================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                     For the Fiscal Year Ended June 30, 2006

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                         Commission File Number 0-26634

                               LECROY CORPORATION
             (Exact name of registrant as specified in its charter)

             DELAWARE                                  13-2507777
   (State or other jurisdiction                     (I.R.S. Employer
 of incorporation or organization)                Identification No.)

        700 CHESTNUT RIDGE ROAD                          10977
       CHESTNUT RIDGE, NEW YORK
(Address of principal executive office)               (Zip Code)

                                 (845) 425-2000
              (Registrant's telephone number, including area code)

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

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, Par Value $.01 Per Share
                                (Title of Class)

Indicate by check mark whether the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
                               YES [ ] NO |X|

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 |X| NO [ ]

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

Indicate by check mark 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 the 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. [ ]

Indicate by check mark ("X") whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer (as defined in Rule
12b-2 of the Exchange Act).

 Large accelerated filer [ ] Accelerated filer |X| Non-Accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.
                                YES [ ] NO |X|


         The number of shares outstanding of the registrant's Common Stock, as
of August 31, 2006, was 12,871,319 shares. The aggregate market value of shares
of Common Stock held by non-affiliates as of the last business day of the
registrant's most recently completed second fiscal quarter was $183,831,865.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Definitive Proxy Statement for the 2006 Annual Meeting
of Stockholders are incorporated by reference in Part III hereof.
================================================================================

                                        1


<PAGE>


                               LECROY CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                     FOR THE FISCAL YEAR ENDED JUNE 30, 2006

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
FORM 10-K ITEM NUMBER:                                                                                       Page No.
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<S>                                                                                                         <C>
   Cautionary Statement Regarding Forward-Looking Statements...............................................     3
                                                       PART I

   Item 1.      Business...................................................................................     4
   Item 1A.     Risk Factors...............................................................................    18
   Item 1B.     Unresolved Staff Comments..................................................................    26
   Item 2.      Properties.................................................................................    26
   Item 3.      Legal Proceedings..........................................................................    27
   Item 4.      Submission of Matters to a Vote of Security Holders........................................    28
                                                      PART II
   Item 5.      Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
                Equity Securities..........................................................................    28
   Item 6.      Selected Consolidated Financial Data.......................................................    30
   Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations......    32
   Item 7A.     Quantitative and Qualitative Disclosure About Market Risk..................................    45
   Item 8.      Financial Statements and Supplementary Data................................................    48
   Item 9.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.......    86
   Item 9A.     Controls and Procedures....................................................................    86
   Item 9B.     Other Information..........................................................................    88
                                                      PART III
   Item 10.     Directors and Executive Officers of the Registrant ........................................    89
   Item 11.     Executive Compensation.....................................................................    89
   Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
                Matters....................................................................................    89
   Item 13.     Certain Relationships and Related Transactions.............................................    89
   Item 14.     Principal Accounting Fees and Services.....................................................    89
                                                      PART IV
   Item 15.     Exhibits and Financial Statement Schedules.................................................    90
                Signatures.................................................................................    93


</TABLE>

         LeCroy(R), Wavelink(TM), WaveMaster(R), WavePro(R), WaveJet(R),
WaveRunner(R), WaveSurfer(TM), WaveExpert(TM), MAUI(TM) and CATC(TM) are our
trademarks, among others not referenced in this document. All other trademarks,
servicemarks or tradenames referred to in this Annual Report on Form 10-K are
the property of their respective owners.



<PAGE>



            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


         Certain statements in this report, other than purely historical
information, including estimates, projections, statements relating to our
business plans, objectives and expected operating results, and the assumptions
upon which those statements are based, are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally are identified by the words "believe,"
"project," "expect," "anticipate," "estimate," "intend," "strategy," "plan,"
"may," "should," "will," "would," "will be," "will continue," "will likely
result," and similar expressions. Forward-looking statements are based on
current expectations and assumptions that are subject to risks and uncertainties
which may cause actual results to differ materially from the forward-looking
statements. A detailed discussion of these and other risks and uncertainties
that could cause actual results and events to differ materially from such
forward-looking statements is included in the section entitled "Risk Factors"
(refer to Item 1A). We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.

                                       3

<PAGE>



                                     PART I

ITEM 1. BUSINESS.

OUR COMPANY

         LeCroy Corporation (the "Company," "LeCroy," "us," "we" or "our") was
founded in 1964 and is incorporated in the State of Delaware. Our principal
executive offices and manufacturing facilities are located at 700 Chestnut Ridge
Road, Chestnut Ridge, New York 10977 and our telephone number is (845) 425-2000.
Our website is located at www.lecroy.com. We sell our products and provide
service worldwide through wholly-owned subsidiaries, representatives and
distributors.

         We develop, manufacture, sell and license high-performance
oscilloscopes and global communication protocol analyzers. Our oscilloscopes are
tools used by designers and engineers to measure and analyze complex electronic
signals in order to develop high-performance systems, validate electronic
designs and improve time to market. We offer six families of oscilloscopes,
which address different solutions for the markets we serve: WaveExpert, our line
of Sampling Oscilloscopes; WaveMaster, one of our high performance product
families; WavePro, which is targeted at the mid- to high-performance sector;
WaveRunner, designed for the mid-performance sector; WaveSurfer, designed for
value-oriented users in the low-performance bandwidth sector of the market; and
WaveJet, our entry-level oscilloscope products. Our protocol analyzers are used
to reliably and accurately monitor communications traffic and diagnose
operational problems in a variety of communications devices to ensure that they
comply with industry standards. Our protocol analyzers are used by designers and
engineers whose products are in development and production and also for products
deployed in the field.

         We generate revenue in a single segment within the Test and Measurement
market, primarily from the sale of our oscilloscopes, protocol analyzers,
probes, accessories, and applications solutions. To a lesser extent, we also
generate revenue from the sales of our extended warranty contracts, maintenance
contracts and repairs and calibrations on our instruments after their warranties
expire. Revenue is recognized when products are shipped or services are rendered
to customers and other revenue recognition criteria are met, net of allowances
for anticipated returns. We sell our products into a broad range of end markets,
including Computer/Semiconductor/Consumer Electronics, Data Storage,
Automotive/Industrial, and Military/Aerospace. We believe designers in all of
these markets are developing products which rely on increasingly complex
electronic signals to provide the features and performance their customers
require.

TEST AND MEASUREMENT MARKET

         Test and Measurement equipment is used in the design, development,
manufacture, deployment and operation of electronic products and systems. This
equipment is required to verify functionality and performance of new product
designs and to ensure compliance to industry standards and overall product
quality. These instruments are used across all electronic equipment industries,
including computer, semiconductor, communications, consumer, automotive,
defense, and video. In addition, Test and Measurement instruments are utilized
to install, maintain and monitor wireless and wire-line communications and
broadcast networks. This Test and Measurement equipment aids in the research and
development of new products, testing of products in production, and maintenance
and service of products in the field.

         According to Prime Data, Inc., an independent market research firm
tracking the Test and Measurement industry, the market for this equipment
exceeded $7 billion in 2005. Certain segments of the Test and Measurement
industry have historically experienced greater volatility than the overall
industry because of their exposure to certain end markets, such as
communications, that experienced rapid growth in the late 1990s, followed by
rapid declines.

         Growth in the Test and Measurement market is driven by improvements in
electronic systems performance, growth in the electronics market and emerging
technologies and standards. Designers in a wide variety of industries are being
constantly driven to increase the performance of their products and to add new
features and capabilities. These improvements rely on advanced semiconductor
technology and require the design of faster, more powerful and complex


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electronic systems. As a result, the underlying technological advances in
communications and electronic signals are increasing exponentially in complexity
and speed. This is driving the demand for analysis tools that allow designers
and manufacturers of these devices to improve new product cycle time. With each
advance in technology, engineers designing next generation technologies and
products must contend with both a reduced margin for error and a progressively
more difficult task of fully characterizing new product design.

         While the overall market for test and measurement equipment is made up
of hundreds of different types of instruments and measurement tools, one of the
largest single product categories is oscilloscopes. We estimate that
oscilloscopes represented approximately $1.1 billion of the overall $7 billion
market in 2005. In addition, protocol analyzers, an emerging product category,
represented approximately $300 million in sales in 2005. Protocol analyzers
address specific communications standards in the wide area network (WAN), local
area network (LAN), storage area network (SAN), voice mail and computer
peripheral interconnect market spaces. LeCroy presently focuses on the computer
peripheral interconnect space. We believe the potential for these products lies
somewhere in the $70 to $80 million range of the total protocol analyzer product
category.

     OSCILLOSCOPE PRODUCT CATEGORY

         Oscilloscopes are the primary instrument used by engineers for testing
and analyzing electronic signals. Historically, oscilloscope products within the
Test and Measurement industry have experienced less volatility than the industry
as a whole because of their widespread use across many applications and end
markets. Thorough testing of complex electronic signals requires a measurement
tool capable of physically attaching to the signal of interest, capturing data
with high resolution for long periods of time and supporting detailed signal
analysis while providing additional insight into data characteristics and signal
trends over time. An oscilloscope utilizes a graphical display device that
allows an engineer to view an electronic signal. The most basic display of an
oscilloscope plots a signal's voltage versus time (typically in billionths and
trillionths of a second), providing a user insight into the performance of an
electronic circuit. In many cases, a user is trying to either verify that the
circuit is behaving as designed or measure the signal to gain a basic
understanding of signal performance.

         Today's oscilloscopes are digital devices which capture electronic
signals and convert the voltage values to digital representations, which are
stored in computer memory, allowing the instrument not only to display the
signal on a screen, but also to utilize a computer to analyze the signal's
characteristics. The ability of an oscilloscope to conduct in-depth analysis of
a complex electronic signal's characteristics and trends is referred to as wave
shape analysis, which is increasingly important as signals become more complex.

         The three primary specifications of an oscilloscope are its bandwidth,
or capacity to capture a signal of a particular speed; sample rate, or number of
data points that can be captured within a specific time, typically billions of
samples per second in modern oscilloscopes; and memory length, or the number of
data points that may be captured at one time. Higher bandwidths allow capture of
higher speed signals, increased sample rate improves resolution, and longer
memory allows capture of longer, more complex signals. The merit of a specific
oscilloscope depends on the combination of these specifications. Real-time
oscilloscopes with bandwidths ranging from 20 Megahertz ("MHz") up to 18
Gigahertz ("GHz") are currently available. Generally, the prices of
oscilloscopes increase as the primary specifications increase. We believe the
oscilloscope market can be generally divided into four major categories:

     o    High-end oscilloscopes. The largest part of the market, which we
          believe currently accounts for slightly more than half of the market
          based on revenues generated, comprises instruments with the ability to
          capture and analyze signals ranging from 300 MHz up to the highest
          available real-time bandwidths. These instruments generally sell from
          $4,000 up to over $100,000 depending on their capabilities.

     o    Lower-end oscilloscopes. We believe about one-third of the market's
          revenue comes from these products which include less complex
          instruments with the ability to capture and analyze signals ranging
          from 20 MHz to 300 MHz. These instruments generally sell for below
          $5,000.

     o    Handheld oscilloscopes. This includes a variety of handheld
          oscilloscopes which we believe currently comprise less than 10% of the
          overall market. Selling prices for these handheld instruments are
          generally between $1,000 and $3,000.



                                       5
<PAGE>

     o    Sampling oscilloscopes. For certain high signal speed applications,
          such as optical communications, instruments with bandwidths of up to
          100 GHz are required. At these speeds, real-time oscilloscopes do not
          have the ability to track the signal shape in real time and take
          samples quickly enough to be effective. We believe this category
          currently comprises less than 10% of the overall market, but because
          of their ability to provide extremely high bandwidths, sampling
          oscilloscopes can range in price generally from $50,000 to $100,000.

     PROTOCOL ANALYZER PRODUCT CATEGORY

     The demand for digital information has accelerated the need for
communication among multiple electronic devices in various markets, including
computers, telecommunications, networking, storage, consumer electronics,
aerospace, automotive, industrial automation and medical instrumentation. This
growing demand centers on the widespread need to transmit digital information.
Communication among digital devices, or connectivity, occurs over a variety of
physical media, such as copper wire and fiber optic cable, as well as over
wireless frequencies.

     Computer technology initially provided connectivity only among internal
devices, such as the processor, memory and storage, and with external peripheral
devices, such as the keyboard, mouse and printer. Today, computer technology
also enables connectivity among multiple computing devices and across networks,
such as local area networks, wide area networks, storage area networks, home
area networks, personal area networks and the Internet. Telecommunications
technology also enables connectivity among multiple devices, such as telephones,
fax machines, pagers and personal digital assistants. Consumer electronics
technology is progressively enabling connectivity among devices, such as
Internet appliances, digital cameras, audio systems and televisions.

     Digital devices communicate by sending electronic signals through a
transmission channel according to a specified protocol. A protocol is a set of
detailed rules that governs and regulates the manner in which the signals are
sent, received, and interpreted. The channel and the protocol are both typically
specified in a formal communications standard. For communication to be
successful, each device must implement and conform to the same standard.

     Early communications standards were relatively simple, typically involving
low-speed communications between two simple devices connected directly by copper
wire. Current standards are increasingly complex, typically involving high-speed
communications among multiple sophisticated devices indirectly linked to other
devices and across various physical media, including copper wire, fiber optic
cables, and wireless technologies with rapidly fluctuating frequencies. As a
result, standards that were specified initially in only a few pages of text may
now extend to over one thousand pages. The specifications for these standards
are broadly available, which facilitates interoperability of hardware and
software products from different manufacturers.

     A standard is typically introduced by several leading technology and
infrastructure companies. These core promoter companies comprise the nucleus of
independent standards groups. These groups are sometimes referred to as
implementers' forums, trade associations or special interest groups which assist
in the development, implementation, promotion, and compliance with the
standards. As commercial interest in a standard increases, the communications
standards group typically expands to include system and device manufacturers and
service providers. The promoter companies typically remain closely associated
with the standard throughout its lifecycle.

     A standard is implemented over a lifecycle that includes three overlapping
phases: development, production and market deployment. During the development
phase, key component manufacturers develop and produce important building blocks
such as semiconductors, embedded software, protocol stacks and device drivers
which will be used by others in the industry to create products. During the
production phase, system and device manufacturers apply these building blocks to
construct their unique products and applications. The market deployment phase
includes the introduction and sale of products and applications to end users in
the market. Similarly, products associated with a particular standard follow
their own unique lifecycle from development through production and deployment.

