DAKTRONICS, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS

Note 1. SIGNIFICANT ACCOUNTING POLICIES

        Nature of business of Plan Sponsor: Daktronics, Inc. (the “Company”) and its subsidiaries, the sponsoring employer companies, are engaged principally in the design, manufacture, and sales of computer-programmable information display systems.

        Basis of accounting: The accompanying financial statements are prepared on the accrual basis of accounting.

        Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

        Investment valuation and income recognition: The Daktronics, Inc. 401(k) Plan (the “Plan”) investments are stated at fair value as determined by quoted market prices on the last business day of the Plan year. Participant notes receivable are valued at their outstanding balances, which approximated fair value.

        Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

        Payment of benefits: Benefit payments are recorded when paid.

        Reclassification: Certain prior year amounts have been reclassified to conform with the current year presentation.

   Note 2. INFORMATION REGARDING THE PLAN

        The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.

        General: The Plan is a defined contribution plan providing benefits for substantially all employees of Daktronics, Inc. and its U.S. based subsidiaries (the Company) who have attained 21 years of age and have completed one year of service. Notwithstanding the preceding, employees are eligible to make salary deferrals to the Plan upon completion of three months of service and attainment of 21 years of age. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

        Administration: The Company has appointed an Administrative Committee to manage the day-to-day operation and administration of the Plan and an Investment Committee to select and monitor the investments of the Plan.

        Plan amendments: Effective November 23, 2004, the Plan was amended to afford employees hired as a result of an acquisition an appropriate service credit for the length of employment with their former company for purposes of determining eligibility, vesting and contribution allocations for the Plan.

        Effective March 28, 2005, the Plan was amended due to a change in the law with respect to automatic rollover provisions. If the participant terminates employment, and the participant vested interest exceeds $1,000, a distribution may be made to an individual retirement account for the benefit of the participant, if a rollover or distribution is not elected by the participant.

        Participant’s contributions: Participants may elect to have the Company contribute a percentage of their eligible pre-tax compensation not to exceed the maximum amount allowable under the Code. Participants who elect to have the Company contribute a portion of their compensation to the Plan agree to accept an equivalent reduction in taxable compensation. Contributions withheld are invested in accordance with the participant’s direction.

        Participants are also allowed to make rollover contributions of amounts received from other tax-qualified employer-sponsored retirement plans. Such contributions are deposited in the appropriate investment funds in accordance with the participant’s direction and the Plan’s provisions.

        Employer contributions: The Company may make discretionary profit sharing contributions to the accounts of eligible participants as defined in the Plan and as approved by the Board of Directors. In the twelve months ending April 30, 2005 and April 30, 2004, respectively, the Company matched 50% of the first 6% of each eligible participant’s contribution. Additional discretionary contributions were made for year ended April 30, 2004 equal to 2% of pay to a maximum of $187.50 per quarter per participant and for the year ended April 30, 2005 equal to 1.5% of pay to a maximum of $137.50 per quarter per participant.

        Participants’ accounts: Each participant’s account is credited with the participant’s contribution and allocations of the Company’s contribution and Plan earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefits that can be provided from the participant’s vested account.

        Vesting: Participants are immediately vested in their voluntary contributions, including rollover contributions from other qualified plans, plus actual earnings thereon. The remainder of their accounts are vested according to the number of years of continuous service. In general, the employee’s accounts become fully vested after five years of credited service, vesting at the rate of twenty percent per year commencing after one year of service.

        Payment of benefits: Distribution of a participant’s vested account balance shall be made as soon as administratively possible following his or her retirement, total disability, death or termination of employment. The amount of distribution under the Plan shall be equal to the participant’s vested account balance. If the participant has any loan balance at the time of distributions, the amount of cash available to the participant or beneficiary shall be reduced by the outstanding principal balance of the loan.

        Investment fund information: Participants may individually direct employee contributions in various mutual funds, common/collective trusts, money market accounts and Daktronics, Inc. common stock. Participants may change their investment options daily.

        Participant loans: Participants may borrow from their accounts up to a maximum equal to the lessor of $50,000 or 50 percent of their vested account balance. Loan transactions are treated as a transfer to (from) the investment funds from (to) the participant notes fund. Loan terms range from one to five years, or longer for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear a commercially reasonable rate of interest, which the Employer has determined to be the prime rate as determined by the Plan’s Trustee. Changes in the prime rate are implemented by the Trustee when it is reasonably administratively feasible to do so. Principal and interest is paid ratably no less than biweekly through payroll deductions.

        Forfeited accounts: During the years ended April 30, 2005 and April 30, 2004, respectively, forfeitures due to the non-vested accounts of terminated participants of $4,235 and $7,364 were used to reduce employer contributions.

        No administrative expenses were paid by the Company during fiscal year 2005 and 2004. It not paid by the Company, such expenses become the responsibility of the Plan.

Note 3. INVESTMENTS

        During the years ended April 30, 2005 and April 30, 2004, the Plan’s investments (including investments purchased, sold and held during the year) appreciated (depreciated) in fair value as determined by quoted market prices as follows: