buildings

30 to 35 yearsMachinery and equipment

3 to 20 yearsLeasehold improvements

Terms of lease, or estimated useful life (whichever is less)


Intangible Assets

The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets."

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(1)    Summary of Significant Accounting Policies (Continued)

Under
SFAS No. 142, goodwill and intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment. The goodwill test for
impairment consists of a two-step process that begins with an estimation of the fair value of the reporting unit. The first step of the test is a screen for potential impairment and the
second step measures the amount of impairment, if any. The first step of the goodwill impairment test includes a comparison of the fair value of each reporting unit that has associated goodwill with
the carrying value of the reporting unit. The Company has identified seven reporting units, which constitute components of its business that include goodwill. The Company completed its annual goodwill
impairment test and has determined that the fair value of each of the reporting units exceeded the reporting unit's carrying amount, and no impairment was indicated.

Long-Lived Assets

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company
periodically evaluates the recoverability of the carrying amount of long-lived assets (including property, plant and equipment, and intangible assets with determinable lives) whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates events or changes in circumstances based on a number of factors
including operating results, business plans and
forecasts, general and industry trends and economic projections and anticipated cash flows. An impairment loss is recorded when the undiscounted expected future cash flows derived from an asset are
less than its carrying amount. Impairment losses are measured as the amount by which the carrying value of an asset exceeds its fair value and are recognized in earnings.

Share-Based Compensation

Effective February 1, 2006, the Company adopted the provisions of SFAS No. 123(R) "Share-Based Payment." SFAS
No. 123(R) requires employee stock options and rights to purchase shares under stock participation plans to be accounted for under the fair value method and requires the use of an option
pricing model for estimating fair value. Accordingly, share-based compensation is measured at grant date, based on the fair value of the award. The Company previously accounted for awards granted
under its equity incentive plans under the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, and provided the required pro forma disclosures prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation," as amended. The exercise price of options is equal to the
market price of National Technical Systems, Inc. common stock (defined as the closing price reported by the NASDAQ global market) on the date of grant. Accordingly, no share-based compensation,
other than acquisition-related compensation, was recognized in the financial statements prior to February 1, 2006.

The
Company used the modified prospective method of adoption for SFAS No. 123(R), under which the compensation cost recognized by the Company beginning in fiscal 2007 includes
(a) compensation cost for all equity incentive awards granted prior to, but not yet vested as of February 1, 2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123, and (b) compensation cost for all equity incentive awards granted subsequent to February 1, 2006, based on the grant-date fair
value estimated in accordance with the provisions of SFAS No. 123(R). The Company uses the straight-line attribution method to recognize share-based compensation costs over the
service period of the award. Upon exercise, cancellation, or expiration of non qualified stock options, deferred tax assets for

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(1)    Summary of Significant Accounting Policies (Continued)

options
with multiple vesting dates are eliminated for each vesting period on a first-in, first-out basis as if each vesting period was a separate award. To calculate the
excess tax benefits available for use in offsetting future tax shortfalls as of the date of implementation, the Company followed the alternative transition method discussed in FASB Staff Position
No. 123(R)-3.

No
options have been granted by the Company during fiscal years 2009 or 2008. Any options granted to existing and newly hired employees or directors will generally vest over a
four-year period from the date of grant. The Company may also assume the equity incentive plans and the
outstanding equity awards of certain acquired companies. Once assumed, the Company does not grant additional stock under these plans. The Company may use other types of equity incentive awards, such
as restricted stock. The Company's equity incentive plan also allows for performance-based vesting for equity incentive awards.

Share-based
compensation is based on the Black-Scholes-Merton option pricing model for estimating fair value of options and non-vested shares granted under the Company's
equity incentive plans and rights to acquire stock granted under the Company's stock participation plan.

Compensation
expense related to non-vested shares represents the fair value of the shares at the date of the grant, net of assumptions regarding estimated future forfeitures,
and is charged to earnings over the vesting period.

In
accordance with SFAS No. 123(R), the Company adjusts share-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based on
actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for fiscal years 2009 and
2008 was immaterial.

Accounting for Income Taxes

Income taxes are accounted for under the liability method in accordance with SFAS No. 109 "Accounting for Income Taxes."
Deferred income taxes are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is recorded, if necessary, to reduce deferred tax assets to an amount management believes is more likely than not to be realized.

In
July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB
Statement No. 109" ("FIN 48"). This Interpretation was effective for the fiscal year beginning February 1, 2007. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires the recognition of penalties and interest on
any unrecognized tax benefits. The Company's policy is to reflect penalties and interest as part of income tax expense when and if they become applicable.

The
Company has reviewed its positions in recording income and expenses and has no reason to record a liability under the provisions of FIN 48. The Company files income tax
returns in the United

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(1)    Summary of Significant Accounting Policies (Continued)

States
("U.S.") on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject. The
Company does not anticipate that its total unrecognized tax benefits will significantly change due to the settlement of examinations or the expiration of statutes of limitations during the next twelve
months.

Comprehensive Income

In accordance with SFAS No. 130, "Reporting Comprehensive Income," the Company is required to report and display the components
of comprehensive income, including unrealized gains or losses on marketable securities and foreign currency translation adjustments. Accumulated other comprehensive loss was $110,000 as of
January 31, 2009 and accumulated other comprehensive income was $100,000 as of January 31, 2008.

Earnings Per Share

Basic and diluted net income per common share is presented in conformity with SFAS No. 128, "Earnings Per Share" for all periods
presented. In accordance with SFAS No. 128, basic earnings per share has been computed using the weighted average number of shares of common stock outstanding during the year. Basic earnings
per share excludes any dilutive effects of options, warrants and convertible securities and non-vested restricted shares. Diluted earnings per share excludes any non-vested
restricted shares with an anti-dilutive effect.