     Protocol analyzers are "standard specific" tools; they enable a design
engineer to analyze the "conversation" between two devices. Many distinct
communications standards are emerging to meet the growing demand for digital
connectivity in the Computer/Semiconductor/Consumer Electronics, Data Storage,
Automotive/Industrial, and Military/Aerospace industries. The characteristics of
each standard, including its principal uses, physical medium, transmission speed



                                       6
<PAGE>

and distance covered, vary greatly. Examples of existing and emerging standards
in the computer peripheral interconnect space include the following:

     o    Bluetooth(R). The Bluetooth standard, or Bluetooth wireless
          technology, enables low speed, wireless connectivity among computers,
          telecommunication devices, such as mobile telephones, and consumer
          electronics devices, such as personal digital assistants and
          headphones. Bluetooth was introduced in 1998. The promoter group
          consists of Agere, Ericsson, IBM, Intel, Microsoft, Motorola, Nokia
          and Toshiba. Bluetooth operates through radio waves with rapidly
          fluctuating frequencies at speeds of up to 1 million bits (megabits)
          per second, or Mbps, over distances of up to 100 meters. In 2005, over
          500 million Bluetooth chipsets were shipped - primarily in the handset
          and mobile computing markets. Bluetooth has recently been enhanced
          further with updates to the specification to improve the performance
          and usability of the interface. In March of 2006, the Bluetooth
          Special Interest Group announced a next generation high-speed
          Bluetooth wireless technology to be based on WiMedia Ultra-Wideband
          platform. Collaboration between the WiMedia Alliance and the Bluetooth
          community should help define Bluetooth technology as a key personal
          area network technology for today and the future.

     o    Ethernet. Ethernet enables high-speed connection among computers and
          peripheral devices in local area networks. Ethernet was introduced in
          1980 by Digital Equipment Corporation, Intel, and Xerox and, in 1983,
          the Institute of Electrical and Electronics Engineers, Inc. (IEEE)
          released the first IEEE standard for Ethernet technology. Ethernet
          technology operates over coaxial cable, twisted pair wiring or fiber
          optic cable at speeds of up to 10 Mbps over distances of up to 2,000
          meters. The IEEE has released newer versions of the Ethernet
          technology including: Fast Ethernet in 1995, which operates at speeds
          of up to 100 Mbps, Wireless Ethernet in 1997, that operates at speeds
          up to 10 Mbps, Gigabit Ethernet in 1998, which operates at speeds of
          up to 1 billion bits (gigabits) per second, or Gbps, and 10 Gbps
          Ethernet released in June 2002.

     o    Fibre Channel. Fibre Channel enables reliable, cost-effective
          information storage and delivery at very high-speeds. Fibre Channel
          development started in 1988 and the American National Standards
          Institute (ANSI) standards body approved the first revision in 1994.
          Fibre Channel is designed to operate at speeds of 1, 2, and 4 Gbps and
          gives users the option to develop storage networks with configuration
          choices at different price points, levels of scalability and
          availability. Fibre Channel is a layered protocol that supports
          additional storage or networking protocols such as SCSI, IP, VI, and
          ESCON, thus offering many choices for storage connectivity, cluster
          computing and network interconnect.

     o    IEEE 1394. The IEEE 1394 standard, commonly known as 1394, FireWire or
          i.Link, enables high-speed connectivity among computers, peripheral
          devices and consumer electronic devices, including audio systems,
          television sets, digital cameras, video recorders, video players and
          game consoles. 1394a was introduced in 1987 and was ratified by the
          IEEE in 1995. The promoter group includes Apple, Canon,
          Hewlett-Packard, IBM, Intel, Microsoft, NEC, Philips, Sony, Sun
          Microsystems, Texas Instruments and Yamaha. 1394a enables connectivity
          through copper wire at speeds of up to 400 Mbps over distances of up
          to four and one-half meters. This speed increases to up to 3.2 Gbps
          over distances of up to 100 meters in the 1394b standard approved by
          the IEEE in April 2002.

     o    InfiniBand. The InfiniBand standard enables high-speed connectivity
          inside computers and among computers and storage devices in complex
          storage area networks. InfiniBand was introduced in 1999 and is used
          largely in enterprise database, high performance computing (HPC) and
          storage applications. The promoter group consists of Dell,
          Hewlett-Packard, IBM, Intel, Microsoft and Sun Microsystems.
          InfiniBand operates over copper wire and fiber optic cable at speeds
          of up to 10 Gbps over distances of up to ten meters for copper wire
          and ten kilometers for fiber optic cable.

     o    PCI Express. PCI Express is an emerging standard first introduced in
          2002 and is intended to enhance the Peripheral Connect Interface (PCI)
          architecture spanning multiple computer market segments: clients
          (desktop and mobile), servers (standard and enterprise), embedded
          computers and communication devices. PCI Express provides system
          original equipment manufacturers, or OEMs, and peripheral developers
          the ability to realize product versatility and market differentiation
          without the burden of maintaining obsolete interfaces or losing
          compatibility. The promoter group consists of Hewlett-Packard, Dell,
          IBM, Intel and Microsoft. PCI Express currently runs at 2.5 Gbps per


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          lane in each direction, providing a total bandwidth of 80 Gbps in a
          16-lane configuration. The next generation of PCI Express, Generation
          2 or Gen 2, will run at 5.0 Gbps per lane in each direction, providing
          a total bandwidth of 160 Gbps for a 16-lane configuration. Adoption of
          PCI Express Gen2 will begin in the first half of fiscal 2007.

     o    Serial ATA. The Serial ATA standard (SATA) enables high-speed,
          low-cost internal storage connections for desktops and mobile
          computers. Serial ATA was introduced in 2000 and is expected to
          replace Parallel ATA, the standard used to connect storage devices
          such as hard drives, DVD and CD drives to the motherboard. Serial ATA
          operates over copper wire at speeds up to 3 Gbps over distances of up
          to one meter. In 2006, Serial ATA volume is expected to surpass legacy
          Parallel ATA device shipments for the first time. Broad based adoption
          of Serial ATA in the storage market has led to the use of SATA in new
          applications including server, networked storage and consumer
          electronics devices.

     o    Serial Attached SCSI. Initiated in December 2001 by the Small Computer
          System Interface (SCSI) Trade Association, Serial Attached SCSI (SAS)
          was designed to be the logical evolution of SCSI to satisfy the data
          center requirements of scalability, performance, reliability and
          manageability, while leveraging a common low-cost electrical and
          physical connection interface from Serial ATA. SAS provides universal
          interconnect with Serial ATA, while offering logical SCSI
          compatibility along with the reliability, performance and
          manageability of parallel SCSI. SAS is positioned primarily for
          enterprise class storage applications. SAS allows each host to address
          up to 4,096 devices via expanders. SAS's flexibility allows single or
          multiple lane communications with devices, with a 3 Gbps four lane
          wide connection providing 12 Gbps total throughput. The SAS-2
          specification initiated in May of 2005 will run at 6.0 Gbps per lane
          in each direction, providing a total bandwidth of 24 Gbps. Early
          adopters are expected to begin sampling 6.0 Gbps devices in the 2nd
          half of fiscal 2007.

     o    Universal Serial Bus. The Universal Serial Bus standard (USB) enables
          low, medium and high-speed connectivity between computers and
          peripheral devices, including keyboards, mice, printers, scanners,
          joysticks and cameras, using plug and play technology. In addition, it
          is becoming widely used as the replacement technology for proprietary
          cabling on medical and industrial control equipment. USB was
          introduced in 1995 and replaces the serial, parallel, mouse and
          keyboard ports. The specifications for the second version of USB, or
          USB 2.0, were released in April 2000. The promoter group for USB
          consists of Agere, Hewlett-Packard, Intel, Lucent, Microsoft, NEC and
          Philips. USB enables connectivity through copper wires at speeds of up
          to 480 Mbps over distances of up to five meters. USB technology
          continued its impressive growth in 2005 with higher shipments in MP3
          players, mobile handsets, digital televisions, set top boxes and DVD
          recorders. Market research firm In-Stat forecasts that USB-enabled
          electronics device annual shipments will double from 1.4 billion in
          2005 to 2.8 billion in 2010.

     o    Wireless USB. Certified Wireless USB is the new wireless extension to
          USB that combines the speed and security of wired technology with the
          ease-of-use of wireless technology. Certified Wireless USB will
          support robust high-speed wireless connectivity by utilizing the
          WiMedia MB-OFDM Ultra-wideband (UWB) radio platform as developed by
          the WiMedia Alliance. This emerging wireless technology is endorsed
          for use in the U.S. and Japan; with regulatory approval underway in
          Europe. The combination of a low-cost, low-power wireless transport
          with the ubiquitous USB protocol layer is expected to become a key
          enabler for next-generation consumer electronic devices.

     LeCroy is a provider of protocol analyzers for these existing and emerging
digital communications standards. Our products are used by semiconductor,
device, system and software companies at each phase of their products'
lifecycles from development through production and market deployment. We have
expertise in the Bluetooth, Ethernet, Fibre Channel, IEEE 1394, InfiniBand, PCI
Express, SCSI, Serial ATA, SAS and wireless USB standards and are actively
engaged with our customers throughout their development and production processes
in order to deliver solutions that meet their needs. Utilizing our easy to use,
color-coded expert analysis software called CATC Trace(TM), our products
generate, capture, filter and analyze high-speed communications traffic,
allowing our customers to quickly discover and correct persistent and
intermittent errors and flaws in their product design. Our production products
are used during the manufacturing process to ensure that our customers' products
comply with standards and operate with other devices, as well as assist system
manufacturers to download software onto new computers.


                                       8
<PAGE>

OUR COMPETITIVE STRENGTHS

     We are a leading, worldwide provider of oscilloscopes and protocol
analyzers as well as a provider of related test and measurement equipment used
by electronic designers and engineers to measure and analyze complex electronic
signals. Our key competitive strengths include:

     Technology leadership. We are a recognized technology leader in the Test
and Measurement industry and continue to leverage our core strengths to develop
new and innovative products for the changing requirements of the markets we
serve. Most recently, we have focused on incorporating our internally developed
operating system and our advanced methodology for enabling high-speed signal
acquisition into our entire oscilloscope product line. We believe this has
allowed us to transform general purpose oscilloscopes into application-specific
analysis tools, providing a competitive advantage to our products. These, and
our other core technologies, are currently protected by 57 U.S. patents and 25
foreign patents, with approximately 47 other U.S. patents pending.

     Broad product portfolio. We offer a broad range of oscilloscope and
protocol analyzer products which are designed to capture and analyze a wide
range of electronic signals and data packets. We believe our breadth of product
offerings, coupled with our ability to create application-specific analysis
tools, address the specific needs of design engineers and systems integration
teams in many industries.

     Leading customer relationships. Our major customers are leaders in a range
of industries, including computer/semiconductor/consumer electronics, data
storage, automotive/industrial, and military/aerospace. Our ability to work with
innovative, industry-leading customers allows us to continuously refine our
products to better address the needs of the latest technologies.

     Global sales and distribution. We have a global sales force and
distribution structure covering North America, Europe/Middle East, Japan and
Asia/Pacific. Each of these regions is a major contributor to our revenue and
provided between approximately 14% and 32% of our revenues in the last three
fiscal years. We currently have direct sales personnel in 12 countries and
operate in 53 smaller markets through regional managers, distributors and sales
representatives. We believe that our sales force is recognized by our customers
for their technical expertise. Our sales force often works in tandem with design
engineers to create solutions to complex applications.

     Experienced management team. Our management team has a long and successful
track record in the Test and Measurement industry with an average of over 17
years of experience in the industry. Our management team has overseen the
introduction of many new products over the past four years and has restructured
our operations, enhancing our focus on our core markets while developing our
ongoing business strategy, which encourages product innovation.

OUR STRATEGY

     In order to enhance our position as a leading provider of oscilloscopes and
protocol analyzers, our objective is to grow our company and our market share in
the markets in which we operate. In addition, we may pursue strategic
acquisitions that have strong adjacent market positions or complement our
current product lines. Key strategic goals include:

     Focus on the general purpose oscilloscope market. We have a competitive
product offering and ongoing engineering development efforts underway to address
customer needs for oscilloscope solutions in market sectors representing the
largest and most profitable portion of the oscilloscope market.

     Focus on the market for serial data test applications. The market for
testing important serial data standards including PCI Express, Serial ATA, SAS,
USB2.0, wireless USB and Bluetooth, is a rapidly growing market - on the order
of 30% Compound Annual Growth Rates (CAGR) according to internal estimates. The
primary tools associated with testing serial data links are oscilloscopes (to
test the electrical signals and paths or the "physical layer") as well as
specialized protocol analyzers (to observe, decode and verify that the desired
data traffic and device specific messages are flowing from node to node). Our
high end real-time oscilloscope and sampling oscilloscope development efforts
are aimed primarily at satisfying the needs of customers in this important
applications area. We believe our offering in these two primary product
categories combined with an intense focus on ensuring the right capability is



                                       9
<PAGE>

available to our customers at the right time in the most important applications
will allow us to continue to grow in this market segment.

PRODUCTS AND SERVICES

   OSCILLOSCOPES

     We currently offer five major real-time oscilloscope families: WaveMaster,
WavePro, WaveRunner, WaveSurfer and WaveJet and one sampling oscilloscope
family, WaveExpert. Each oscilloscope model is capable of capturing and
analyzing electronic signals at different bandwidth and performance points in
the market. Each oscilloscope family is also offered with a selection of general
software packages that expand its capabilities and allow customization of the
operation and measurements of the specific product.

                       NUMBER
   PRODUCT               OF        BANDWIDTH         U.S. LIST         MARKET
   FAMILY              MODELS        RANGE          PRICE RANGE     INTRODUCTION
--------------------   ------    --------------  -----------------  ------------
WaveExpert Sampling
Oscilloscope                3     Up to 100 GHz  $28,000 - $90,000    April 2005
Series...............
WaveMaster/SDA/DDA
Series...............      22        3 - 18 GHz $47,000 - $128,000  January 2002

WavePro
7000A Series.........       7         1 - 3 GHz  $20,000 - $33,000  January 2003
WaveRunner
6000A Series.........      10   350 MHz - 2 GHz   $8,250 - $19,990  October 2003
WaveRunner
Xi Series............       3     400 - 600 MHz   $9,250 - $11,250  January 2006
WaveSurfer
Xs Series............       4     400 - 600 MHz    $5,590 - $9,690  January 2006
WaveSurfer
400 Series...........      11     200 - 500 MHz    $4,490 - $8,790    April 2004
WaveJet
300 Series...........       8     100 - 500 MHz    $2,890 - $7,490  January 2006

   SUPPORTING ANALYZERS AND APPLICATION SOFTWARE

     Our general purpose oscilloscope products are tailored with proprietary
software and hardware to create application specific analyzers which function as
industry-specific oscilloscopes for use in:

     o    Data storage applications -- Disk Drive Analyzer products and DDA5000
          series, using WaveMaster and WavePro platforms;

     o    Serial data applications -- Serial Data Analyzer products, SDA3000
          series, SDA4000, SDA5000 series, SDA6000 series, SDA11000 series and
          the SDA18000 series, based on the WaveMaster platform;

     o    Automotive applications -- Hardware and software applications based on
          the WaveRunner platform for use in understanding serial communications
          in automobiles and industrial systems; and

     o    Power measurement applications -- Hardware and software applications
          based on the WaveRunner and WaveSurfer platforms for use in a variety
          of industries.

   PROTOCOL ANALYZERS

     Our protocol analyzer products are advanced verification systems that
assist hardware and software manufacturers in the efficient design of reliable
and interoperable systems and devices. Most of these systems utilize our
proprietary intuitive expert analysis software, the CATC Trace, which displays
communications traffic in searchable, color-coded packets. Highlights include:

     o    PETracer(TM) and PETracer ML. PETracer and PETracer ML are advanced
          verification systems introduced in 2003. The PETracer is a high



                                       10
<PAGE>

          impedance, non-intrusive analyzer, capturing, processing and analyzing
          5 Gbps PCI Express traffic on a single link. The PETracer ML allows
          for full bi-directional decode and capture of up to 8 PCI Express
          links. Both analyzers are based on the UPAS 10000 platform.

     o    PETrainer(TM). The PETrainer, announced in 2003, is a PCI Express(TM)
          exerciser supporting up to 4 links. PETrainer is a critical test and
          verification tool intended to assist engineers in improving the
          reliability of their solutions, while providing advanced capabilities
          for stress and compliance testing. Together with the CATC PETracer and
          PETracer ML analyzers, the PETrainer reduces time to market by
          enabling users to quickly identify logic and design flaws.

     o    SATracer(TM). The SATracer was first introduced in 2001 for SATA 1.5
          Gbps speed and the second generation was introduced in the fourth
          quarter of 2003 for 3 Gbps. SATracer is a non-intrusive protocol
          analysis system that facilitates efficient and accurate debug, test
          and verification of Serial ATA semiconductors, devices and systems.

     o    SATrainer(TM). The SATrainer, introduced in 2003, is an add-on traffic
          generation module for our SATracer. It allows designers and validation
          engineers to transmit valid and invalid traffic to emulate host or
          device-side SATA communications. SATrainer features error injection
          capabilities that permit observation of device behavior under faulty
          link conditions.

     o    SASTracer(TM). The SASTracer, our Serial Attached SCSI development
          product introduced in 2003, is the Company's first system that
          supports the advanced protocol analysis of 1.5 and 3 Gbps SAS in 1-,
          2- and 4-wide configurations. The SASTracer is able to logically group
          multiple related bus transactions allowing developers to quickly
          understand complex SAS transactions. SASTracer's features were
          especially designed for the multiple ways in which SAS systems can be
          configured.

     o    USBTracer/Trainer(TM). The USBTracer/Trainer system, introduced in
          2001, is a powerful development and test tool based on the UPAS 2500
          platform. The USBTracer captures, displays and analyzes all speeds of
          USB bus traffic. The USBTrainer serves as a flexible USB host for the
          development of USB devices, hubs and integrated circuits, enabling
          stress/limit testing of USB designs and observation of design behavior
          under faulty bus conditions.

   OTHER PRODUCTS AND SERVICES

     We offer our customers a variety of complementary oscilloscope probes and
accessory products. Probes provide the critical physical electrical or optical
connection from the customer's circuit to the oscilloscope. We believe our
WaveLink high frequency differential probes provide the high bandwidth
performance necessary to measure serial data signals in the expanding serial
data communications market. We also offer digitizing modules from 150 MHz to 1
GHz bandwidths.

     We also provide technical support services, repairs, maintenance,
recalibration and a variety of post sale upgrades and installations. We maintain
field service centers in Chestnut Ridge, New York; Geneva, Switzerland; Tokyo,
Japan; Seoul, South Korea; and Shanghai, China.

OUR CUSTOMERS AND END MARKETS

     Our oscilloscope products are used primarily by electronic designers and
engineers principally in the research and development of new products. These end
users typically employ our oscilloscopes to validate the performance of
electronic designs and components. Our protocol analyzers are used by designers
and engineers whose products are in development and production and also for
products deployed in the field. These end users typically use our products to
monitor communications traffic and diagnose operational problems in a variety of
communications devices to ensure that they comply with industry standards. We
currently provide products to customers in four primary end markets, including
Computer/Semiconductor/Consumer Electronics, Data Storage,
Automotive/Industrial, and Military/Aerospace. Our customers also include
leading original equipment manufacturers.



                                       11
<PAGE>

     Computer/Semiconductor/Consumer Electronics. These markets include
companies providing components, interfaces, subsystems and complete products for
high speed and general purpose computing, network servers, and related devices
and systems. Requirements in this end market have been driven by:

     o    growth in the capability and complexity of devices, which now provide
          a higher level of integration and functionality;

     o    a dramatic increase in the use of high speed serial data
          communications interfaces in both the computer and semiconductor
          market;

     o    new interface standards, which enable increased interoperability and
          higher levels of bandwidth between devices and peripherals, including:
          PCI Express -- a high speed serial data interface for connection to
          high performance subsystems, such as a graphics card, inside a
          computer; Serial ATA -- a high speed serial data interface for
          computer disk drives; USB 2.0 -- the latest version of the Universal
          Serial Bus standard, a high speed computer peripheral expansion
          interface; Wireless USB - new wireless extension to USB that combines
          the speed and security of wired USB with the ease of use of wireless;
          XAUI -- a 10 Gigabit Ethernet standard that improves the routing of
          electrical interconnections; and Firewire -- a high-speed serial
          interface for computer peripheral expansion; and

     o    system-on-a-chip validation.

     Data Storage Devices. This market includes companies that provide magnetic
and optical storage devices such as hard disk drives, removable media, tape, CDs
and DVDs. Requirements in this end market are being driven by:

     o    continued pressure to reduce product development life cycle time;

     o    increasing need to store more information on storage media, which
          requires the encoding of signals to achieve higher density;

     o    migration of hard disk drives to portable media applications and
          consumer devices, such as MP3 players and digital video recorders;

     o    evolution to perpendicular magnetic recording for higher capacity
          storage; and

     o    adoption of faster point-to-point connections through the use of the
          Serial Advanced Technology Attachment, or Serial ATA, and Serial
          Attached Storage, or SAS, interface standards.

     Automotive/Industrial. The automotive market includes automobile OEMs,
component suppliers to automobile OEMs and industrial equipment manufacturers.
Requirements in this end market are being driven by:

     o    proliferation of Electronic Control Units, or ECUs, to various
          automotive subsystems, such as engine control, braking, and traction
          control;

     o    progression to networked ECUs;

     o    serial data topologies managing complex inbound and outbound signals;
          and

     o    evolution to 42 V power systems to provide adequate power with lower
          current.

     Military/Aerospace. The military and aerospace market includes companies
that provide components and systems for defense and commercial airplane
applications. Requirements in this end market are being driven by:

     o    applications that use complex communications signals in challenging
          environments;

     o    extraordinarily high need for precision and reliability given the
          consequences of failure; and

                                       12
<PAGE>

     o    need for long-term support due to long military program life.

SALES, MARKETING AND DISTRIBUTION

     We maintain a direct sales force of highly trained, technically
sophisticated sales engineers who are knowledgeable in the use of oscilloscopes
and protocol analyzers and the features and advantages of our products. In
addition, because of our focus on high-performance oscilloscopes and protocol
analyzers, our sales engineers are skilled in performing product demonstrations
for current and prospective customers.

     We sell our oscilloscopes and protocol analyzers through our own direct
sales force in the United States, Switzerland, Germany, Italy, France, the
United Kingdom, Sweden, Japan, China, South Korea and Singapore, with regional
sales headquarters located in Chestnut Ridge, New York; Geneva, Switzerland; and
Tokyo, Japan. In territories where the sales potential does not currently
justify the maintenance of a direct sales force, we use manufacturers'
representatives and distributors in support of our direct selling efforts.

     We support our customers through a worldwide network of specialized
applications engineers. We maintain service, repair and calibration facilities
in Chestnut Ridge, New York; Santa Clara, California, Geneva, Switzerland;
Seoul, South Korea; Tokyo, Japan; and Shanghai, China.

     In order to raise market awareness of our products, we maintain an
informative website (www.Lecroy.com), advertise in trade publications,
distribute promotional materials, conduct marketing programs and seminars, issue
press releases regarding new products, publish technical articles and
participate in industry trade shows and conferences.

TECHNOLOGY AND PRODUCT DEVELOPMENT

     We believe we are a technology leader in both the oscilloscope and protocol
analyzer markets. We have developed core capabilities in the design of
high-performance, high-speed signal conditioning, sampling and analog-to-digital
conversion circuitry. We believe we are also a leader in the design of
technologies related to the storage, movement and processing of the large
amounts of data produced by oscilloscopes and protocol analyzers.

     In protocol analyzers, with the acquisition of Computer Access Technology
Corporation ("CATC)" in October 2004 (See " Management's Discussion and Analysis
of Financial Condition and Results of Operations - CATC Acquisition"), we
believe we have a competitive advantage as a result of our knowledge and
expertise in multiple communications standards, computer and software
architecture and advanced ASIC and programmable logic design. This expertise is
enhanced by our advanced design tools and collaboration among our various design
teams. We have a broad, vertically integrated technology base that includes the
knowledge and expertise to design advanced ASICs, use programmable logic in the
form of microcontrollers and programmable logic devices in real-time embedded
applications, design electronic circuit boards and systems, and design and
develop embedded software, software drivers and software applications.

     Our product development efforts are focused on hardware, software and
mechanical development initiatives. Our hardware product development team is
focused on developing innovative signal conditioning, data acquisition and
electrical circuit probing technologies that allow better waveform fidelity and
circuit connection capabilities. This is accomplished through the use of
advanced integrated circuit techniques and processes, innovative design tools
and methodologies and key technology partnerships.

     In June 2002, we entered into a technology development agreement with IBM,
in order to gain access to IBM's next-generation silicon germanium technology.
This development agreement is set to expire in December 2006 but can be renewed
at no additional cost. During fiscal 2005, this agreement was renewed at no cost
for an additional term of two years.

     Our software engineering group continues to develop and advance our
protocol, wave shape analysis and measurement technologies in order to offer new



                                       13
<PAGE>

and innovative analysis tools for our customers. This group also develops
application solutions to perform specific analysis for specific communications
protocols, data storage, power measurement, communications and other markets.

     We have also entered into technology partnerships that have provided us
access to technologies that enable extremely high-speed, high-fidelity signal
capture capabilities and very high throughput data movement capabilities. We
intend to continue to develop and leverage such key partnerships in areas that
complement or enhance our own internal strengths.

MANUFACTURING AND SUPPLIERS

     We have consolidated and streamlined our manufacturing and operational
activity to focus on our core expertise of oscilloscope and protocol analyzer
product introduction and development. Our WaveMaster, WaveExpert and WavePro
oscilloscopes and related products are manufactured at our facility in Chestnut
Ridge, New York. Protocol analyzer products are manufactured in both our
Chestnut Ridge, NY and Santa Clara, California facilities. Our focus on supply
chain execution has allowed us to improve the cycle time required to build our
instruments as well as reduce the time required to test and deliver products to
our customers. For example, we have partnered with manufacturing companies in
the U.S. and Asia that have allowed us to design and develop innovative products
at reduced costs. This has allowed us to lower the overall costs of our products
to our customers while improving our overall margin efficiency. Our WaveJet and
WaveSurfer 4X products are manufactured by our strategic partner, Iwatsu, and
our WaveRunner 6000A and WaveSurfer XS products are manufactured by a contract
manufacturer, Plexus Corporation.

     We purchase a small number of parts from single-source suppliers. In
particular, several key integrated circuits that we use are made by IBM.
Although we have not experienced significant production delays attributable to
supply changes, we believe that, for integrated circuits in particular,
alternative sources of supply would be difficult to develop over a short period
of time. Because we have no direct control over our third-party suppliers,
interruptions or delays in the products and services provided by these third
parties may be difficult to remedy in a timely fashion. In addition, if such
suppliers are unable or unwilling to deliver the necessary parts or products, we
may be unable to redesign or adapt our technology to work without such parts or
find alternative suppliers or manufacturers. In such events, we could experience
interruptions, delays, increased costs or quality control problems and loss of
revenues.

COMPETITION

    Oscilloscopes

     The oscilloscope market is highly competitive and characterized by rapid
and continual advances in technology. Our principal competitors in this market
are Tektronix, Inc. ("Tektronix") and Agilent Technologies, Inc. ("Agilent").
Both of our principal competitors have substantially greater sales and
marketing, development and financial resources than we do. We believe that
Tektronix, Agilent and other competitors offer a range of products that attempt
to address most sectors of the oscilloscope market.

     We believe that the principal bases of competition in the oscilloscope
market are a product's performance characterized by the confluence of bandwidth,
sample rate, memory length and processing power, its price and quality, the
vendor's name recognition and reputation, product availability and the quality
of post-sale support. We believe that we currently compete effectively with
respect to each of the principal bases of competition in the oscilloscope market
in the general price range ($2,900 to $128,000) in which our oscilloscopes are
focused. We also believe that our success will depend in part on our ability to
maintain and develop the advanced technology used in our oscilloscope products
and our ability to offer high-performance products at a favorable
"price-to-performance" ratio.

    Protocol Analyzers

     Our protocol analyzer markets are highly competitive, and we expect
competition to intensify in the future. We compete with a number of companies,



                                       14
<PAGE>

with Agilent and Finisar Corporation representing the largest competitors. These
competitors are diverse and offer a variety of solutions directed at various
segments of this marketplace. We believe the principal factors of competition
include:

     o    Product functionality;

     o    Time to market with new products;

     o    Ease of product use;

     o    Product speed, reliability, stability and accuracy;

     o    Price performance;

     o    Flexibility and programmability of products;

     o    Upgradeability of products;

     o    Local support and service for products; and

     o    Breadth of product offerings.


     We believe we compete favorably with respect to each of these factors and
have gained significant market share in some of our target markets as a result.
We believe our success has been driven by our vertically integrated technology,
ability to generate customer loyalty and ability to anticipate market trends.

BACKLOG

     Our backlog of unshipped customer orders was approximately $11.2 million
and $8.5 million as of June 30, 2006 and 2005, respectively. Backlog at June 30,
2005 excluded $0.7 million of deferred revenue established in connection with
the adoption of the Securities and Exchange Commission's Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements," in
fiscal 2001. This revenue was fully recognized in fiscal 2006. Customers may
cancel or reschedule orders at any time. We believe that our level of backlog at
any particular time is not necessarily indicative of our future operating
performance.

PATENTS, TRADEMARKS AND LICENSES

     We rely on a combination of patents, trademarks and trade secret laws,
non-disclosure agreements and other intellectual property protection methods, as
well as technical expertise and continuing technological research and
development to establish and protect proprietary rights in our products. We
believe, however, that because of the rapid pace of change and advancement in
oscilloscope technology, legal intellectual property protection is and will
continue to be a less significant factor in our success than our core competency
of wave shape analysis and the experience and expertise of our personnel.

     We protect significant technologies, products and processes that we
consider important to our business by, among other things, filing applications
for patent protection. We currently hold 57 U.S. and 25 foreign patents, and
approximately 47 pending applications covering a range of products with various
expiration dates. Although none of our products depends exclusively on any
single patent, we believe our patents, in the aggregate, are important to our
business and contribute to our competitive advantage.

     We license or otherwise acquire key enabling technologies from third
parties in order to gain access to technologies that would be too expensive or
too time consuming to develop internally or that would give us a competitive
advantage or shorten our product development time-to-market. We are currently
party to a license agreement with Perigee LLC pursuant to which we license fast
data readout technology for use in our WaveRunner 6000 Series family of
products. This license is perpetual. We also license a patent from William A.
Farnbach, which relates to the triggering characteristics of an oscilloscope.




                                       15
<PAGE>

This license extends for the term of the patent, which expires in October 2008.
In June 2002, we entered into a technology development agreement with IBM, as
described in more detail in the "Business - Technology and Product Development"
section, in order to gain access to IBM's next-generation silicon germanium
technology. With the exception of our technology development agreement with IBM,
the capabilities licensed or otherwise acquired through these agreements, and
additional license agreements we entered into, could be developed by us, but
would require considerable time and expense.

     From time to time, we license our technology to third parties. The revenue
generated from these licenses is a small percentage of our total revenue. We
generally do not actively seek out licensing opportunities, but will take
advantage of opportunities that arise in the normal course of business.

     Although we believe that our products and technologies do not infringe the
proprietary rights of third parties, there can be no assurance that third
parties will not assert claims against us based on the infringement or alleged
infringement of any such rights. Such claims are typically costly to defend,
regardless of the legal outcome. There can be no assurance that we would prevail
with respect to any such claim, or that a license to third party rights, if
needed, would be available or available on acceptable terms. In any event,
patent and proprietary rights litigation can be extremely protracted and
expensive.

REGULATION

     As we manufacture our products in the United States and sell our products
and purchase parts, components and sub-assemblies in a number of countries, we
are subject to legal and regulatory requirements, particularly the imposition of
tariffs and customs, in a variety of countries. Our products are also subject to
United States export control restrictions. In certain cases, we may not be
permitted to export products without obtaining an export license. U.S. export
laws also prohibit the export of our products to a number of countries deemed by
the United States to be hostile. The export of our high-performance
oscilloscopes from the United States is also subject to regulation under the
Treaty for Nuclear Non-Proliferation. We cannot be certain that the U.S.
government will approve any pending or future export license requests. In
addition, the list of products and countries for which export approval is
required, and the regulatory policies with respect thereto, could be revised.

EMPLOYEES

     As of June 30, 2006, we had 458 full-time employees, 215 of whom work in
our Chestnut Ridge, New York facility. Our employees are not represented by a
labor union and we have not experienced any work stoppages. We believe that our
employee relations are satisfactory.

INVESTOR INFORMATION

     Our Internet website address is www.lecroy.com. We make available, free of
charge on our website, by clicking on "About LeCroy" and then selecting the
"Investor Relations" link and the "SEC Filings" link, our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as soon as reasonably practicable after electronically filing such material
with, or furnishing it to, the Securities and Exchange Commission, or SEC.

EXECUTIVE OFFICERS OF THE REGISTRANT

     Unless otherwise set forth, below are the name, age, position, and a brief
account of the business experience of each of our executive officers as of
August 31, 2006:

<TABLE>
<CAPTION>
      NAME                                         AGE                       POSITION(S)
    -------                                       ----   ---------------------------------------------------
<S>                                                <C>
    Thomas H. Reslewic......................       47    President; Chief Executive Officer and Director
    R. Scott Bausback.......................       45    Executive Vice President, Chief Operating Officer
    Carmine Napolitano......................       38    Vice President, General Manager-Product Divisions
    David C. Graef..........................       49    Vice President, Chief Technology Officer
    Sean B. O'Connor........................       41    Vice President, Finance; Chief Financial Officer;
                                                         Secretary and Treasurer
    Conrad J. Fernandes.....................       45    Vice President, Corporate Development and Strategy
    Corey Hirsch............................       49    Vice President, Chief Information Officer
</TABLE>

                                       16
<PAGE>

     Thomas H. Reslewic was named to our Board of Directors in January 2002. He
joined us in 1990 and has served as President and Chief Executive Officer since
January 2002. Mr. Reslewic previously served as President from October 2000
until December 2001, and Executive Vice President and Chief Operating Officer
from February 1998 until October 2000. Mr. Reslewic has a Bachelor of Science
degree in physics from the College of the Holy Cross and a Master of Business
Administration degree from the University of Oregon.

     R. Scott Bausback has served as Executive Vice President, Chief Operating
Officer since joining us in August 2001. In August 2006, he was given the
additional responsibility of managing LeCroy's worldwide sales force.
Previously, he held a variety of sales and marketing management positions during
an 18-year tenure at Tektronix, culminating in his role as Vice President and
General Manager of Tektronix's Communications Business Unit from September 1998
until June 2001. Mr. Bausback has a Bachelor of Science degree in electrical
engineering from Rutgers College of Engineering and completed the YEI Executive
Education program at Kenan-Flagler Business School at the University of North
Carolina at Chapel Hill.

     Carmine J. Napolitano was appointed Vice President and General Manager of
LeCroy's Product Divisions in August 2006. Previously he held the position of
Vice President, President - Serial Data Division, with the acquisition of CATC
in November 2004, (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - CATC Acquisition,") having served as a
CATC Director, President and Chief Executive Officer since July 2004. Mr.
Napolitano joined CATC in September 2002 as Vice President, Chief Financial
Officer and Secretary. He was named Chief Legal Officer in August 2003 and was
promoted to President in November 2003. Before joining CATC, from August 1995
until August 2002, Mr. Napolitano was Vice President of Finance & Administration
and Chief Financial Officer at Centric Software, a leader in collaborative
product development software. Mr. Napolitano received a BS in Mechanical
Engineering from the University of California, Santa Barbara and an MBA in
Finance from New York University.