Foreign Currency

The accounts of the foreign divisions are translated into United States dollars in accordance with SFAS No. 52, "Foreign
Currency Translation." All balance sheet accounts, except for certain fixed assets accounts, have been translated using the current rate of exchange at the balance sheet date. Results of operations
have been translated using the average rates prevailing
throughout the year. Translation gains or losses resulting from the changes in the exchange rates from year-to-year are accumulated in a separate component of shareholders'
equity. The translation of the balance sheet accounts resulted in $71,000 in unrealized loss and $16,000 in unrealized gain in fiscal years 2009 and 2008, respectively. In addition, a transaction loss
of $114,000 and a transaction gain of $132,000 for the fiscal years 2009 and 2008, respectively, are included in operating income for each period.

Related Party Transactions

NTS provides management and consulting services to NQA, Inc. for an agreed-upon management fee. Such services
include, but are not limited to, advice and assistance concerning any and all aspects of the operations of the Company. Management fees earned by the Company for fiscal 2009 and 2008 were $603,000 and
$407,000, respectively.

NICEIC
Group Limited ("NICEIC, Ltd.") (formerly NQA, Ltd.), the minority shareholder of NQA, Inc., provides certification oversight and advice and processes and
issues ISO registration certificates. NICEIC, Ltd. charges NQA, Inc. an agreed-upon fee for each certificate in place at the beginning of the year and issued during the year
together with the appropriate United Kingdom

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(1)    Summary of Significant Accounting Policies (Continued)

Accreditation
Service ("UKAS") and Raad voor Accreditatie ("RVA") levy. Certification fees for fiscal 2009 and 2008 were $603,000 and $407,000, respectively.

NQA, Inc.
leases space from NTS and was assessed $71,000 for rent and utilities in fiscal years 2009 and 2008.

Reclassifications

Certain amounts in the prior year financial statements have been reclassified to conform to the current year financial statement
presentation.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"), which clarifies the
definition of fair value, establishes guidelines for measuring fair value, and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements
and eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 was initially effective for the Company on February 1, 2008 and the adoption by the
Company had no material impact on our consolidated financial position, cash flows, or results of operations. However, on February 12, 2008, the FASB issued FSP FAS 157-2
which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on
a recurring basis (at least annually). This FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal
years for items within the scope of this FSP. On February 1, 2009 the Company adopted SFAS 157 except as it applies to those nonfinancial assets and nonfinancial liabilities as noted in
FSP FAS 157-2. The future partial adoption of SFAS 157 did not have a material impact on our consolidated financial position, cash flows, or results of operations.

In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities"("SFAS 159") which permits entities to choose
to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 was effective for the Company on
February 1, 2008 and the adoption by the Company had no material impact on our consolidated financial position, cash flows, or results of operations.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R") and SFAS No. 160, "Accounting and Reporting of
Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB 51" ("SFAS 160"), which will change the accounting for and reporting of business combination
transactions and noncontrolling interests in consolidated financial statements. SFAS 160 requires changes in classification and presentation of minority interests in the consolidated balance
sheets, statements of income, and statements of shareholders' equity. SFAS 141R and SFAS 160 will be effective for the Company on February 1, 2009. We are currently evaluating the
impact of adopting SFAS 141R and SFAS 160 on our consolidated financial position, cash flows, and results of operations.

SFAS 141(R)
amends SFAS No. 109, "Accounting for Income Taxes," to require the acquirer to recognize changes in the amount of its deferred tax benefits that are
recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(1)    Summary of Significant Accounting Policies (Continued)

contributed
capital, depending on the circumstances. SFAS 141(R) also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business
combination.

In
April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS 142-3"), to improve the
consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R.
The provisions of FSP FAS 142-3 will be effective for the Company on February 1, 2009. We are currently evaluating the impact on our consolidated financial position, cash
flows, and results of operations.

In
May 2008, the FASB issued SFAS No. 162 ("SFAS 162"), "The Hierarchy of Generally Accepted Accounting Principles." SFAS 162 is intended to improve financial
reporting by identifying a consistent hierarchy for selecting accounting principles to be used in preparing financial statements that are prepared in conformity with generally accepted accounting
principles. Unlike Statement on Auditing Standards No. 69, "The Meaning of Present Fairly in Conformity With GAAP," SFAS 162 is directed to the entity rather than the auditor.
SFAS 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission of the Public Company Accounting Oversight Board's amendments to AU Section 411,
"The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." The Company does not expect SFAS 162 to have a material impact on its financial position, cash
flows, or results of operations.

In
November 2008, the FASB ratified the consensus reached by the EITF on Issue EITF No. 08-6, "Equity Method Investment Accounting Considerations"
("EITF 08-6"), which clarifies the accounting for certain transactions and impairment considerations involving equity method investments. The prospective provisions of
EITF 08-6 will be effective for the Company on February 1, 2009. The adoption of EITF 08-6 is not expected to have a material impact on the Company's
consolidated financial position, cash flows, or results of operations.

(2)    Business Acquisitions

Acquisition of International Management Systems, Inc. (IMS)

On April 21, 2008, NQA, USA, a 50% owned consolidated subsidiary of NTS, acquired the assets of International Management
Systems, Inc., located in Tampa, Florida for a total purchase price of $445,000. IMS has been in business for over ten years and is well branded in the registration industry. The IMS location
provides NQA a strategic presence for the support of its current and new customers in the Southeast region. The subsidiary paid $267,000 in cash and may pay an additional $178,000 in
earn-out, upon the first anniversary of the closing date. The amount of the earn-out may be adjusted in accordance with certain terms and conditions specified in the purchase
agreement. An additional $25,000 in working capital adjustment was paid at closing. The preliminary purchase price including acquisition costs was $301,000 and was allocated $190,000 to customer
relationships, $78,000 to goodwill, $48,000 to accounts receivable, $8,000 to fixed assets, and $23,000 in assumed accounts payable. The results of operations for IMS are included in the Company's
consolidated statements of income from April 21, 2008 to January 31, 2009.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(2)    Business Acquisitions (Continued)

Acquisition of Elliott Laboratories, Inc.