     David C. Graef has served as Vice President, Chief Technology Officer since
April 2003. Previously, he served as Vice President, Research and Development
from January 1999 through March 2003, Engineering Manager from June 1996 through
January 1999 and Senior Engineer from January 1989 through May 1996. Mr. Graef
has a Bachelor of Science degree in Electrical Engineering from the University
of Bridgeport.

     Sean B. O'Connor was appointed Vice President, Finance and Chief Financial
Officer in November 2005. Previously he served as Vice President, Legal Affairs
and Chief Compliance Officer and from August 2001 to May 2005, he served as the
Company's Tax Director. Prior to joining LeCroy, he was an attorney at the law
firm of McDermott, Will and Emory. Previously Mr. O'Connor served as Director of
Taxation and Finance at Movado Group and as a senior consultant in the New York
office of PricewaterhouseCoopers LLC. Mr. O'Connor, a CPA, received his B.B.A.
from Pace University and his J.D. from Seton Hall University School of Law.

     Conrad J. Fernandes was appointed Vice President of Corporate Development
and Strategy in August 2006. Previously he served as Vice President, Worldwide
Sales from July 2001 to August 2006, Vice President, International Sales from
1999 until 2000, Director of Asia / Pacific Sales from 1994 until 1999 and
Product Marketing Manager from 1990 until 1994. Mr. Fernandes has a Bachelor of
Electronic Engineering degree and a Master of Business Administration degree
from City University of London.

     Dr. Corey Hirsch has served as Vice President, Information Systems and
Facilities since January 2002, and was named Chief Information Officer in May
2005. He joined LeCroy in September 2001, after a 24-year tenure at Tektronix,
most recently as Director of European Operations, and Acting European Vice
President. He completed his Doctorate degree in Business Administration from
Brunel University, London and his Masters in Business Administration from the
University of Oregon, and has recently earned a Certification in Information
Security Management (CISM) from Information Systems Audit and Control
Association (ISACA).

FORWARD-LOOKING INFORMATION

     This Form 10-K contains forward-looking statements. When used in this Form
10-K, the words "anticipate," "believe," "estimate," "will," "plan," "intend,"
and "expect" and similar expressions identify forward-looking statements.



                                       17
<PAGE>

Although we believe that our plans, intentions, and expectations reflected in
any forward-looking statements are reasonable, these plans, intentions, or
expectations may not be achieved. Our actual results, performance, or
achievements could differ materially from those contemplated, expressed, or
implied, by the forward-looking statements contained in this Form 10-K.
Important factors that could cause actual results to differ materially from our
forward-looking statements are set forth in this Form 10-K, including under the
heading "Risk Factors." All forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements set forth in this Form 10-K. Except as required by federal
securities laws, we are under no obligation to update any forward-looking
statement, whether as a result of new information, future events, or otherwise.

ITEM 1A. RISK FACTORS

     An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below together with all of the
other information included in this Form 10-K when evaluating the Company and its
business. If any of the following risks actually occurs, our business, financial
condition, or results of operations could suffer. In that case, the trading
price of our common stock could decline and our stockholders may lose all or
part of their investment.

RISKS RELATED TO OUR BUSINESS

     OUR OPERATING RESULTS ARE EXPECTED TO CONTINUE TO FLUCTUATE AND MAY NOT
     MEET OUR FINANCIAL GUIDANCE OR PUBLISHED ANALYST FORECASTS, WHICH MAY
     CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE SIGNIFICANTLY.

     Our past operating results, including our gross profits, have fluctuated
from fiscal period to fiscal period. We expect our future operating results and
gross profits will continue to fluctuate from fiscal period to fiscal period due
to a number of factors, many of which are outside our control and any of which
could cause our stock price to fluctuate. The primary factors that affect our
operating results include the following:

     o    changes in overall demand for our products;

     o    the timing of the announcement, introduction and market acceptance of
          new products by us or competing companies;

     o    the timing and magnitude of research and development expenses;

     o    changes in the estimation of the future size and growth rates of our
          markets;

     o    changes in our production efficiency;

     o    disruptions in operations at any of our facilities or the facilities
          of any of our contract manufacturers for any reason;

     o    changes in the selling prices of our products; and

     o    changes in foreign currency exchange risks.

     In addition, we have historically experienced somewhat lower activity
during our first fiscal quarter than in other fiscal quarters which, we believe,
is due principally to the lower level of orders and market activity during the
summer months, particularly in Europe. We believe this seasonal aspect of our
business is likely to continue in the future.

     OUR STOCK PRICE MAY BE VOLATILE IN THE FUTURE, AND OUR STOCKHOLDERS MAY BE
     UNABLE TO RESELL THEIR SHARES AT OR ABOVE THE PRICE THEY PAID.

     The market price of our common stock fluctuates significantly. The stock
price could fluctuate in the future due to a number of factors, some of which
are beyond our control. These factors include:

     o    historically low trading volume in our stock relative to alternative
          investments;

     o    announcements of developments related to our business, including
          additions or departures of key personnel;

     o    announcements of technological innovations or new products or
          enhancements by us or our competitors;



                                       18
<PAGE>

     o    sales by competitors, including sales to our customers;

     o    sales of common stock into the public market, including those by
          directors and members of management;

     o    developments in our relationships with our customers, partners,
          distributors and suppliers;

     o    shortfalls or changes from analysts' expectations in revenue, gross
          profits, earnings or losses, or other financial results;

     o    discontinuance of our recent stock repurchase program;

     o    regulatory developments;

     o    fluctuations in results of operations;

     o    failure to meet our financial obligations under any loans or financing
          agreements;

     o    trends in the seasonality of our sales; and

     o    general conditions in our market or the markets served by our
          customers.

     In addition, in recent years the stock market in general and the market for
shares of technology stocks in particular have experienced extreme price
fluctuations, which have often been due largely to factors other than the
operating performance of the affected companies. We cannot ensure that the
market price of our common stock will not decline substantially, or otherwise
continue to experience significant fluctuations in the future, including
fluctuations that are unrelated to our operating performance.

    IF DEMAND FOR OUR PRODUCTS DOES NOT MATCH MANUFACTURING CAPACITY, WE MAY
    UNDERUTILIZE OUR CAPACITY OR, ALTERNATIVELY, BE UNABLE TO FULFILL ORDERS
    IN A TIMELY MANNER, AND IN EITHER SITUATION OUR OPERATING RESULTS MAY
    SUFFER.

     The sale of our products is dependent, to a large degree, on customers
whose industries are subject to cyclical trends in the demands for their
products. We may not be able to adapt production capacity and related cost
structures to rapidly changing market conditions in a timely manner. When demand
does not meet expectations, manufacturing capacity will likely exceed production
requirements. We have at times increased our production capacity and the
overhead that supports production based on anticipated market demand which has
not always developed as expected. As a result, we have periodically
underutilized our capacity, which has adversely affected our earnings due to
existing fixed costs. In addition, conversely, if during a market upturn we
cannot increase manufacturing capacity to meet product demand, we will be unable
to fulfill orders in a timely manner, which in turn may have a negative effect
on operating results and our overall business.

     IF OUR OPERATING RESULTS DECLINE IN THE LONG-TERM, WE MAY BE REQUIRED TO
     ESTABLISH AN ADDITIONAL VALUATION ALLOWANCE AGAINST OUR
     NET DEFERRED TAX ASSETS.

     We evaluate whether our deferred tax assets can be realized and assess the
need for a valuation allowance on an ongoing basis. As of June 30, 2006, our
Consolidated Balance Sheet includes approximately $15.5 million of deferred tax
assets after valuation allowance related to the future tax benefit of certain
temporary differences between our financial statements and our tax returns.
Realization of our deferred tax assets is mainly dependent on our ability to
generate future taxable income. As of June 30, 2006, we recorded a valuation
allowance of approximately $0.3 million to reserve for those deferred tax assets
we believe are not more likely than not to be realized in future periods. An
additional valuation allowance would be recorded if it was deemed more likely
than not that some or all of our deferred assets will not be realized. If we
establish additional valuation allowances, we would record a tax expense in our
Consolidated Statements of Operations, which would have an adverse impact on our
operating results.

     WE FACE RISKS FROM FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES VERSUS
     THE U.S. DOLLAR AND THE COST OF CURRENCY EXCHANGE, WHICH AFFECT OUR
     REVENUE, COST OF REVENUE AND OPERATING MARGINS AND COULD RESULT IN
     EXCHANGE LOSSES.

     A large portion of our sales and expenses are denominated in foreign
currencies. We purchase materials from suppliers and sell our products around
the world and maintain investments in foreign subsidiaries, all denominated in a
variety of currencies. As a consequence, we are exposed to risks from
fluctuations in foreign currency exchange rates with respect to a number of



                                       19
<PAGE>

currencies, changes in government policies and legal and regulatory
requirements, political instability, transportation delays and the imposition of
tariffs and export controls. Changes in the relation of foreign currencies to
the U.S. dollar will affect revenues, our cost of revenue and operating margins
and could result in exchange losses. Among the more significant potential risks
to us of relative fluctuations in foreign currency exchange rates is the
relationship among and between the U.S. dollar, European monetary unit (Euro),
Swiss franc, British pound, Swedish krona, Japanese yen, Korean won, and
Singapore dollar.

     We have a program of entering into foreign exchange forward contracts to
minimize the risks associated with currency fluctuations on assets, liabilities
or other transactions denominated in other than the functional currency of us or
our subsidiaries. It cannot be assured, however, that this program will
effectively offset all of our foreign currency risk related to these assets or
liabilities. These foreign exchange forward contracts do not qualify for hedge
accounting. Other than this program, we do not attempt to reduce our foreign
currency exchange risks by entering into foreign currency management programs.
As a consequence, there can be no assurance that fluctuations in foreign
currency exchange rates in the future will not result in mismatches between
local currency revenues and expenses, and will not adversely affect our results
of operations. Moreover, fluctuations in exchange rates could affect the demand
for our products.

     No assurance can be given that our strategies will prevent future currency
fluctuations from having a material adverse affect on our business, financial
condition, results of operations or liquidity.

     WE FACE NUMEROUS RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS,
     WHICH COULD CAUSE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
     AND RESULTS OF OPERATIONS SINCE APPROXIMATELY TWO-THIRDS OF OUR
     REVENUES ARE DERIVED FROM INTERNATIONAL SALES.

     We market and sell our products and services outside the United States, and
currently have employees located in China, France, Germany, Italy, Japan,
Singapore, South Korea, Sweden, Switzerland and the United Kingdom. Many of our
customers and licensees are located outside the United States. As part of our
strategy, we have expanded our international sales, particularly in China. We
face numerous risks in doing business outside the United States, including:

     o    dependence on sales representatives or foreign distributors and their
          sales channels;

     o    longer accounts receivable collection cycles;

     o    less effective and less predictable recognition, protection and
          enforcement of intellectual property rights, specifically in areas of
          Asia and particularly in China;

     o    trade protection measures, import or export licensing requirements,
          tariffs and other trade barriers;

     o    highly cyclical business environments;

     o    unusual or burdensome foreign laws or regulatory requirements or
          unexpected changes to those laws or requirements;

     o    strengthening of the U.S. dollar, which could make our products more
          expensive;

     o    changes in the political or economic condition of a specific country
          or region, particularly in emerging markets; and

     o    potentially adverse tax consequences.

     Such factors could cause our future international sales to decline.

     Our business practices in international markets are also subject to the
requirements of the Foreign Corrupt Practices Act. If any of our employees are
found to have violated these requirements, we could be subject to significant
fines and other penalties.

     Our products are also subject to United States export control restrictions.
In certain cases, we may not be permitted to export products without obtaining
an export license. U.S. export laws also prohibit the export of our products to
a number of countries deemed by the United States to be hostile. The export of
our high-performance oscilloscopes from the United States, which accounts for a
material portion of our internationally derived revenue, is also subject to
regulation under the Treaty for Nuclear Non-Proliferation. However, only a small
portion of those oscilloscopes are sold in countries where that treaty restricts
the end-user. These restrictions may make foreign competitors facing less
stringent controls on their products more competitive in the global market. We
cannot be certain that the U.S. government will approve any pending or future



                                       20
<PAGE>

export license requests. In addition, the list of products and countries for
which export approval is required, and the regulatory policies with respect
thereto, could be revised. Our international sales and, because approximately
two-thirds of our revenue is derived from sales outside the United States, our
sales in general, could be materially harmed by our inability to obtain required
licenses or by the costs of compliance.

     We may be greatly impacted by the political, economic, and military
conditions in China, Taiwan, North Korea, and South Korea. These countries have
recently conducted military exercises in or near the others' territorial waters
and airspace. Such disputes may continue or escalate, resulting in economic
embargoes, disruptions in shipping, or even military hostilities. This could
severely harm our business by interrupting or delaying shipment of our products
to or through these areas and/or reducing our sales in these areas.

     WE DEPEND ON SINGLE-SOURCE SUPPLIERS FOR SOME OF OUR PRODUCTS, AND THE
     LOSS OF THESE SUPPLIERS COULD HARM OUR BUSINESS BY INTERRUPTING OR
     TERMINATING OUR MANUFACTURE OF THOSE PRODUCTS.

     We purchase a small number of parts from single-source suppliers. In
particular, several key integrated circuits that we use are made by
International Business Machines ("IBM"). Although we have not experienced
significant production delays attributable to supply changes, we believe that,
for integrated circuits in particular, alternative sources of supply would be
difficult to develop over a short period of time. Because we have no direct
control over our third-party suppliers, interruptions or delays in the products
and services provided by these third parties may be difficult to remedy in a
timely fashion. In addition, if such suppliers are unable or unwilling to
deliver the necessary parts or products, we may be unable to redesign or adapt
our technology to work without such parts or find alternative suppliers or
manufacturers. In such events, we could experience interruptions, delays,
increased costs, or quality control problems.

     WE DEPEND UPON KEY PERSONNEL AND QUALIFIED FUTURE HIRES TO IMPLEMENT OUR
     EXPANSION STRATEGY, AND IF WE ARE UNABLE TO RETAIN OR ATTRACT PERSONNEL
     WE MAY NOT BE ABLE TO MANAGE AND OPERATE SUCCESSFULLY AND WE MAY NOT BE
     ABLE TO MEET OUR STRATEGIC OBJECTIVES.

     Our success depends on the efforts and abilities of senior management and
key employees in the sales, marketing, research and development, and
manufacturing areas. Many of these employees would be difficult to replace. We
do not have employment contracts with some of our key personnel. If we cannot
retain existing key managers and employ additional qualified senior employees,
our business, financial condition, and results of operations could be materially
and adversely affected. We do not maintain "key man" life insurance policies on
any of our personnel. Future expansion of operations will require us to attract,
train and retain new personnel. In addition, we may be limited by
non-solicitation agreements entered into by our key personnel with respect to
hiring employees from our competitors. These factors could increase our
operating expenses. If we are unable to recruit or retain a sufficient number of
qualified employees, or the costs of compensation or employee benefits increase
substantially, our business, results of operations or financial condition could
be materially and adversely affected.

     WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR INTELLECTUAL AND PROPRIETARY
     RIGHTS, WHICH WOULD DEPRIVE US OF A COMPETITIVE ADVANTAGE AND THEREBY
     NEGATIVELY IMPACT OUR ABILITY TO COMPETE.

     As a technology-based company, our success depends on developing and
protecting our intellectual property. We rely generally on patent, copyright,
trademark and trade secret laws in the United States and abroad. Electronic
equipment as complex as most of our products, however, is generally not
patentable in its entirety. We also license intellectual property from third
parties and rely on those parties to maintain and protect their technology. We
cannot be certain that actions we take to establish and protect proprietary
rights will be adequate, particularly in countries where intellectual property
rights are not highly developed or protected. If we are unable to adequately
protect our technology, or if we are unable to continue to obtain or maintain
licenses for protected technology from third parties, it may be difficult to
design alternatives to such technology without incurring significant costs.
Thus, the loss of intellectual property rights to technology could have a
material adverse effect on our business, results of operations or financial
condition. From time to time, in the ordinary course of business, we receive
notices from third parties regarding intellectual property infringement or take
action against others with regard to intellectual property rights. Even where we
are successful in defending or pursuing such claims, we may incur significant
costs. In the event of a successful claim against us, we could lose our rights
to needed technology or be required to pay license fees for the infringed
rights, either of which could have an adverse impact on our business.

                                       21
<PAGE>

     WE LICENSE CERTAIN INTELLECTUAL PROPERTY FROM THIRD PARTIES, AND THE LOSS
     OF THESE LICENSES COULD DELAY DEVELOPMENT OF FUTURE PRODUCTS OR PREVENT
     THE SALE OR ENHANCEMENT OF EXISTING PRODUCTS.

     We rely on licenses of intellectual property for our businesses, including
technology used in our products. We cannot ensure that these licenses will be
available in the future on favorable terms or at all. The loss of these licenses
or the ability to maintain any of them on acceptable terms could delay
development of future products or prevent the further sale or enhancement of
existing products. Such loss could adversely affect our business, results of
operations and financial condition.

     POTENTIAL ACQUISITIONS, STRATEGIC ALLIANCES, AND JOINT VENTURES MAY RESULT
     IN FINANCIAL RESULTS THAT ARE DIFFERENT THAN EXPECTED.

     In the normal course of business, we engage in discussions with third
parties relating to possible acquisitions, strategic alliances and joint
ventures. On October 29, 2004, we acquired all of the outstanding shares of
common stock of CATC. As a result of our acquisition of CATC or other
transactions which may be consummated, our financial results may differ from the
investment community's expectations in a given quarter and year. In addition,
acquisitions and strategic alliances may require us to integrate a different
company culture, management team and business infrastructure. We may have
difficulty developing, manufacturing and marketing the products of the
newly-acquired company in a way that enhances the performance of our combined
businesses or product lines to realize the value from expected synergies.
Depending on the size and complexity of an acquisition, our successful
integration of the entity depends on a variety of factors, including:

     o    the retention of key employees;

     o    the management of facilities and employees in different geographic
          areas;

     o    the retention of key customers; and

     o    the integration or coordination of different research and development,
          product manufacturing and sales programs and facilities.

     Any impairment of the value of purchased assets or goodwill could have a
significant negative impact on our future operating results.

     All of these efforts require varying levels of management resources, which
may divert our attention from other business operations. Further, if market
conditions or other factors lead us to change our strategic direction, we may
not realize the expected value from such transactions. If we do not realize the
expected benefits or synergies of such transactions, our consolidated financial
position, results of operations, cash flows and stock price could be negatively
impacted.

     WE MAY NOT BE ABLE TO OBTAIN THE CAPITAL WE NEED TO MAINTAIN OR GROW
     OUR BUSINESS.

     Our ability to execute our long-term strategy may depend to a significant
degree on our ability to obtain long-term debt and equity capital. We have no
commitments for additional borrowings at this time, other than $46.5 million
remaining under the Revolver with The Bank of New York and the other lenders
party thereto, or for sales of equity, other than under our existing employee
benefit plans. We cannot determine the precise amount and timing of our funding
needs at this time. We may be unable to obtain future additional financing on
terms acceptable to us, or at all. If we fail to comply with certain covenants
relating to our indebtedness, we may need to refinance our indebtedness or repay
it. We also may need to refinance our indebtedness at maturity. We may not be
able to obtain additional capital on favorable terms to refinance our
indebtedness.

     The following factors could affect our ability to obtain additional
financing on favorable terms, or at all:

     o    our results of operations;



                                       22
<PAGE>

     o    general economic conditions and conditions in our industry;

     o    the perception in the capital markets of our business;

     o    our ratio of debt to equity;

     o    our financial condition;

     o    our business prospects; and

     o    changes in interest rates.

     In addition, certain covenants relating to our $100.0 million credit
facility impose limitations on additional indebtedness. If we are unable to
obtain sufficient capital in the future, we may have to curtail our capital
expenditures and reduce research and development expenditures. Any such actions
could have a material adverse effect on our business, financial condition,
results of operations and liquidity.

     WE COULD INCUR SUBSTANTIAL COSTS AS A RESULT OF VIOLATIONS OF OR
     LIABILITIES UNDER ENVIRONMENTAL LAWS.

     Our operations and products are subject to laws and regulations relating to
the protection of the environment, including those governing the discharge of
pollutants into the air or water, the management and disposal of hazardous
substances or wastes and the cleanup of contaminated sites. Some of our
operations require environmental permits and controls to prevent and reduce air
and water pollution, and these permits are subject to modification, renewal and
revocation by issuing authorities. We could incur substantial costs, including
cleanup costs, fines and civil or criminal sanctions and third-party claims for
property damage and personal injury as a result of violations of or liabilities
under environmental laws or noncompliance with environmental permits.

     Our former subsidiary, Digitech Industries, Inc., has been involved in
environmental remediation activities, the liability for which was retained by us
and entirely reserved for after the sale of the Vigilant Networks business and
the residual assets of Digitech. Any liability beyond what is currently expected
and reserved for could have a material adverse affect on our results of
operations.

     WE ARE SUBJECT TO LAWS AND REGULATIONS GOVERNING GOVERNMENT CONTRACTS,
     AND FAILURE TO ADDRESS THESE LAWS AND REGULATIONS OR
     COMPLY WITH GOVERNMENT CONTRACTS COULD HARM OUR BUSINESS BY LEADING
     TO A REDUCTION IN REVENUE ASSOCIATED WITH THESE CUSTOMERS.

     We have agreements relating to the sale of our products to government
entities and, as a result, we are subject to various statutes and regulations
that apply to companies doing business with the government. The laws governing
government contracts differ from the laws governing private contracts. For
example, many government contracts contain pricing terms and conditions that are
not applicable to private contracts. We are also subject to investigation for
compliance with the regulations governing government contracts. A failure to
comply with these regulations might result in suspension of these contracts, or
administrative penalties.

     WE HAVE A CREDIT FACILITY THAT CONTAINS FINANCIAL COVENANTS, AND THE
     FAILURE TO COMPLY WITH THESE COVENANTS COULD HARM OUR
     FINANCIAL CONDITION BECAUSE OUR CREDIT FACILITY MAY BE UNAVAILABLE TO US.

     We have a $100.0 million credit facility with The Bank of New York and the
other lenders party thereto. We are subject to financial covenants under our
credit facility, including interest coverage ratio, minimum total net worth,
leverage ratio and fixed charge coverage ratio requirements. Failure to comply
with the financial covenants under our credit facility may adversely affect our
business, results of operations, liquidity and financial condition.

    ISSUANCE OF SHARES IN CONNECTION WITH FINANCING TRANSACTIONS OR UNDER
    STOCK PLANS WILL DILUTE CURRENT STOCKHOLDERS.

     Pursuant to our stock plans, our management is authorized to grant
restricted stock awards or stock options to our employees, directors and
consultants. Our stockholders will incur dilution upon exercise of any
outstanding stock options. In addition, if we raise additional funds by issuing
additional common stock, or securities convertible into or exchangeable or
exercisable for common stock, further dilution to our existing stockholders will
result, and new investors could have rights superior to existing stockholders.

    ANTI-TAKEOVER PROVISIONS UNDER OUR STOCKHOLDER RIGHTS PLAN, CHARTER
    DOCUMENTS AND DELAWARE LAW COULD DELAY OR PREVENT A CHANGE OF
    CONTROL AND COULD ALSO LIMIT THE MARKET PRICE OF OUR STOCK.

                                       23
<PAGE>

     Our stockholder rights plan, certificate of incorporation and bylaws
contain provisions that could delay or prevent a change of control of our
company that our stockholders might consider favorable. Certain provisions of
our certificate of incorporation and bylaws allow us to:

     o    authorize the issuance of preferred stock which can be created and
          issued by the board of directors without prior stockholder approval,
          with rights senior to those of the common stock;

     o    provide for a classified board of directors, with each director
          serving a staggered three-year term;

     o    prohibit stockholders from filling board vacancies, calling special
          stockholder meetings, or taking action by written consent; and

     o    require advance written notice of stockholder proposals and director
          nominations.

     In addition, we are governed by the provisions of Section 203 of the
Delaware General Corporate Law, which may prohibit certain business combinations
with stockholders owning 15% or more of our outstanding voting stock. These and
other provisions in our certificate of incorporation, bylaws and stockholder
rights plan and Delaware law could make it more difficult for stockholders or
potential acquirers to obtain control of our board of directors or initiate
actions that are opposed by the then-current board of directors, including delay
or impede a merger, tender offer, or proxy contest involving our company. Any
delay or prevention of a change of control transaction or changes in our board
of directors could cause the market price of our common stock to decline.

    WE FACE BURDENS RELATING TO THE RECENT TREND TOWARD STRICTER CORPORATE
    GOVERNANCE AND FINANCIAL REPORTING STANDARDS.

     Recently adopted or new legislation or regulations that follow the trend of
imposing stricter corporate governance and financial reporting standards,
including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, have
led to an increase in our costs of compliance. A failure to comply with these
new laws and regulations may impact market perception of our financial
condition, could materially harm our business and could cause the market price
of our common stock to decline. Additionally, it is unclear what additional laws
or regulations may develop, and we cannot predict the ultimate impact of any
future changes.

     WE MUST SUCCESSFULLY EXECUTE OUR STRATEGY TO INTRODUCE NEW PRODUCTS.

     One of our key strategies is to expand our addressable portion of the
oscilloscope and protocol analysis markets by introducing new products such as
sampling oscilloscopes and protocol exercisers and probes. We have in the past
withdrawn product lines due to implementation and financial concerns. The
success of our new product offerings will depend on a number of factors,
including our ability to identify customers' existing and future needs properly
and quickly, timely manufacture and deliver products that address these needs in
sufficient volumes, differentiate offerings from competitors' offerings, price
products competitively and anticipate competitors' developments of new products
or technological innovations.

     WITHOUT THE TIMELY INTRODUCTION OF COMPETITIVE PRODUCTS, OUR PRODUCTS MAY
     BECOME TECHNOLOGICALLY OBSOLETE.

     We generally sell our products in industries that are characterized by
rapid technological changes, frequent new product announcements and
introductions and changing industry standards. The development of new,
technologically advanced products is a complex and uncertain process requiring
high levels of innovation, highly skilled engineering and development personnel
and accurate anticipation of technological and market trends. Consequently,
product development delays are typical in our industry. If we fail to introduce
competitive products in a timely manner, customers may defer placing orders in
anticipation of future releases or may purchase products from competitors.
Product development delays may result from numerous factors, including:

     o    changing product specifications and customer requirements;

     o    unanticipated engineering complexities;

     o    difficulties with or delays by contract manufacturers or suppliers of
          key components or technologies;

     o    difficulties in allocating engineering resources and overcoming
          resource limitations; and

     o    difficulties in hiring and retaining necessary technical personnel.


                                       24
<PAGE>

     Without the timely introduction of new products, services and enhancements,
our products may become technologically obsolete, in which case our revenue and
operating results could suffer.

     IF WE DEVOTE RESOURCES TO DEVELOPING PRODUCTS FOR EMERGING COMMUNICATIONS
     STANDARDS THAT ULTIMATELY ARE NOT WIDELY ACCEPTED, OUR BUSINESS COULD
     BE HARMED.

     Our future growth depends, in part, upon our ability to develop,
manufacture and sell in volume advanced verification systems for existing,
emerging and yet unforeseen communications standards. We have little or no
control over the conception, development or adoption of new standards. Moreover,
even in relation to currently emerging standards, the markets are rapidly
evolving and we have virtually no ability to impact the adoption of those
standards. As a result, there is significant uncertainty as to whether markets
for new and emerging standards ultimately will develop at all or, if they do
develop, their potential size or future growth rate. We may incur significant
expenses and dedicate significant time and resources to develop products for
standards that fail to gain broad acceptance. Failure of a standard for which we
devote substantial resources to gain widespread acceptance would likely harm our
business.

     IF WE FAIL TO MAINTAIN AND EXPAND OUR RELATIONSHIPS WITH THE CORE OR
     PROMOTER COMPANIES IN OUR TARGET MARKETS, WE MAY HAVE
     DIFFICULTY DEVELOPING AND MARKETING CERTAIN PROTOCOL ANALYZER PRODUCTS.

     It is important to our success that we establish, maintain and expand our
relationships with technology and infrastructure leader companies developing
emerging communications standards in our target markets. We must work closely
with these companies to gain valuable insights into new market demands, obtain
early access to standards as they develop and help us design new or enhanced
products. Generally, we do not enter into contracts obligating these companies
to work or share their technology. Industry leaders could choose to work with
other companies in the future. If we fail to establish, maintain and expand our
industry relationships, we could lose first-mover advantage with respect to
emerging standards and it would likely be more difficult for us to develop and
market products that address these standards.



RISKS RELATED TO OUR INDUSTRY

     WE OPERATE IN HIGHLY COMPETITIVE MARKETS AND THIS COMPETITION COULD REDUCE
     OUR MARKET SHARE AND HARM OUR BUSINESS.

     The oscilloscope and protocol analysis markets are highly competitive and
characterized by rapid and continual advances in technology. Our principal
competitors in these markets are Tektronix and Agilent. Both of our principal
competitors have substantially greater sales and marketing, development and
financial resources. We believe that Tektronix, Agilent and other competitors
each offer a wide range of products that attempt to address most sectors of the
oscilloscope and many sectors of the protocol analysis markets.

     We have historically engaged in intense competition with Tektronix. Some of
our senior managers, including our chief executive officer and chief operating
officer, are former employees of Tektronix. In fiscal 1994, we settled
litigation with Tektronix alleging that our oscilloscope products infringed
certain patents held by Tektronix by entering into a license agreement for the
right to use that intellectual property. In fiscal 2005, we settled intellectual
property litigation with Tektronix in which both sides claimed patent
infringement. This settlement is described in more detail in Note 22 to the
Consolidated Financial Statements.

     We believe that the principal bases of competition in the oscilloscope and
protocol analysis markets are a product's performance (bandwidth, sample rate,
memory length and processing power), its price and quality, the vendor's name
recognition and reputation, product availability and the quality of post-sale
support. If any of our competitors surpass us or are perceived to have surpassed
us with respect to one or more of these factors, we may lose customers. We also
believe that our success will depend in part on our ability to maintain and
develop the advanced technology used in our oscilloscope products and protocol
analyzers and our ability to offer high-performance products timely and at a
favorable "price-to-performance" ratio. We cannot assure that we will continue
to compete effectively.

                                       25
<PAGE>

     A PROLONGED ECONOMIC DOWNTURN COULD MATERIALLY HARM OUR BUSINESS BY
     DECREASING CAPITAL SPENDING.

     Negative trends in the general economy, including trends resulting from
actual or threatened military action by the United States and threats of
terrorist attacks in the United States and abroad, could cause a decrease in
capital spending in many of the markets we serve. In particular, a downward
cycle affecting the computer and semiconductor, data storage devices, automotive
and industrial, and military and aerospace markets would likely result in a
reduction in demand for our products and would have a material adverse effect on
our business, results of operations, financial condition and liquidity. In
addition, if customers' markets decline, we may not be able to collect
outstanding amounts due to us. Such declines could harm our consolidated
financial position, results of operations, cash flows and stock price, and could
limit our ability to maintain profitability.

     WE COULD BE AFFECTED BY GOVERNMENT REGULATION AND OTHER LEGAL
     UNCERTAINTIES.

     We manufacture our products in the United States, and sell our products and
purchase parts, components and sub-assemblies in a number of countries. We are
therefore subject to various significant international, federal, state and local
regulations, including but not limited to health and safety, product content,
labor and import/export regulations. For example, the export of high-performance
oscilloscopes from the United States is subject to regulation under the Treaty
for Nuclear Non-Proliferation. These regulations are complex, change frequently
and have tended to become more stringent over time. We may be required to incur
significant expenses to comply with these regulations or to remedy violations of
these regulations. Any failure by us to comply with applicable government
regulations could also result in cessation of our operations or portions of our
operations, product recalls or impositions of fines and restrictions on our
ability to carry on or expand our operations. In addition, because many of our
products are regulated or sold into regulated industries, we must comply with
additional regulations in marketing our products.

ITEM 1B. UNRESOLVED STAFF COMMENTS

    There are no unresolved comments to be reported pursuant to Item 1B.

ITEM 2. PROPERTIES.

     We own our executive offices and manufacturing facility, which is an
approximately 88,000 square foot building in Chestnut Ridge, New York. Pursuant
to our secured credit agreement with The Bank of New York and other syndicated
lenders, we granted the banks a security interest in this property. In addition,
we lease other office space in Santa Clara, California and around the world to
support our local sales and service operations and to support our research and
development activities. Santa Clara also serves as a manufacturing facility for
a limited number of products. We believe that our facilities are in good
condition and are suitable and sufficient for our current operations.



                                       26
<PAGE>


ITEM 3. LEGAL PROCEEDINGS.

     From time to time, the Company is involved in lawsuits, claims,
investigations and proceedings, including patent and environmental matters,
which arise in the ordinary course of business. There are no matters pending
that the Company expects to be material to its business, results of operations,
financial condition or cash flows.



                                       27
<PAGE>


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

     During the fourth quarter of fiscal 2006, there were no matters submitted
to a vote of securities holders, through the solicitation of proxies or
otherwise.


                                     PART II

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

PRICE RANGE OF COMMON STOCK

     Our common stock is traded on the NASDAQ Global Market under the symbol
"LCRY." The following table sets forth, for the periods indicated, the high and
low closing prices per share of our common stock as reported on the NASDAQ
Global Market. As of August 29, 2006, there were 313 stockholders of record of
our common stock.