On June 6, 2008, the Company acquired Elliott Laboratories, Inc., a leading San Francisco Bay
Area electromagnetic compatibility (EMC), product safety and wireless regulatory testing laboratory with two full-service facilities. The addition of Elliott Laboratories to the NTS
organization creates one of the largest independent providers of EMC design, test and evaluation services in North America. The total purchase price consideration through January 31, 2009 was
$7,327,000, of which $3,600,000 was paid in cash at closing and $1,974,000 was paid in Company stock. $1,000,000 in cash and stock was held back and is payable 18 months after closing. An
additional $75,000 in cash was paid subsequently for working capital adjustment and $61,000 was paid in common stock. Total acquisition costs as of January 31, 2009 were $617,000. The
$1,974,000 and $61,000 paid in Company stock consisted of 346,853 shares and 10,790 shares of common stock, respectively, calculated at the average closing price of Company stock during a period prior
to the acquisition close date. In addition, the Company agreed to pay to the sellers up to a maximum of $1,275,000 in earn-out consideration, payable in Company stock, contingent upon the
achievement by Elliott Laboratories of certain targets over the 24 months immediately following the closing of the transaction. This will be added to the purchase price and result in an
increase to goodwill if and when the requirements are met and the contingency is removed. The results of operations for Elliott Laboratories are included in the Company's condensed consolidated
statements of income from June 6, 2008 to January 31, 2009.

The
aggregate purchase price is comprised of the following:

Cash paid

$
3,675,000Stock issued to sellers


2,035,000Holdback payable


1,000,000Acquisition costs


617,000$
7,327,000


The
purchase price allocation has not been finalized pending further information that may impact the valuation of certain assets or liabilities. The Company has preliminarily allocated
the aggregate purchase price of approximately $7,327,000 to the estimated fair value at the date of acquisition of the acquired tangible and intangible assets and assumed liabilities of Elliott
Laboratories, as follows:

Accounts receivable

$
1,398,000Other current assets


87,000Deferred income taxes, current, net


322,000Property, plant and equipment


4,116,000Goodwill


1,674,000Intangible assets


2,633,000Deposits


60,000Accounts payable


(192,000
)Accrued expenses


(435,000
)Deferred income taxes, non-current, net


(2,336,000
)$
7,327,000


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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(2)    Business Acquisitions (Continued)

The
Company acquired Elliott Laboratories to expand its EMC design, test and evaluation services in North America, and management believes that this combination will lead to increased
market opportunity and an expanded customer base. The Company believes that these factors support the amount of goodwill recorded. Amortization of the goodwill on this transaction is not tax
deductible.

Business Dispositions

Sale of IT Staffing

On November 3, 2008, the Company sold to Strategic Staffing Solutions, L.C., a Florida limited liability company, contracts and
certain other assets from its Technical Solutions segment that are associated with information technology services and information technology consulting. The sale price for the assets sold was
$5,000,000, subject to working capital adjustment.

Sale price

$
5,153,000Less selling costs


(590,000
)Less net assets sold


(2,116,000
)Gain on sale

$
2,447,000


The
assets and liabilities sold consist of the following:

Accounts receivable

$
2,470,000Prepaid expenses


8,000Net fixed assets


15,000Net intangible assets


279,000Other assets


7,000Total assets sold

$
2,779,000Accounts payable

$
319,000Accrued expenses


344,000Total liabilities sold

$
663,000Net assets sold

$
2,116,000


All
revenues and expenses from discontinued operations for the twelve months ended January 31, 2009, and the gain from the sale are presented as "Income (loss) from discontinued
operations" in the accompanying Statements of Income. Prior year numbers were reclassified to conform to the current year presentation.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(2)    Business Acquisitions (Continued)

The
results of the discontinued operations for twelve months ended January 31, 2009 and 2008 were as follows:

Sale of IT Staffing2009

2008Net revenues

$
15,693,000

$
20,342,000Income from discontinued operations before income taxes


596,000


342,000Income taxes


259,000


133,000Net income from discontinued operations


337,000


209,000Gain from sale of discontinued operations before income tax


2,447,000


Income taxes


1,061,000


Net income from sale of discontinued operations


1,386,000


Total net income from discontinued operations

$
1,723,000

$
209,000


Santa Rosa Disposal

The Company discontinued operations at its Santa Rosa facility on January 31, 2009. Shut-down costs and future rent
payments on abandoned facilities were accrued for, and are included in "Income (loss) from discontinued operations" in the accompanying Statements of Income. Prior year numbers were reclassified to
conform to the current year presentation.

The
results of the discontinued operations for twelve months ended January 31, 2009 and 2008 were as follows:

2009

2008Net revenues

$
935,000

$
1,177,000Income from discontinued operations before income taxes


(1,874,000
)

(337,000
)Income taxes


(813,000
)

(131,000
)Net income from discontinued operations

$
(1,061,000
)
$
(206,000
)


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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(3)    Debt

Long-term debt consists of the following:

2009

2008Revolving lines of credit(a)

$
11,500,000

$
9,500,000Term loan A(b)


7,255,000


9,000,000Term loan B(c)


11,927,000


12,650,000Term loan C(d)


5,253,000


Notes payable secured by land and buildings





1,957,000Secured and other notes payable


1,217,000


1,055,000Subtotal


37,152,000


34,162,000Less current installments


3,239,000


1,888,000Total

$
33,913,000

$
32,274,000


---

On
December 5, 2007, the Company entered into an Amendment No. 9 to the Revolving Credit Agreement with Comerica Bank, as agent and lender, holding 60%, and First Bank, as lender,
holding 40% (the "Amendment"). This agreement matures on December 1, 2012. Under the Amendment, the credit facility was restructured as follows:



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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(3)    Debt (Continued)



In
addition to the Comerica agreement, the Company has an additional $802,000 in equipment line balances which were used to finance various test equipment with terms of 60 months
for each equipment schedule at interest rates ranging from 5.56% to 7.47%.

The
Company's 50% owned subsidiary, NQA, Inc., has total borrowings of $415,000 at January 31, 2009, for the acquisitions of TRA Certification Inc. and International
Management Systems, Inc. (IMS).

Maturities
of long-term debt for five years subsequent to January 31, 2009 are as follows:

2010

$
3,239,0002011


3,798,0002012


4,234,0002013


24,051,0002014


1,830,000Thereafter


$
37,152,000


In
accordance with the requirements of SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," a reasonable estimate of fair value for the Company's fixed rate debt
was based on a discounted cash flow analysis. The carrying amount of variable rate debt, including borrowings under the Company's revolving lines of credit, approximate their fair values.

The
carrying amounts and estimated fair values of the Company's financial instruments are:

2009
Carrying
amount

2009
Estimated
fair value

2008
Carrying
amount

2008
Estimated
fair valueNotes payable

$


$


$
1,957,000

$
1,987,000Secured and other notes payable


25,652,000


25,572,000


22,705,000


18,876,000Revolving lines of credit


11,500,000


11,500,000


9,500,000


9,500,000


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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(4)    Income Taxes

The provision (benefit) for income taxes consists of:

2009

2008Current:Federal

$
2,944,000

$
1,732,000State


864,000


386,000Foreign


(65,000
)

79,0003,743,000


2,197,000Deferred:Federal


(656,000
)

(434,000
)State


(238,000
)

(52,000
)(894,000
)

(486,000
)Income tax expense

$
2,849,000

$
1,711,000


Foreign
operations had a pre-tax loss of $432,000 in fiscal 2009 compared with $597,000 in pre-tax profit in fiscal 2008. The earnings associated with the
Company's foreign subsidiary in Japan are reported net of tax and are included in operating income. $420,000 in dividends was distributed by XXCAL Japan to NTS and the appropriate taxes, net of
foreign tax credit were recorded in fiscal 2009. Accumulated foreign earnings were reduced by the dividend amount to $985,000 in fiscal 2009, compared to accumulated foreign earnings of $1,362,000 as
of January 31, 2008.

The
following is a reconciliation of the difference between the actual provision for income taxes and the provision computed by applying the federal statutory tax rate on income from
continuing operations before income taxes:

2009

2008Income before income taxes and minority interest

$
6,571,000

$
4,410,000Federal income tax computed at statutory rate

$
2,234,000

$
1,500,000State income taxes, net of federal benefits


413,000


220,000Foreign income not subject to US Tax


147,000


(203,000
)Foreign tax


(277,000
)

79,000Other, principally non-deductible expenses


332,000


115,000Income tax expense

$
2,849,000

$
1,711,000


Deferred
income taxes on the consolidated balance sheets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(4)    Income Taxes (Continued)

amounts
used for income tax purposes. The primary components of the Company's deferred tax assets and liabilities at January 31 were as follows:

2009

2008Current

Non-current

Current

Non-currentDeferred tax assets:Bad debts reserves

$
357,000

$


$
372,000

$
Vacation accrual


779,000





666,000


State taxes


686,000





357,000


Deferred compension


1,086,000





391,000


Net operating loss


199,000





204,000


Accrued costs on discontinued operations


555,000








Other


321,000





226,000


Total deferred tax assets

$
3,983,000

$


$
2,216,000

$
Deferred tax liabilities:Goodwill and other intangibles

$



(1,709,000
)
$



(425,000
)Gain on involuntary conversion





(159,000
)




(10,000
)Tax over book depreciation





(5,877,000
)




(4,391,000
)Other





(213,000
)




(322,000
)Total deferred tax liabilities

$


$
(7,958,000
)
$


$
(5,148,000
)Net deferred tax asset (liability)

$
3,983,000

$
(7,958,000
)
$
2,216,000

$
(5,148,000
)


In
July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB
Statement No. 109" ("FIN 48"). This Interpretation was effective for the fiscal year beginning February 1, 2007. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires the
recognition of penalties and interest on any unrecognized tax benefits. The Company's policy is to reflect penalties and interest as part of income tax expense when and if they become applicable.

The
Company has reviewed its positions in recording income and expenses and has no reason to record a liability under the provisions of FIN 48. The Company files income tax
returns in the United States ("U.S.") on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the
Company is subject. The Company does not anticipate that its total unrecognized tax benefits will significantly change due to the settlement of examinations or the expiration of statutes of
limitations during the next twelve months.

(5)    Stock Options, Equity Incentive and Pension Plans

The Company has two employee incentive stock option plans; the "2002 stock option plan" and the "1994 stock option plan."

Under
both stock option plans, officers, key employees, non-employee directors and consultants may be granted options to purchase shares of the Company's authorized but
unissued common stock. The

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(5)    Stock Options, Equity Incentive and Pension Plans (Continued)

number
of shares approved for issuance under the 2002 stock option plan was 1,000,000 shares. During fiscal 2008 and 2009 there were no shares granted under the 2002 stock option plan. The 1994 stock
option plan is terminated and no additional options will be granted under this plan.

Outstanding
options under all plans are exercisable at 100% or more of fair market value (as determined by the compensation committee of the Board of Directors) at the date of grant. The
options are contingent upon continued employment and are exercisable, unless otherwise specified, on
a cumulative basis of one-fourth of the total shares each year, commencing one year from the date of grant. Options currently expire five to ten years from the date of grant. Proceeds
received by the Company from the exercises are credited to common stock. No stock options were granted in fiscal years 2009 and 2008. A summary of option activity under the plan as of
January 31, 2009, and changes during the two years then ended is presented below:

Shares

Weighted Avg.
Exercise Price

Weighted Avg.
Remaining Contract
Life in years

Aggregate Intrinsic
ValueOutstanding at January 31, 2007


1,861,842

$
3.90


4.74

$
3,960,000Granted





Exercised


(123,283
)

3.48Canceled or expired


(12,100
)

5.68Outstanding at January 31, 2008


1,726,459

$
3.92


3.84

$
3,793,000Granted





Exercised


(129,250
)

3.93Canceled or expired


(266,823
)

5.56Outstanding at January 31, 2009


1,330,386

$
3.59


3.29

$
4,771,000Exercisable at January 31, 2009


1,285,011

$
3.55


3.17

$
4,557,000


The
aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of the Company's
common stock at the end of each fiscal year and the exercise price for in-the-money options) that would have been received by the option holders if all
in-the-money options had been exercised at the end of each fiscal year.