                                                            HIGH        LOW
                                                            ----       -----
Year Ended June 30, 2005:
  First Quarter......................................    $   18.46  $   13.00
  Second Quarter.....................................        23.34      15.69
  Third Quarter......................................        25.42      17.00
  Fourth Quarter.....................................        17.32      12.93

Year Ended June 30, 2006:
  First Quarter......................................    $   15.98  $   13.72
  Second Quarter.....................................        16.32      14.41
  Third Quarter......................................        15.88      13.78
  Fourth Quarter.....................................        15.42      11.78

ISSUER REPURCHASES OF EQUITY SECURITIES

     On May 25, 2006, LeCroy's Board of Directors approved the adoption of a
share repurchase plan authorizing the Company to purchase up to 2 million
shares, not to exceed $25 million, of its common stock. Purchases under this
buyback program may be made from time to time on the open market and in
privately negotiated transactions. The timing of these purchases is dependent
upon several factors, including market conditions, the market price of the
Company's common stock, the effect of the share dilution on earnings, available
cash and any other potential risks the Company may encounter. The share
repurchase plan may be discontinued at any time at the discretion of the
Company's Board of Directors.

     The following table sets forth information regarding LeCroy's purchases of
its common stock on a monthly basis during the fourth quarter of fiscal 2006.
Share repurchases are recorded on a trade date basis.

<TABLE>
<CAPTION>
                                                       TOTAL NUMBER OF
                                         WEIGHTED    SHARES PURCHASED AS     MAXIMUM NUMBER OF
                        TOTAL NUMBER     AVERAGE       PART OF PUBLICLY     SHARES THAT MAY YET
                          OF SHARES     PRICE PAID   ANNOUNCED PLANS OR      BE PURCHASED UNDER
  PERIOD                  PURCHASED     PER SHARE          PROGRAM         THE PLANS OR PROGRAMS
  ------                  ---------     ---------    -------------------   ---------------------
<S>                       <C>          <C>               <C>                  <C>
  May 1, 2006 to May
  31, 2006.......              43,963     $13.43            43,963               1,956,037
  June 1, 2006 to
  June 30, 2006.......         98,320     $12.82            98,320               1,857,717
                               ------                       ------
  Total.....................  142,283     $13.01           142,283               1,857,717
                              =======                      =======

</TABLE>

                                       28
<PAGE>


EQUITY COMPENSATION PLAN INFORMATION

     Information regarding LeCroy's equity compensation plans, including both
stockholder approved plans and plans not approved by stockholders, is set forth
in the section entitled "Executive Compensation-- Equity Compensation Plan
Information" in LeCroy's Notice of Annual Meeting of Stockholders and Proxy
Statement, to be filed within 120 days after LeCroy's fiscal year end of July 1,
2006 (the "Proxy Statement"), which information is incorporated herein by
reference.

DIVIDEND POLICY

     We have never declared or paid cash dividends on our common stock and do
not anticipate paying any dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to operate and expand our business.
Subject to the terms of our revolving credit agreement, our payment of any
future dividends will be at the discretion of our board of directors after
taking into account various factors, including our financial condition,
operating results, cash needs and growth plans. Under the terms of our amended
bank credit agreement, we are permitted within prescribed covenant restrictions
to declare and pay cash dividends.



                                       29
<PAGE>


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

     The following selected consolidated financial data as of and for the year
ended for each fiscal year presented has been derived from our consolidated
financial statements for each of the years in the five-year period ended June
30, 2006. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes
appearing elsewhere in this Annual Report on Form 10-K.


CONSOLIDATED STATEMENTS OF OPERATIONS DATA:

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED JUNE 30,
                                                                  ------------------------------------------------------
                                                                    2006(7)    2005(7)     2004       2003        2002
                                                                  ---------- ---------- ---------- ----------  ---------
<S>                                                              <C>        <C>        <C>        <C>         <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Revenues:
  Test and measurement products(1)....................            $ 153,441  $ 156,440  $ 117,290  $   98,281  $ 103,695
  Service and other(1)(2).............................                7,095      8,538      7,650       9,578      7,761
                                                                  ---------  ---------  ---------  ----------  ---------
    Total revenues....................................              160,536    164,978    124,940     107,859    111,456
Cost of revenues(3)(4)................................               63,476     73,632     52,594      50,989     59,717
                                                                  ---------  ---------  ---------  ----------  ---------
  Gross profit........................................               97,060     91,346     72,346      56,870     51,739

Operating expenses:
  Selling, general and administrative(4)(5)...........               51,622     57,341     43,997      41,422     40,477
  Legal settlement....................................                2,792      1,000         --          --         --
  Research and development(6).........................               30,123     28,050     15,760      18,226     22,006
                                                                  ---------  ---------  ---------  ----------  ---------
    Total operating expenses..........................               84,537     86,391     59,757      59,648     62,483
                                                                  ---------  ---------  ---------  ----------  ---------

Operating income (loss)...............................               12,523      4,955     12,589      (2,778)   (10,744)
  Interest income.....................................                  813        564        716         912        637
  Interest expense....................................               (3,096)    (2,742)      (720)       (675)      (211)
  Other, net..........................................                 (204)       238         (7)       (321)      (116)
  Loss from sale of marketable securities.............                   --         --         --          --       (122)
Income (loss) from continuing operations before
  income taxes........................................               10,036      3,015     12,578      (2,862)   (10,556)
                                                                  ---------  ---------  ---------  ----------  ---------
(Provision for) benefit from income taxes.............               (3,463)      (872)    (4,653)      1,059      4,307
                                                                  ---------  ---------  ---------  ----------  ---------
Income (loss) from continuing operations..............                6,573      2,143      7,925      (1,803)    (6,249)

Gain from discontinued operations, net of tax.........                   --         --        119         129         --
                                                                  ---------  ---------  ---------  ----------  ---------
Net income (loss).....................................                6,573      2,143      8,044      (1,674)    (6,249)

Charges related to convertible preferred stock........                   --         --         --       2,069      1,876
Redemption of convertible preferred stock.............                   --         --      7,665          --         --
                                                                  ---------  ---------  ---------  ----------  ---------
Net income (loss) applicable to common stockholders...            $   6,573  $   2,143  $     379  $   (3,743) $  (8,125)
                                                                  =========  =========  =========  ==========  =========

Net income (loss) per common share - basic:
    Income (loss) from continuing operations applicable
      to common stockholders..........................            $    0.54  $    0.18  $    0.02  $   (0.37)  $   (0.81)
    Gain from discontinued operations, net of tax.....                   --         --       0.01       0.01          --
    Net income (loss) applicable to common stockholders                0.54       0.18       0.04      (0.36)      (0.81)

Net income (loss) per common share - diluted:
    Income (loss) applicable to common stockholders...            $    0.53  $    0.17  $    0.02  $   (0.37)  $   (0.81)
    Gain from discontinued operations, net of tax.....                   --         --       0.01       0.01          --
    Net income (loss) applicable to common stockholders                0.53       0.17       0.03      (0.36)      (0.81)

Weighted average number of common shares:
  Basic...............................................               12,218     11,774     10,754      10,364     10,052
  Diluted.............................................               12,474     12,258     11,074      10,364     10,052

<CAPTION>

                                                                                    AS OF JUNE 30,
                                                                -------------------------------------------------------
                                                                   2006       2005        2004       2003       2002
                                                                ---------- ----------  ---------- ---------- ----------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
<S>                                                             <C>        <C>         <C>        <C>        <C>
Cash and cash equivalents and marketable securities,
  current.................................................      $  16,972  $   13,866  $  38,100  $  30,851  $   27,322
Working capital...........................................         46,997      44,313     69,916     62,831      63,265
Total assets..............................................        201,974     193,168    129,793    122,152     126,991
Total debt and capital leases.............................         38,130      45,489        196        291         375
Redeemable convertible preferred stock....................             --          --         --     15,335      13,266
Total stockholders' equity................................        129,703     116,818    101,608     80,514      81,505

</TABLE>


                                       30
<PAGE>

(1)  Certain prior year amounts have been reclassified from service revenue to
     product revenue to conform to the fiscal 2006 and 2005 presentation. These
     reclassifications had no impact on previously reported total revenue.

(2)  Service and other revenue in each of fiscal 2005, 2004, 2003 and 2002
     includes the recognition of $1.3 million of revenue that was deferred with
     the adoption of the Securities and Exchange Commission's Staff Accounting
     Bulletin No. 101, "Revenue Recognition in Financial Statements," ("SAB
     101") as of the beginning of fiscal 2001. Fiscal 2006 includes recognition
     of the remaining balance of $0.7 million of previously deferred revenue
     under SAB 101. Also included in service and other revenue in fiscal 2003 is
     a technology license fee of $3.0 million.

(3)  Cost of revenues in fiscal 2006 includes a $0.1 million charge for
     severance and other related charges. Cost of revenues in fiscal 2005
     includes $2.7 million of charges for inventory write-downs related to a
     change in our long-term product support, $1.8 million in other inventory
     write-downs, $1.5 million of asset impairment charges, and a $0.1 million
     charge for severance and other related charges. Included in cost of
     revenues in fiscal 2003 is $2.3 million of asset impairment charges and a
     $0.1 million charge for severance. In fiscal 2002, we recorded a $1.0
     million charge for severance and $3.6 million of excess and obsolete
     inventory charges related to the cost of inventory associated with
     discontinued product lines and inventory levels that had been deemed to be
     in excess of forecasted requirements.

(4)  Certain prior year amounts have been reclassified from cost of revenues to
     selling, general and administrative expense to conform to the fiscal 2006
     and 2005 presentation. These reclassifications had no impact on previously
     reported operating income (loss).

(5)  In Selling, general and administrative expense in fiscal 2006 and 2005, we
     recorded a charge for severance and other related costs of $0.2 million and
     $1.5 million, respectively. Included in selling, general and administrative
     expense in fiscal 2004 is the reversal of an unused 2002 restructuring
     reserve of $0.1 million. In fiscal 2003, we recorded a $0.3 million charge
     related to the cost of closing our Beaverton, Oregon facility and a $2.4
     million charge for severance, partially offset by the reversal of an unused
     2002 restructuring reserve of $0.1 million. In fiscal 2002, we recorded
     $3.0 million in severance-related charges.

(6)  Research and development in each of fiscal 2006, 2005, 2004, 2003 and 2002
     includes severance-related charges of $0.1 million, $0.1 million, zero,
     $0.7 million and $0.2 million, respectively. In fiscal 2005 we recorded a
     charge for in-process research and development ("IPR&D") of $2.2 million
     related to the acquisition of Computer Access Technology Corporation
     ("CATC") and, in fiscal 2002, a $4.0 million technology access fee paid to
     IBM.

(7)  Results for fiscal 2006 and 2005 include CATC acquired October 29, 2004
     (See "CATC Acquisition" in Management's Discussion and Analysis of
     Financial Condition and Results of Operations).


                                       31
<PAGE>

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

     The following discussion and analysis should be read in conjunction with
the other financial information and consolidated financial statements and
related notes appearing elsewhere in this Form 10-K and the documents
incorporated by reference herein. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of a variety of factors, including those discussed in "Risk Factors" and
elsewhere in this Form 10-K.

     We utilize fiscal years that end on the Saturday nearest to June 30. For
clarity of presentation, we have described all fiscal years as if they end on
June 30. Fiscal years 2006 and 2004 each include 52 weeks. Fiscal year 2005
includes 53 weeks.

OVERVIEW

     We were founded in 1964 to develop, manufacture and sell high performance
signal analysis tools to scientists engaged in high-energy physics research. In
1985 we introduced our first oscilloscope using our core competency of designing
signal acquisition and digitizing technology.

     We are a leading, worldwide provider of oscilloscopes and protocol
analyzers as well as a provider of related test and measurement equipment and
currently operate as one business segment in the Test and Measurement market.
Our oscilloscopes are tools used by designers and engineers to measure and
analyze complex electronic signals in order to develop high-performance systems,
to validate electronic designs and to improve time to market. We currently offer
six families of oscilloscopes, which address different solutions to the markets
we serve: WaveExpert, a powerful family of sampling oscilloscopes and modules;
WaveMaster, one of our high performance product families; WavePro, which is
targeted at the mid- to high-performance sector; WaveRunner, designed for the
mid-performance sector; WaveSurfer, designed for value-oriented users in the
low-performance bandwith sector of the market; and WaveJet, our entry-level
oscilloscope products. Our protocol analyzers are tools used by designers and
engineers to generate and monitor traffic over high speed serial data
interfaces, including USB2.0, Bluetooth, PCI Express, Serial ATA, Serial
Attached SCSI (SAS), Wireless USB, and others.

     We sell our products into a broad range of end markets, including
Computer/Semiconductor/Consumer Electronics, Data Storage,
Automotive/Industrial, and Military/Aerospace markets. We believe that our
products offer the strongest value proposition in these markets by providing
advanced analysis capabilities coupled with innovative and proprietary
technology features. We believe designers in all of these markets are developing
products which rely on increasingly complex electronic signals to provide the
features and performance their customers require.

     We employ a direct sales model utilizing a highly skilled global sales
force where it makes economic sense to do so. We supplement our direct sales
force with a combination of manufacturers' representatives and distributors in
areas where demand levels do not justify direct distribution. We divided the
world into four areas - North America, Europe/Middle East, Japan and
Asia/Pacific. In North America we primarily sell our products directly in the
United States. In Europe/Middle East, we sell our products directly in
Switzerland, Germany, Italy, France, the United Kingdom and Sweden. In Japan, we
sell our products directly. In Asia/Pacific, we sell our products directly in
South Korea, Singapore and five regions in China.

     We generate revenue in a single segment within the Test and Measurement
market, primarily from the sale of our oscilloscopes, protocol analyzers,
probes, accessories, and applications solutions. To a lesser extent, we also
generate revenue from the sales of our extended warranty, maintenance contracts
and repairs and calibrations on our instruments after their warranties expire.

     Generally, we transact revenues and pay our operating expenses in the local
currencies of the countries in which we have a direct distribution presence or
other operations, with limited exceptions, most notably in China where our sales
and operating expenses are denominated in U.S. dollars. In Europe/Middle East,
we transact business in Euros, Swiss francs, British pounds, Swedish krona and



                                       32
<PAGE>

U.S. dollars. In Japan, we transact business in Japanese yen. In South Korea, we
transact business in Korean won and in Singapore, we transact business in both
U.S. dollars and Singapore dollars. For a discussion of our foreign currency
exchange rate exposure, see below, Item 7A of this Part II entitled
"Quantitative and Qualitative Disclosure About Market Risk."

     Historically, we have, at times, experienced lower levels of demand during
our first fiscal quarter than in other fiscal quarters which, we believe, have
been principally due to the lower level of general market activity during the
summer months, particularly in Europe.

     Cost of revenues represents manufacturing and service costs, which
primarily comprise materials, labor and factory overhead. Gross profit
represents revenues less cost of revenues. Additional factors integral to gross
profit earned on our products are mix, as the list prices of our products range
from $2,900 to $128,000, and the effects of foreign currencies, as approximately
two-thirds of our revenues are derived overseas, much of which is denominated in
local currencies while product manufacturing costs are primarily U.S. dollar
denominated.

     Selling, general and administrative expenses consist of salaries and
related overhead costs for sales, marketing and administrative personnel as well
as legal, accounting and other professional services.

     Research and development expenses consist primarily of salaries and related
overhead costs associated with employees engaged in research, design and
development activities, as well as the cost of masks, wafers and other materials
and related test services and equipment used in the development process.

     Our results of operations and financial condition are affected by a variety
of factors. As discussed below, we believe the most significant recurring
factors are the economic strength of the technology markets into which we sell
our products, our ability to identify market demands and develop competitive
products to meet those demands, the announcements and actions of our competitors
and our ability to enter into new markets and broaden our presence in existing
markets.

     Our sales are largely dependent on the health and growth of technology
companies whose operations tend to be cyclical. Consequently, demand for our
products tends to coincide with the increase or decrease in capital spending in
the technology industry.

     In addition, in response to fluctuations in the technology markets we
target, we continually assess and adopt programs aimed at positioning us for
long-term success. These programs may include streamlining operations,
discontinuing older and less profitable product lines, and reducing operating
expenses from time to time. As an example, in fiscal 2006 and 2005 we
implemented restructuring and business realignment plans intended to reduce
costs and more efficiently allocate product development resources. For a more
detailed discussion of our restructuring efforts in fiscal 2006 and 2005, see
the Section entitled "Restructuring and Asset Impairment," below.

     We face significant competition in our target markets. We believe that in
order to continue to compete successfully, we need to timely anticipate,
recognize and respond to changing market demands by providing products that
serve our customers' needs as they arise at prices acceptable to the market. We
believe that we compete favorably with our competition in each of these areas.
Consequently, we are constantly reviewing our product development strategy and
invest time, resources and capital in development projects we deem most likely
to succeed.