The
total intrinsic value of options exercised during the years ended January 31, 2009 and 2008 was $193,000 and $366,000, respectively.

The
range of exercise prices for options outstanding at January 31, 2009 was $1.49 to $5.50. The range of exercise prices for options is wide due primarily to the fluctuating
price of the Company's stock over the period of the grants.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(5)    Stock Options, Equity Incentive and Pension Plans (Continued)

The
following table summarizes information about options outstanding at January 31, 2009:

Range of
exercise prices

Outstanding at
January 31, 2009

Weighted Avg.
Remaining contract
life in yrs.

Weighted Avg.
Exercise Price

Number
Exercisable

Weighted Avg.
Exercisable Price$1.00 to $2.00


98,500


2.4

$
1.64


98,500

$
1.64$2.01 to $3.00


432,780


2.3

$
2.58


432,780

$
2.58$3.01 to $4.00


162,206


1.0

$
3.29


162,206

$
3.29$4.01 to $5.00


582,900


4.6

$
4.60


540,025

$
4.60$5.01 to $6.00


54,000


5.6

$
5.11


51,500

$
5.101,330,386








1,285,011


These
options will expire if not exercised at specific dates ranging from September 2009 to December 2016. During the year ended January 31, 2009, 129,250 options
were exercised at prices from $1.49 to $5.50 per share.

The
Company presented an equity incentive plan for shareholder vote at its June 29, 2006 annual shareholders' meeting and it was approved by the shareholders. Additionally,
143,050 shares that were reserved for future grants, were cancelled. A total of 300,000 new shares of common stock were reserved for issuance under the 2006 Equity Incentive Plan ("EIP"). As of
January 31, 2009, 158,314 shares of the Company's common stock had been issued under the 2006 EIP and 141,686 shares were reserved for future issuance under the plan. Shares are issued under
the EIP as compensation to certain employee and non-employee directors of the Company.

The
Company's non-vested shares have a vesting period of four years. Compensation expense, representing the fair market value of the shares at the date of grant, net of
assumptions regarding estimated future forfeitures, is charged to earnings over the vesting period. Compensation expense included in general and administrative expenses in the Company's consolidated
statement of income, relating to these grants was $94,000 for fiscal year 2009 and $123,000 for fiscal year 2008.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(5)    Stock Options, Equity Incentive and Pension Plans (Continued)

The
following table summarizes the non-vested shares transactions for fiscal year 2009:

Number of Shares

Weighted-Average
Grant Date Fair
ValueNon-vested shares:Outstanding at January 31, 2007


43,270

$
7.08Granted


43,766

$
7.00Vested


(10,821
)
$
7.08Forfeited





Outstanding at January 31, 2008


76,215

$
7.03Granted


71,277

$
4.90Vested


(21,763
)
$
7.04Forfeited


(11,430
)
$
7.05Outstanding at January 31, 2009


114,299

$
5.82


Under
the provisions of SFAS No. 123(R), $294,000 and $388,000 in share based compensation were recorded as a credit to common stock during fiscal years 2009 and 2008,
respectively. In addition, the tax benefit realized for the tax deduction from option exercises and restricted stock totaled $270,000 and $145,000 for fiscal years 2009 and 2008, respectively and were
credited to common stock. As of January 31, 2009, there was $28,000 of total unrecognized compensation costs related to stock options granted under the Company's equity incentive plans. The
unrecognized compensation cost is expected to be recognized over a period of one year.

As
of January 31, 2009, there was $666,000 of total unrecognized compensation cost related to the non-vested share-based compensation arrangements granted under the
plan. That cost is expected to be recognized over a weighted-average period of 42 months.

The
Company offers three 401(k) profit sharing plans: National Technical Systems 401(k) Profit Sharing Plan, XXCAL 401(k) Profit Sharing Plan and NQA 401(k) Pension Plan. The purpose of
these plans is
to provide retirement benefits to all employees of the Company. The Company's employees can contribute a portion of their salary into the 401(k) plan and the Company's Board of Directors, at its
discretion, will determine each year the amount of matching contribution the Company will make. Employer contributions are allocated based on participants' own contribution percentage amount to the
total amount contributed by all employees in each plan. In fiscal 2009, the Company contributed $436,000 to the 401(k) profit sharing plan as compared to $281,000 in 2008.

The
former president of XXCAL has elected to receive the cash surrender value of life insurance owned by the Company on his life, in lieu of lifetime periodic deferred compensation
payments. The cash surrender value is included in other assets and the deferred compensation liability is included in deferred compensation. The deferred compensation benefits are accrued and
recognized over each employee's expected term of employment. The Company's total deferred compensation expenses were $76,000 and $78,000 for the years ended January 31, 2009 and 2008,
respectively. Included in other assets is $2,715,000 and $2,626,000 for the cash surrender values as of January 31, 2009 and 2008, respectively.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(5)    Stock Options, Equity Incentive and Pension Plans (Continued)

In fiscal year 2007, the Company started a new Senior Executive Retirement Plan ("SERP"). The Company contributed to the Plan $750,000 in fiscal year 2009 and $375,000 in fiscal year
2008 and paid premium charges of $54,000 and $14,000 in fiscal years 2009 and 2008, respectively, for life insurance policies with the Company designated as the beneficiary. The SERP includes
investments with a fair value of $958,000 at January 31, 2009, consisting of money market and mutual funds.

Effective
February 1, 2008, the Company adopted SFAS 157 for financial assets and liabilities. SFAS 157 establishes a framework for measuring fair value and expands
disclosures about fair value measurements by establishing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy under SFAS 157 are described below:

Basis of Fair Value Measurement at Reporting Date Using

Level 1

Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2

Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets
or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.Level 3

Unobservable inputs reflecting the Company's own assumptions incorporated in valuation techniques used to determine fair value.
These assumptions are required to be consistent with market participant assumptions that are reasonably available.


The
following inputs were used to determine the fair value of the Company's investment securities at January 31, 2009:

Total

(Level 1)

(Level 2)

(Level 3)SERP Investmenttrading securities

$
958,000

$
958,000Total

$
958,000

$
958,000

$


$



(6)    Capital Stock

As of January 31, 2009 and 2008, the Company had 20,000,000 authorized common shares with no par value. At January 31, 2009 and January 31, 2008, 9,299,000 shares
and, 8,846,000 were issued and outstanding, respectively.

During
fiscal year 2009, there were 129,000 options exercised, 56,000 shares retired and 22,000 shares of restricted stock became vested under the 2006 equity incentive plan. In
addition, 358,000 were issued for the acquisition of Elliott Laboratories, Inc. During fiscal year 2008, there were 123,000 options exercised, 5,000 shares retired and 11,000 shares of
restricted stock became vested under the 2006 equity incentive plan.

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NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(6)    Capital Stock (Continued)

Holders
of common stock vote on matters submitted to shareholders, including the election of directors. Except as required by law, the powers, preferences and rights of all common stock
and the qualifications, limitations or restrictions thereof, shall in all respects be identical. The common stock shareholders will be entitled to receive, to the extent permitted by law, and to share
equally and ratably, share for share, any such dividends as may be declared from time to time by the board of directors.

(7)    Commitments

The Company leases certain of its operating facilities under operating leases which principally expire at various dates through fiscal year 2019. The leases are generally on a
net-rent basis, whereby the Company pays taxes, maintenance, insurance and other operating expenses. Management expects that, in the normal course of business, leases that expire will be
renewed or replaced by other leases. Total rental expense from continuing operations was $3,723,000 and $2,993,000 for the years ended January 31, 2009 and 2008, respectively.

At
January 31, 2009, minimum rental payment obligations under operating leases were as follows:

2010

$
3,201,0002011

$
2,312,0002012

$
1,598,0002013

$
1,358,0002014

$
748,000Thereafter

$
2,369,000$
11,586,000


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Table of Contents

NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(8)    Intangible Assets

As of January 31, 2009 and January 31, 2008, the Company had the following acquired intangible assets:

January 31, 2009

January 31, 2008Gross
Carrying
Amount

Accum.
Amort.

Net
Carrying
Amount

Estimated
Useful
Life

Gross
Carrying
Amount

Accum.
Amort.

Net
Carrying
Amount

Estimated
Useful
LifeIntangible assets subject to amortization:Covenants not to compete

$
879,000

$
358,000

$
521,000

3-10 years

$
849,000

$
225,000

$
624,000

3-10 yearsCustomer relationships


8,596,000


876,000


7,720,000

3-15 years


6,012,000


178,000


5,834,000

3-15 yearsAcreditations and certifications


20,000


5,000


15,000

5 years


20,000


1,000


19,000

5 yearsTotal

$
9,495,000

$
1,239,000

$
8,256,000



$
6,881,000

$
404,000

$
6,477,000Intangible assets not subject to amortization:Goodwill







$
12,070,000









$
10,471,000Trademarks and tradenames








400,000










200,000Total







$
12,470,000









$
10,671,000


Amortization expense for intangible assets subject to amortization was $835,000 and $245,000 for the twelve months ended January 31, 2009
and 2008, respectively. The aggregate amortization for the next five years is estimated to be $878,000, $840,000, $754,000, $669,000 and $639,000 for fiscal years 2010 through 2014, respectively.

(9)    Accrued Expenses

A summary of accrued expenses at January 31 is as follows:

2009

2008Compensation and employee benefits

$
5,023,000

$
4,329,000Other


2,915,000


1,528,000Total accrued expenses

$
7,938,000

$
5,857,000


(10)    Contingencies

The Company is, from time to time, the subject of claims and suits arising out of matters occurring during the operation of the Company's business. In the opinion of management, no
claims or suits would materially affect the financial position or the results of the operations or cash flows of the Company.

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Table of Contents

NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

January 31, 2009

(11)    Quarterly Financial Data (Unaudited)

Three months ended,2009

Apr 30

Jul 31

Oct 31

Jan 31Net revenues

$
26,560,000

$
30,625,000

$
32,391,000

$
30,344,000Gross profit


6,752,000


8,770,000


9,225,000


7,334,000Income from continuing operations


735,000


1,019,000


1,008,000


216,000Income from discontinued operations


(7,000
)

111,000


167,000


391,000Basic earnings per common shareIncome from continuing operations


0.08


0.11


0.11


0.02Income from discontinued operations





0.01


0.02


0.04Net income


0.08


0.12


0.13


0.07Diluted earnings per common shareIncome from continuing operations


0.08


0.11


0.10


0.02Income from discontinued operations





0.01


0.02


0.04Net income


0.08


0.12


0.12


0.06Weighted average common shares outstanding


8,868,000


9,118,000


9,280,000


9,299,000Dilutive effect of stock options


581,000


465,000


417,000


296,000Weighted average common shares outstanding, assuming dilution


9,449,000


9,583,000


9,697,000


9,595,000




Three months ended,2008

Apr 30

Jul 31

Oct 31

Jan 31Net revenues

$
24,250,000

$
25,384,000

$
25,745,000

$
25,478,000Gross profit


6,045,000


7,191,000


6,831,000


6,156,000Income from continuing operations


512,000


749,000


700,000


651,000Income from discontinued operations


79,000


21,000


(68,000
)

(29,000
)Basic earnings per common shareIncome from continuing operations


0.06


0.09


0.08


0.07Income from discontinued operations


0.01


0.00


(0.01
)

Net income


0.07


0.09


0.07


0.07Diluted earnings per common shareIncome from continuing operations


0.05


0.08


0.07


0.07Income from discontinued operations


0.01


0.00


(0.01
)

Net income


0.06


0.08


0.07


0.07Weighted average common shares outstanding


8,744,000


8,779,000


8,822,000


8,834,000Dilutive effect of stock options


578,000


664,000


711,000


695,000Weighted average common shares outstanding, assuming dilution


9,322,000


9,443,000


9,533,000


9,529,000


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Table of Contents

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.