     In furtherance of our drive to meet our customers' changing demands, we
also look outside our organization for opportunities to expand our markets.
Accordingly, on October 29, 2004, we completed the acquisition of Computer
Access Technology Corporation ("CATC") to complement our expanding portfolio of
serial data test solutions. This division, Protocol Solutions Group ("PSG"), now
represents about 15% of our total business. The acquisition of CATC is described
more fully below. In March 2006, we completed purchase and settlement agreements
with Iwatsu Electric Corporation that included the rights to a new low-end
product line, `ViewGo,' re-engineered and launched as the WaveJet Family of
products, as well as unrelated intellectual property designs and a 10-year
non-compete agreement.


                                       33
<PAGE>

     Also in fiscal 2006, we transformed our entire low and mid-range product
lines by introducing a new line of WaveRunners and WaveSurfers and adding the
new WaveJet product line noted above. Additionally, we expanded our high-end
product line by introducing the SDA18000. We believe that our diversified
product mix strategically positions us to expand our presence in the Test and
Measurement market in the coming year.

CATC ACQUISITION

     On October 29, 2004, we completed our acquisition of 100% of the
outstanding common stock of CATC (the "Merger"). CATC is a provider of advanced
verification systems for existing and emerging digital communications standards.
CATC's products are used by semiconductor, device, system and software companies
at each phase of their products' lifecycles from development through production
and market deployment. CATC had approximately 70 employees at the time of the
Merger. Through our acquisition of CATC, we expect to capitalize on the
increasing demand for serial data test instruments, leverage our global,
technical, direct sales force to accelerate the growth of CATC's products,
strengthen our position in the data storage market, increase penetration into
the computer market, expand gross profit margins, increase operating leverage
leading to expanded operating profit and increase cash generation capabilities.

     Total consideration paid to acquire CATC was approximately $130.0 million.
The Merger was recorded under the purchase method of accounting, which requires
that the total consideration be allocated to the assets acquired and liabilities
assumed based on their fair values. On the effective date of the Merger, each
share of CATC common stock issued and outstanding immediately prior thereto was
canceled and converted into the right to receive $6.00 in cash. In addition, we
paid cash to the holders of CATC's outstanding, vested, in-the-money stock
options and employee stock purchase plan purchase rights. Further, we assumed
CATC's outstanding unvested stock options, as well as certain vested but
unexercised stock options, by granting to CATC employees a total of 648,284
options to purchase LeCroy common stock (the "LeCroy Options"). The LeCroy
Options were recorded at their fair values using the Black-Scholes option
pricing model based on a stock price of $16.83 per share, which was the closing
price of LeCroy common stock on October 29, 2004, less the intrinsic value of
unvested options, which was to be charged as compensation expense to operations
as earned by employees over their remaining vesting periods. As a result of the
adoption of SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R") on
July 1, 2005, which requires that the cost resulting from all share-based
payment transactions be recognized in the financial statements at their fair
values, the remaining unamortized deferred compensation was eliminated against
Additional paid-in capital in the Consolidated Balance Sheet in the first fiscal
quarter of 2006 and the fair value of remaining unvested LeCroy options is being
recognized in our consolidated financial statements over the remaining requisite
service period. (See "Critical Accounting Policies" below). LeCroy paid cash of
$80.4 million, net of cash acquired, using $30.4 million of cash on hand and
borrowings of $50.0 million under our $75.0 million senior, secured, five-year
credit agreement entered into on October 29, 2004, with the lenders listed
therein and The Bank of New York, as administrative agent for such lenders. For
more information see Notes 2 and 13 to the Consolidated Financial Statements.

RESTRUCTURING AND ASSET IMPAIRMENT

     In the fourth quarter of fiscal 2006, we realigned certain of our business
processes and as a result, incurred expenses of approximately $0.4 million of
which approximately $0.1 million was charged to cost of revenues, $0.2 million
was expensed to Selling, general and administrative and $0.1 million was
expensed to Research and development. The implementation of this plan resulted
in headcount reductions of sixteen employees or 3.5% of the workforce as
compared to June 30, 2005. As of June 30, 2006, approximately $0.2 million has
been paid in cash and $0.2 million remains in Accrued expenses and other current
liabilities on the Consolidated Balance Sheet. Severance and other related
amounts under this plan will be paid by the end of the third quarter of fiscal
2007.

     In the fourth quarter of fiscal 2005, we realigned certain of our business
processes and, as a result, incurred expenses of approximately $1.0 million,
consisting of $0.7 million of severance and related expenses and $0.3 million of
facility closure expenses, which included lease termination costs and asset
write-downs. Of these costs, $0.1 million was recorded in Cost of revenues, $0.8
million was recorded in Selling, general and administrative and $0.1 million was
recorded in Research and development. The implementation of this plan resulted
in headcount reductions of 20 employees or approximately 5% of the workforce as
compared to June 30, 2004. As of June 30, 2006, approximately $0.7 million of
severance has been paid and $0.3 million of facility charges have been paid in
cash or written off and approximately $19,000 remains in Accrued expenses and
other current liabilities on the Consolidated Balance Sheet. The remaining
balance is expected to be paid by the end of fiscal 2007.


                                       34
<PAGE>

     During the second quarter of fiscal 2005, as a result of the Merger, we
adopted a plan to restructure our organization and refine our product strategy.
In connection with the adoption of this plan, we recorded a charge for severance
and other related expenses in fiscal 2005 of approximately $0.6 million in
Selling, general and administrative expense. The implementation of this plan
resulted in headcount reductions of six employees or approximately 2% of the
workforce as compared to June 30, 2004. As of June 30, 2006, approximately $0.6
million of severance has been paid and approximately $46,000 remains in Accrued
expenses and other current liabilities on the Consolidated Balance Sheet.
Severance and other related amounts under this plan will be paid by the end of
the second quarter of fiscal 2007. Additionally, in the second quarter of fiscal
2005, as a result of a change in our organization stemming from the Merger and a
subsequent change in our low to mid-range oscilloscope manufacturing strategy,
we took a $1.5 million non-cash charge to Cost of revenues for the impairment of
a related intangible asset.

     The below table summarizes our restructuring charges for the fiscal years
ended June 30, 2006 and 2005 (No similar charges were recorded in fiscal 2004.)
(in thousands):

                                                         FISCAL YEAR
                                                     2006             2005
                                                     ----             ----

     Charges for:
       Impaired intangible assets.............   $     --      $      1,500
       Service center closure.................         --                59
       Severance and related costs............          77               18
                                                 ---------     ------------
          Cost of revenues....................   $      77     $      1,577
                                                 =========     ============

     Charges for:
       Severance and related costs............   $     127     $         77
                                                 ---------     ------------
          Research and development............   $     127     $         77
                                                 =========     ============

     Charges for:
       Severance and related costs............   $     176     $      1,328
       Facility closure.......................         --               171
                                                 ---------     ------------
          Selling, general and administrative.   $     176     $      1,499
                                                 =========     ============

     These restructuring and business realignment charges represent our best
efforts to respond to the current demands in our industry. However, these and
future cost reductions, or other benefits expected from the restructuring, may
be insufficient to align our operations with customer demand and the changes
affecting our industry, or may be more costly or extensive than currently
anticipated.

CRITICAL ACCOUNTING POLICIES

     The discussion and analysis of our financial position and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles. Our
significant accounting policies are described in Note 1 to the consolidated
financial statements. The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities in the consolidated financial statements and
accompanying notes. These estimates and assumptions are based on management's
judgment and available information and, consequently, actual results could
differ from these estimates. The accounting policies that we believe are the
most critical in understanding and evaluating our reported financial results
include the following:

     Revenue Recognition. We enter into agreements to sell products, services,
and other arrangements that include combinations of products and services.
Revenue from product sales, net of allowances for anticipated returns, is
recognized provided that persuasive evidence of an arrangement exists, delivery
has occurred, the selling price is fixed or determinable, and collectibility is
reasonably assured. Delivery is considered to have occurred when title and risk
of loss have transferred to the customer, or when services have been provided.
The price is considered fixed or determinable when it is not subject to refund
or adjustments.

                                       35
<PAGE>

     In the first quarter of fiscal 2006, in an effort to provide end-user
customers an alternative to purchasing the Company's higher end products under
its standard terms and conditions, the Company began offering customers an
opportunity to enter into sales-type or direct financing leases for these
products. The Company is accounting for these leases in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 13, "Accounting for
Leases." Lease and rental revenues are reported within Test and measurement
product revenue.

     Through March 31, 2005, we deferred revenue on shipments of our WaveSurfer
family of oscilloscopes until they were sold by the distributor to their
customers ("sell-through method") because of the associated uncertainty about
sell-through volumes which precluded us from being able to sufficiently estimate
the amounts of potential product returns due to the fact that this was a new
product distributed via a new channel. In the fourth quarter of fiscal 2005,
since we had four full quarters of experience with this product and channel with
no significant returns, we had sufficient data to estimate potential returns.
Therefore, in accordance with SFAS No. 48, we recognized previously deferred
revenue of approximately $2.6 million in the fourth quarter of fiscal 2005. For
sales that include customer-specified acceptance criteria, revenue is recognized
after the acceptance criteria have been met. Revenue from services is deferred
and recognized on a straight-line basis over the contractual period or as
services are rendered and accepted by the customer. When arrangements include
multiple elements, we use relative fair values to allocate revenue to the
elements and recognize revenue when the criteria for revenue recognition have
been met for each element. The amount of revenue recognized is affected by our
judgments as to whether an arrangement includes multiple elements and if so,
whether objective and reliable evidence of fair value exists for those elements.
Changes to the elements in an arrangement and the ability to establish objective
and reliable evidence of fair value for those elements could affect the timing
of the revenue recognition.

     Due to the significant software content of our protocol analyzer products,
we recognize revenue on the sale of these products in accordance with American
Institute of Certified Public Accountants Statement of Position 97-2, "Software
Revenue Recognition" ("SOP 97-2") as amended by Statement of Position 98-9, upon
shipment provided there is persuasive evidence of an arrangement, the product
has been delivered, the price is fixed or determinable and collectibility is
probable. When we ship a protocol analyzer but certain elements relating to the
functionality of the product are not delivered, revenue and the associated cost
of revenue are deferred until the remaining elements are delivered. Software
maintenance support revenue is deferred based on its vendor specific objective
evidence of fair value ("VSOE") and recognized ratably over the maintenance
support periods. Provisions for warranty costs are recorded at the time products
are recognized as revenue. Revenues from protocol analyzer products are included
in Test and measurement products in the Consolidated Statements of Operations.

     Net Reserves on Accounts Receivable. We maintain an allowance for doubtful
accounts relating to the portion of the accounts receivable which we estimate is
non-collectible. We analyze historical bad debts, customer concentrations,
customer creditworthiness, current economic trends and changes in customer
payment patterns when evaluating the adequacy of the allowance for doubtful
accounts. In addition, we maintain an allowance for anticipated sales returns.
We analyze historical return trends as well as in-transit product returns to
evaluate the adequacy of the allowance for anticipated returns. The net reserves
on accounts receivable, which includes the allowance for doubtful accounts as
well as the allowance for anticipated returns, was approximately $0.5 million
and $0.4 million at June 30, 2006 and 2005, respectively. Changes in the overall
economic environment or in the financial condition of our customers may require
adjustments to the allowance for doubtful accounts which could have a material
adverse effect on our financial condition, results of operations and cash flows.

     Allowance for Excess and Obsolete Inventory. We assess the valuation of our
inventory on a quarterly basis and provide an allowance for the value of
estimated excess and obsolete inventory. Our marketing department plays a key
role in our inventory review process by providing updated sales forecasts,
managing product rollovers and working with our manufacturing department to
maximize recovery of excess inventory. Based upon management's forecast,
inventory items no longer expected to be used in the future are considered
obsolete and the difference between an inventory's quantity and its forecasted
usage are classified as excess. The allowance for excess and obsolete inventory
was $1.6 million and $1.1 million at June 30, 2006 and 2005, respectively. If
actual market conditions are less favorable than those projected by management,
additional inventory allowances for excess or obsolete inventory may be
required.


                                       36
<PAGE>


     Deferred Tax Assets. We have recognized approximately $15.5 million of
deferred tax assets after valuation allowance as of June 30, 2006 for the future
tax benefits of certain expenses reported for financial statement purposes that
have not yet been deducted on our tax returns. Significant components of our
deferred tax assets are federal, state and foreign net operating loss and credit
carryforwards, inventory reserves and other reserves. The recognition of this
deferred tax asset is based on the assessment that it is more likely than not
that we will be able to generate sufficient future taxable income within
statutory carryforward periods to realize the benefit of these tax deductions.
The factors that management considers in assessing the likelihood of realization
include the forecast of future taxable income and available tax planning
strategies that could be implemented to realize the deferred tax assets. Based
on this information, we have recorded a valuation allowance of $0.3 million as
of June 30, 2006 to reserve for certain tax credits and foreign net operating
loss carryforwards due to the uncertainty surrounding the utilization of these
deferred tax assets. Adjustments to the valuation allowance may be made in the
future if it is determined that the realizable amount of net operating losses
and other deferred tax assets is greater or less than the amount recorded. Such
adjustments may be material to our results of operations when made.

     Valuation of Long-Lived and Intangible Assets. We assess the recoverability
of our long-lived assets and intangible assets with finite lives (including
technology, manufacturing and distribution rights and patents and other
intangibles) whenever events or changes in circumstances indicate that the
carrying values may not be recoverable. Factors which could trigger an
impairment review include the following: significant underperformance by us
relative to historical or projected operating results; significant changes in
the manner of our use of the assets or the strategy for the overall business;
and significant negative industry or economic trends. When such events or
changes in circumstances occur, we assess the recoverability of long-lived
assets and intangible assets by determining whether the carrying values of such
assets will be recovered through undiscounted expected future cash flows. The
future cash flow projections are based on historical experience, management's
view of growth rates within the industry and the anticipated future economic
environment. If the undiscounted cash flows are less than the carrying amounts
of the asset, an impairment loss is recorded to the extent that the carrying
amount exceeds its fair value. We measure any impairment based on a projected
discounted cash flow method using a discount rate determined by our management
to be commensurate with the risk inherent in our current business model. We
recognized an intangible asset impairment of $1.5 million in fiscal 2005, due to
a change in product strategy, which eliminated the usefulness and value of the
asset.

     Goodwill. SFAS No. 142, "Goodwill and Other Intangible Assets," requires
goodwill to be tested for impairment annually under a two-step approach, or more
frequently, if events or changes in circumstances indicate that the asset might
be impaired. Impairment is assessed at the "reporting unit" level by applying a
fair value-based test. A reporting unit is defined as the same as or one level
below the operating segment level as described in SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." We have one reporting
unit for the purposes of SFAS No. 142 because none of the components of our
operating segment constitute a business for which discrete financial information
is available and for which segment management regularly reviews the results of
operations.

     The first step is to identify if an impairment of goodwill has occurred by
comparing the fair value of a reporting unit with its carrying amount, including
goodwill. If the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is not considered impaired. If the carrying
amount of the reporting unit exceeds its fair value, the second step of the
goodwill test is performed to measure the amount of the impairment loss, if any.
In this second step, the "implied" fair value (as defined in SFAS No. 142) of
the reporting unit's goodwill is compared with the carrying amount of the
goodwill. If the carrying amount of the reporting unit's goodwill exceeds the
implied fair value of that goodwill, an impairment loss is recognized in an
amount equal to that excess, not to exceed the carrying amount of the goodwill.
We completed the annual impairment test required under SFAS No. 142 during the
fourth quarter of fiscal 2006 after completion of our annual financial operating
plan and determined that there was no impairment to our recorded goodwill
balance of $78.5 million at June 30, 2006. We use our market capitalization to
estimate the Company's fair value. There were no impairment indicators during
the fiscal year ended June 30, 2006.

     Warranty. Provisions for estimated expenses related to product warranties
are made at the time products are sold. These estimates are derived from
historical data of product reliability and, for new products, published (by a
third party) expected failure rates. The expected failure rate is arrived at in


                                       37
<PAGE>

terms of units, which are then converted into labor hours to which an average
fully burdened cost per hour is applied to derive the amount of accrued warranty
required. On a quarterly basis, we study trends of warranty claims, review
estimates of costs to repair and take action to improve the quality of our
products and minimize our warranty exposure. The warranty reserve was $1.0
million at June 30, 2006 and 2005. Management believes that the warranty reserve
is appropriate; however, actual claims incurred could differ from the original
estimates, requiring adjustments to the reserve.