None.

ITEM 9A.CONTROLS AND PROCEDURES.

Not applicable.

ITEM 9A(T).CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer carried out an evaluation with the participation of the Company's
management, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls
and procedures were effective.

Changes in Internal Controls Over Financial Reporting

As required by Rule 13a-15(d) under the Exchange Act, the Company's Chief Executive Officer and Chief Financial
Officer, with the participation of the Company's management, also conducted an evaluation of the Company's internal controls over financial reporting to determine whether any changes occurred during
the Company's fourth fiscal quarter that have materially affected, or are reasonably likely to affect, the Company's internal controls over financial reporting. Based on that evaluation, there has
been no such change during the Company's fourth fiscal quarter.

Limitations of the Effectiveness

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any,
within a company have been detected. Notwithstanding these limitations, the Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. The
Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were, in fact, effective at the "reasonable assurance" level as of the end
of the period covered by this report.

Management's Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed 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 in the United
States. However, all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and reporting.

Management
assessed the effectiveness of the Company's internal control over financial reporting as of January 31, 2009. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated

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Table of Contents

Framework.
Based on this assessment, management believes that the Company's internal control over financial reporting was effective as of January 31, 2009.

This
annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report. Management's report was not subject to attestation by the Company's
registered public accounting firm.

ITEM 9B.OTHER INFORMATION.

None.

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Table of Contents

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The sections entitled "Nomination and Election of Directors" and "Remuneration of Directors and Officers" in the Company's definitive
Proxy Statement to be furnished
to shareholders in connection with the Annual Meeting of Shareholders to be held on July 8, 2009 are incorporated herein by reference.



Name

Age

PositionDouglas Briskie


45

Vice President, Corporate Development. He has been associated with the Company since 1987.Aaron Cohen


72

Senior Vice President and Vice Chairman of the Board. He has been associated with the Company since 1961.Jack Lin


76

Chairman of the Board of the Company. He has been associated with the Company since 1961.Raffy Lorentzian


53

Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Corporate Secretary. He has been associated with
the Company since 1997.Cynthia Maher


50

Corporate Counsel, Human Resources Director and Assistant Corporate Secretary. She has been associated with the Company since
2005.William McGinnis


50

President and Chief Executive Officer of the Company. He has been associated with the Company since 1980.Dwight Moore


46

Vice President, Chief Operating Officer. He has been associated with the Company since 1997.


The
Company's Board of Directors has adopted a code of ethics that applies to our principal executive officers, principal financial officer, and corporate controller, as well as other
employees. A copy of this code of ethics has been posted on the Company's website. Any amendments to, or waivers from, a provision of our code of ethics that applies to our principal executive
officer, principal financial officer, controller, or persons performing similar functions and that relates to any element of the code of ethics enumerated in paragraph (b) of Item 406 of
Regulations S-K shall be disclosed by posting such information on our website.

ITEM 11.EXECUTIVE COMPENSATION.

The section entitled "Remuneration of Directors and Officers" in the Company's definitive Proxy Statement to be furnished to
shareholders in connection with the Annual Meeting of Shareholders to be held on July 8, 2009 is incorporated herein by reference.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The sections entitled "Voting Securities and Principal Holders Thereof" and "Nomination and Election of Directors" in the Company's
definitive Proxy Statement to be furnished to shareholders in connection with the Annual Meeting of Shareholders to be held on July 8, 2009 are incorporated herein by reference.

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Table of Contents

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The section entitled "Certain Relationships and Related Party Transactions" and "Nomination and Election of Directors" in the Company's
definitive Proxy Statement to be furnished to shareholders in connection with the Annual Meeting of Shareholders to be held on July 8, 2009 is incorporated herein by reference.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information under the heading "Audit Fees and All Other Fees" in the Company's definitive Proxy Statement to be furnished to
shareholders in connection with the Annual Meeting of Shareholders to be held on July 8, 2009 is incorporated herein by reference.

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

A.

Consolidated Financial Statements and Schedules.Financial statements required by Item 15 are included in Item 8 above.Financial Statements:Consolidated Balance SheetsJanuary 31, 2009 and 2008Consolidated Statements of IncomeYears ended January 31, 2009 and 2008Consolidated Statements of Shareholders' EquityYears ended January 31, 2009 and
2008Consolidated Statements of Cash FlowsYears ended January 31, 2009 and 2008Notes to Consolidated Financial StatementsScheduleSchedule Supporting Financial Statements:Valuation and Qualifying Accounts and Reserves


IIB.

Exhibits.


2.1

Asset Purchase Agreement, dated as of January 23, 2004, by and among National Technical Systems, Inc., NTS Technical Systems, Robert Wakefield, Randolph Fairfield, Calvin Milam, E&C Holdings, Inc.,
Peterson Builders, Inc., and DTI Holdings LLC. (filed January 30, 2004 and is incorporated herein by reference thereto).2.2

Pro forma financial information related to the acquisition of DTI Holdings LLC. (filed with the Company's 8-K/A on March 22, 2004 and is incorporated herein by reference thereto).2.3

Interests Purchase Agreement dated December 5, 2007 among NTS Technical Systems, the 2007 Richard W. Mouser Revocable Trust, the Richard W. Mouser Revocable Trust, the Debra S. Mouser Revocable Trust,
Richard W. Mouser and Debra S. Mouser (filed with the Company's 8-K on December 11, 2007 and is incorporated herein by reference thereto).2.4

Pro forma financial information related to the acquisition of United States Test Laboratory, LLC (USTL) (filed with the Company's 8-K/A on February 20, 2008 and is incorporated herein by reference
thereto).


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Table of Contents

3.1

Articles of Incorporation of National Technical Systems, Inc., a California corporation, as amended to date. (filed with the Company's Annual Report on Form 10-K on April 28, 2004 and is incorporated herein
by reference thereto).3.2

Bylaws of National Technical Systems, Inc., a California corporation, as adopted on May 29, 1996 and as amended by amendment number one thereto, adopted on June 25, 1999. (filed with the Company's Annual
Report on Form 10-K on April 28, 2004 and is incorporated herein by reference thereto).3.3

Bylaws of National Technical Systems, Inc., a California corporation, as adopted on December 14, 2004. (filed on September 13, 2006 and is incorporated herein by reference thereto).10.1

Form of the Company's 1994 Stock Option Plan (filed as Appendix B to the Company's Proxy Statement for Annual Meeting of June 30, 1994, and is incorporated herein by reference thereto).10.2

Amendment to the Company's 1994 Stock Option Plan (filed as Proposal No. 3 to the Company's Proxy Statement for Annual Meeting of June 26, 1998, and is incorporated herein by reference thereto).10.3

Form of the Company's 2002 Stock Option Plan (filed as Proposal 2 to the Company's Proxy Statement for Annual Meeting of June 28, 2002, and is incorporated herein by reference thereto).10.4

Amendment number one to revolving credit agreement between NTS and Comerica Bank effective July 17,2002 (filed on September 12, 2002 and is incorporated herein by reference
thereto).10.5

Amendment number two to revolving credit agreement between the Company and Comerica Bank effective November 25, 2002 (filed on December 13, 2002 and is incorporated herein by reference thereto).10.6

Amendment number three to revolving credit agreement between the Company and Comerica Bank effective July 21, 2003 (filed on September 11, 2003 and is incorporated herein by reference thereto).10.7

Amendment number four to revolving credit agreement between the Company and Comerica Bank effective July 30, 2004 (filed on December 15, 2004 and is incorporated herein by reference thereto).10.8

Employment agreement between the Company and Dr. Jack Lin dated April 28, 2005 (filed on May 3, 2005 and is incorporated herein by reference thereto).10.9

Amendment number five to revolving credit agreement between the Company and Comerica Bank effective July 1, 2005 (filed on September 14, 2005 and is incorporated herein by reference thereto).10.10

Amendment number six to revolving credit agreement between the Company and Comerica Bank effective March 29, 2006 (filed on March 30, 2006 and is incorporated herein by reference thereto).10.11

Amendment number seven to revolving credit agreement between the Company and Comerica Bank effective September 21, 2006 (filed on December 14, 2006 and is incorporated herein by reference thereto).10.12

National Technical Systems, Inc. 2006 Long-Term Incentive Plan (filed on December 14, 2006 and is incorporated herein by reference thereto).10.13

National Technical Systems, Inc. 2006 Supplemental Executive Retirement Plan (filed on December 14, 2006 and is incorporated herein by reference thereto).10.14

Amendment number eight to revolving credit agreement between the Company and Comerica Bank effective September 26, 2007 (filed on December 13, 2007 and is incorporated herein by reference thereto).


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Table of Contents

10.15

Amendment number nine to Revolving Credit Agreement dated December 5, 2007 among the registrant, certain subsidiaries of the registrant, Comerica Bank and First Bank (filed on December 11, 2007 and is
incorporated herein by reference thereto).10.16

Amendment number ten to Revolving Credit Agreement dated June 5, 2008 among the registrant, certain subsidiaries of the registrant, Comerica Bank and First Bank (filed on September 15, 2008 and is incorporated
herein by reference thereto).21.1

Subsidiaries of the Company.23.1

Consent of Independent Registered Public Accounting Firm.23.2

Consent of NQA, Inc. Independent Auditors and Report of Independent Registered Public Accounting Firm.31.1

Certification of the Principal Executive Officer pursuant to rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of the Principal Financial Officer pursuant to rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATIONAL TECHNICAL SYSTEMS, INC.April 30, 2009

By

/s/ WILLIAM MCGINNIS William McGinnis, Chief Executive Officer
(Principal Executive Officer)


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

/s/ JACK LIN Jack Lin, Chairman of the Board

/s/ AARON COHEN Aaron Cohen, Senior Vice President and
Vice Chairman of the Board/s/ WILLIAM MCGINNIS William McGinnis, Chief Executive Officer
(Principal Executive Officer)

/s/ RAFFY LORENTZIAN Raffy Lorentzian, Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer)/s/ ROBERT I. LIN Robert I. Lin, Director

/s/ JOHN GIBBONS John Gibbons, Director/s/ DAN YATES Dan Yates, Director

/s/ DONALD J. TRINGALI Donald J. Tringali, Director/s/ NORMAN S. WOLFE Norman S. Wolfe, Director

/s/ JOHN S. FOSTER John S. Foster, Director


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Table of Contents

Schedule II

NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES

Valuation and Qualifying Accounts and Reserves

Years ended January 31, 2009 and 2008

COLUMN A

COLUMN B

COLUMN C

COLUMN D

COLUMN EDescription

Balance at
beginning of
period

Additions
charged to costs
and expenses

Deductions

Balance
at end
of periodAllowance for doubtful accounts receivable:Year ended January 31, 20092009

$
907,000

$
672,000

$
(305,000
)
$
1,274,0002008

$
691,000

$
336,000

$
(120,000
)
$
907,000


57

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