     Share-based Compensation. In the first quarter of fiscal 2006, we adopted
the provisions of SFAS 123R, "Share-based Payment", which requires that the cost
resulting from all share-based payment transactions be recognized in the
financial statements at their fair values. We adopted SFAS 123R using the
modified prospective application method under which the provisions of SFAS 123R
apply to new awards and to awards modified, repurchased, or cancelled after the
adoption date. Additionally, compensation cost for the portion of awards for
which the requisite service has not been rendered that are outstanding as of the
adoption date is recognized over the remaining service period after the adoption
date. We use the Black-Scholes option pricing model to estimate the fair value
of options on the date of grant which requires certain estimates by management
including the expected volatility and expected term of the option. Management
also makes decisions regarding the risk free interest rate used in the model and
makes estimates regarding forfeiture rates. Fluctuations in the market that
affect these estimates could have an impact on the resulting compensation cost.
Total share-based compensation expense recorded in the Consolidated Statement of
Operations for the year ended June 30, 2006 was $5.3 million.

    RESULTS OF OPERATIONS

     The following table sets forth certain operating data as a percentage of
our total revenues for the fiscal years indicated:

<TABLE>
<CAPTION>
                                                                            YEAR ENDED JUNE 30,
                                                                         ------------------------
                                                                          2006     2005      2004
                                                                          ----     ----      ----
<S>                                                                     <C>      <C>      <C>
Revenues:
  Test and measurement products .....................................     95.6%    94.8%    93.9%
  Service and other .................................................      4.4      5.2      6.1
                                                                         -----    -----    -----
     Total revenues..................................................    100.0    100.0    100.0
Cost of revenues.....................................................     39.5     44.6     42.1
                                                                         -----    -----    -----
     Gross profit....................................................     60.5     55.4     57.9

Operating expenses:
  Selling, general and administrative................................     32.2     34.8     35.2
  Legal settlement...................................................      1.7      0.6        -
  Research and development...........................................     18.8     17.0     12.6
                                                                         -----    -----    -----
     Total operating expenses........................................     52.7     52.4     47.8

Operating income.....................................................      7.8      3.0     10.1

  Interest income....................................................      0.5      0.3      0.6
  Interest expense...................................................     (1.9)    (1.7)    (0.6)
  Other, net.........................................................     (0.1)     0.2      0.0
                                                                         -----    -----    -----
     Other expense, net..............................................     (1.5)    (1.2)     0.0
                                                                         -----    -----    -----
Income from continuing operations before
  income taxes.......................................................      6.3      1.8     10.1
Provision for income taxes...........................................     (2.2)    (0.5)    (3.8)
                                                                         -----    -----    -----
Income from continuing operations ...................................      4.1      1.3      6.3
Gain from discontinued operations, net of tax........................       --       --      0.1
                                                                         -----    -----    -----
Net income...........................................................      4.1      1.3      6.4
Charges related to convertible preferred stock.......................       --       --      6.1
                                                                         -----    -----    -----
Net income applicable to common stockholders.........................      4.1%     1.3%     0.3%
                                                                         =====    =====    =====
</TABLE>


COMPARISON OF FISCAL YEARS 2006 AND 2005

     Total revenues were $160.5 million for the year ended June 30, 2006,
compared to $165.0 million in the prior year, a decrease of 2.7%, or $4.4
million. Foreign currency fluctuations reduced total revenues by approximately
$2.7 million in fiscal 2006 compared to fiscal 2005. Revenues from Test and



                                       38
<PAGE>

measurement products decreased 1.9% to $153.4 million in fiscal 2006 from $156.4
million in fiscal 2005. This decrease in product revenue was mainly attributable
to a decline in shipments of our WaveSurfer and WaveRunner product lines. In
anticipation of our new lower-end product introductions, we experienced a delay
in customer orders which significantly contributed to this decline. Product
revenue was also impacted from lower average selling prices due to increased
competition in the low-end oscilloscope market. Additionally, in fiscal 2006
there was a decrease in product revenue for component parts as we limited our
relationship with a third party manufacturer. This decrease was partially offset
by continued strong sales of our high-end oscilloscopes and the introduction of
the WaveJet. Our Protocol Solutions Group ("PSG"), for the full 2006 fiscal
year, contributed to total revenue approximately 4.4% over the comparable prior
year period which only included eight months of PSG revenue.

     Service and other revenues consist primarily of service revenue and license
and maintenance fees. Service revenue decreased by 16.9%, or $1.4 million, to
$7.1 million in fiscal 2006 from $8.5 million in fiscal 2005, primarily from a
lower volume of locally provided items in our foreign operations. The decrease
was also the result of a reduction in the amount recognized of previously
deferred revenue from the adoption of the Securities and Exchange Commission's
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," as of the beginning of fiscal 2001. The fiscal year ended June 30,
2006 included $0.7 million of revenue recognized from previously deferred
revenue compared to $1.3 million in fiscal 2005.

     Our geographic breakdown of revenues by area in total dollars and as a
percentage of total revenues is as follows (in thousands):

<TABLE>
<CAPTION>
                                  YEAR ENDED JUNE 30,                                    YEAR ENDED JUNE 30,
                                 ---------------------                                  -------------------
                                   2006        2005                                       2006        2005
                                 ---------  ----------                                  --------   --------
<S>                             <C>         <C>            <C>                          <C>         <C>
North America...................  $ 51,795  $   52,500     North America...............   32.3%       31.8%
Europe / Middle East.............   48,767      49,650     Europe / Middle East........   30.4        30.1
Japan............................   22,043      26,209     Japan.......................   13.7        15.9
Asia / Pacific...................   37,931      36,619     Asia / Pacific..............   23.6        22.2
                                    ------  ----------                                    ----        ----
  Total revenues................  $160,536  $  164,978       Total revenues............  100.0%      100.0%
                                   =======  ==========                                   =====       =====
</TABLE>

     Our geographic revenues remained consistent with prior year except for
Japan which was impacted by the decrease in component part revenue as we
limited our relationship with a third party manufacturer.

     Gross profit for the year ended June 30, 2006 was $97.1 million, or 60.5%
gross margin, compared to $91.3 million, or 55.3% gross margin, for the same
period last year. The lower gross margin in fiscal 2005 was primarily
attributable to the second fiscal quarter Merger-related non-cash charges of
$2.7 million for the write-down of inventory related to the changes in our
long-term product support policy and product roadmap strategy as well as $1.5
million for the impairment of an intangible asset due to a change in our
manufacturing strategy and $1.8 million for the write-down of inventory,
primarily related to a lower cost or market adjustment. In the fiscal 2006
period there were no similar write-downs affecting gross margin; however, we
received price reductions from a vendor for inventory purchases which positively
impacted our overall gross margin by approximately 1.0% on resulting product
sales. In addition, gross margins benefited from higher PSG margins which
increased gross margin by approximately 6.5% over the full twelve month period
in fiscal 2006 as compared to an immaterial impact for the twelve-month period
in fiscal 2005 that included only eight months of PSG activity offset by the
related write-up of acquired inventory to its fair value.

     Selling, general and administrative ("SG&A") expense decreased 10.0%, or
$5.7 million, from $57.3 million in fiscal 2005 to $51.6 million in fiscal 2006.
The decrease was mainly attributable to $4.0 million of decreases in
personnel-related and general expenses due to a prior year restructuring and
office closures, a $1.6 million decrease in bonus and commission expenses as
well as $1.7 million decrease in legal and consulting expenses. These decreases
were partially offset by an increase of $0.6 million in non-cash share-based
compensation expense and increases of $0.9 million mainly in travel and
entertainment expense and freight expense. As a percentage of sales, SG&A
expense decreased from 34.8% in the year ended June 30, 2005 to 32.2% in the
year ended June 30, 2006. This decrease as a percentage of revenues was
primarily due to our continued ability to leverage expenses. In fiscal 2007, we
expect selling, general and administrative expense will increase when compared
to fiscal 2006 due to increased variable selling costs on higher forecasted
revenues.


                                       39
<PAGE>

     Legal settlement expense of $2.8 million, for the year ended June 30, 2006,
is related to the settlement of a dispute with Iwatsu pertaining to the
ownership rights of certain intellectual property and other assets relating to
Iwatsu's `ViewGo' product line. (See Note 21 to the Consolidated Financial
Statements for more information). Legal settlement expense of $1.0 million, for
the year ended June 30, 2005, was related to the patent litigation settlement
agreement reached with Tektronix, Inc. ("Tektronix") on May 11, 2005. (See Note
22 to the Consolidated Financial Statements for more information.)

     Research and development ("R&D") expense increased 7.4%, or $2.1 million,
from $28.1 million in fiscal 2005 to $30.1 million in fiscal 2006. There was
approximately $3.5 million of increased expense primarily attributable to a full
year of personnel-related expenses as a result of the Merger compared to only
eight months of expenses in the comparable prior year period. Additionally,
non-cash share-based compensation expense increased R&D expense by $0.8 million.
These increases were partially offset by a $2.2 million charge for in process
research & development ("IPR&D") included in the second fiscal quarter of 2005
in connection with the Merger. There is no similar charge in the fiscal 2006
period. As a percentage of total revenues, research and development expense
increased from 17.0% in fiscal 2005 to 18.8% in fiscal 2006. In fiscal 2007, we
intend to continue to invest a substantial percentage of our revenues in R&D. We
plan to focus on product improvement and feature enhancements designed to
increase the comparative value of our oscilloscopes in the market. We anticipate
a number of new product announcements during fiscal 2007 which capitalize on our
wave shape analysis capabilities and are aimed at increasing our product
features and number of scope users in the market.

     Other expense, net, which consists primarily of interest income and expense
and foreign exchange gains and losses, was approximately $2.5 million for the
year ended June 30, 2006, compared to $1.9 million for fiscal 2005. Other
expense, net for the current year is comprised primarily of interest expense of
approximately $3.1 million, compared to approximately $2.7 million last year,
which increase is due to a full year of interest on the $50.0 million Term Loan
outstanding under our current Credit Agreement as compared to only eight months
in the prior year. Interest expense for both periods also includes interest on
capital lease agreements and, for the fiscal 2005 period only, the write-off of
unamortized fees associated with a previous credit facility. Interest expense
was partially offset by interest income of approximately $0.8 million and $0.6
million for the years ended June 30, 2006 and 2005, respectively. Included in
Other, net were foreign exchange (losses) gains of approximately ($0.3) million
and $0.2 million for the years ended June 30, 2006 and 2005, respectively,
resulting from the changes in our foreign exchange forward contracts and on
transactions denominated in other than our functional currency or that of our
subsidiaries.

     A tax provision of $3.5 million was recorded in fiscal 2006, compared to a
tax provision of $0.9 million in fiscal 2005. The Company's effective tax rate
was 34.5% and 28.9% in fiscal 2006 and fiscal 2005, respectively. Our effective
tax rate for the fiscal 2006 period includes the effect of certain
non-deductible share-based compensation costs in connection with the application
of SFAS 123R (See Note 12 to the Consolidated Financial Statements for more
information). The net statutory tax rate for the year ended June 30, 2005 was
35.0%, increased by a discrete nondeductible IPR&D tax expense of $767,000
associated with the Merger, and decreased by two discrete tax benefits
aggregating $950,000 associated with the reversal of a prior year valuation
allowance related to a favorable conclusion to a tax audit and a fiscal 2004
provision-to-return adjustment determined when we filed our fiscal 2004 tax
returns.

COMPARISON OF FISCAL YEARS 2005 AND 2004

     Total revenues were $165.0 million for the year ended June 30, 2005,
compared to $124.9 million in the prior year, an increase of 32.1%, or $40.1
million. Foreign currency fluctuations contributed approximately $3.9 million to
the increase in total revenues during fiscal 2005 as compared to fiscal 2004.
Revenues from Test and measurement products increased 33.4% to $156.4 million in
fiscal 2005 from $117.3 million in fiscal 2004. This increase in product revenue
was primarily due to an approximate 59.1% increase in total oscilloscope units
shipped, mainly attributable to the WaveSurfer product line launched in the
fourth quarter of fiscal 2004, as well as the incremental revenue generated from
the sales of our protocol analyzers following our acquisition of CATC on October
29, 2004. The contribution to the total increase in revenue from protocol
analyzers was approximately 43.9%.

     Service and other revenues consist primarily of service revenue and license
and maintenance fees. Service revenue increased by 10.4%, or $0.8 million, to
$8.5 million in fiscal 2005 from $7.7 million in fiscal 2004 as a result of the



                                       40
<PAGE>

overall increase in demand for repair services. In the third quarter of fiscal
2005, based on our review and analysis of the then current classification of
service kits, we made the decision to reclassify service kit revenue to product
revenue from its historical classification. For the years ended June 30, 2005
and 2004, respectively, $3.3 million and $3.9 million of service kit revenue was
included as product revenue. Service and other revenue in each of fiscal 2005
and 2004 also included the recognition of $1.3 million of revenue that was
deferred with the adoption of the Securities and Exchange Commission's Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," as of the beginning of fiscal 2001.

     Our geographic breakdown of revenues by area in total dollars and as a
percentage of total revenues is as follows (in thousands):

<TABLE>
<CAPTION>
                                 YEAR ENDED JUNE 30,                                    YEAR ENDED JUNE 30,
                                 ---------------------                                 ---------------------
                                    2005       2004                                       2005        2004
                                 ---------  ----------                                 ---------    --------
<S>                            <C>         <C>                                          <C>         <C>
North America (1)...............$   52,500  $   38,926     North America (1)..........    31.8%       31.2%
Europe / Middle East............    49,650      37,716     Europe / Middle East.......    30.1        30.2
Japan (1).......................    26,209      20,024     Japan (1)..................    15.9        16.0
Asia / Pacific (1)..............    36,619      28,274     Asia / Pacific (1).........    22.2        22.6
                                    ------  ----------                                    ----        ----
  Total revenues................$  164,978  $  124,940       Total revenues...........   100.0%      100.0%
                                   =======  ==========                                   =====       =====
</TABLE>

(1)  Certain prior year amounts have been reclassified to conform to the fiscal
     2005 presentation. These reclassifications had no impact on previously
     reported total revenues.

     Gross profit for the year ended June 30, 2005 was $91.3 million, or 55.3%
gross margin, compared to $72.3 million, or 57.9% gross margin, for the same
period last year. The increase in gross profit dollars was primarily
attributable to increased volume of oscilloscopes shipped due to the
introduction of the WaveSurfer oscilloscope at the end of fiscal 2004, the
incremental profit from sales of protocol analyzers and favorable foreign
exchange impact, partially offset by non-cash charges of $2.7 million for the
write-down of inventory related to the changes in our long-term product support
policy and product roadmap strategy, $1.8 million for the write-down of
inventory, primarily related to a lower cost or market adjustment, as well as
$1.5 million for the write-down of a technology license due to a change in our
manufacturing strategy, which charges contributed to a lower gross margin for
the year ended June 30, 2005. As a result of the amortization of acquired
intangible assets, as well as the incremental cost of revenues related to the
purchase accounting write-up of acquired inventory to its fair value which
offset the favorable impact from the sales of the higher-margin protocol
analyzers, the net impact on gross margin from sales of protocol analyzers for
the year ended June 30, 2005 was immaterial.

     Selling, general and administrative ("SG&A") expense increased 30.3%, or
$13.3 million, from $44.0 million in fiscal 2004 to $57.3 million in fiscal
2005. Approximately 20.3% of the increase in fiscal year 2005 reflects the
incremental SG&A expenses incurred as a result of the Merger. Also included in
SG&A expense for the year ended June 30, 2005 was $3.0 million of non-cash
amortization of deferred compensation related to our equity-based long-term
incentive plan introduced at the end of fiscal 2004. The remaining increase in
SG&A was largely attributable to increases in certain legal and accounting
expenses as well as less significant increases in other general spending
categories. As a percentage of total revenues, selling, general and
administrative expense remained relatively flat in fiscal 2005, compared with
fiscal 2004.

     Legal settlement expense for the year ended June 30, 2005 was related to
the patent litigation settlement agreement reached with Tektronix on May 11,
2005.

     Research and development ("R&D") expense increased by 77.9%, or $12.3
million, from $15.8 million in fiscal 2004 to $28.1 million in fiscal 2005. The
increase was primarily due to incremental R&D expenses incurred as a result of
the Merger. As a percentage of total revenues, research and development expense
increased to 17.0% in fiscal 2005 from 12.7% in fiscal 2004, reflecting
increased spending in anticipation of the launch of new products, and the impact
of the Merger including $2.2 million of IPR&D required to be expensed upon
acquisition.

     Other (expense) income, net, which consists primarily of net interest
income and expense and foreign exchange gains and losses, was an expense of
approximately $1.9 million for the year ended June 30, 2005, compared to an
expense of $11,000 for fiscal 2004. Other (expense) income, net for fiscal 2005
comprised primarily interest expense of approximately $2.7 million, compared to
approximately $0.7 million in fiscal 2004, which increase was due to the
interest on the $50.0 million Term Loan outstanding under our current Credit

                                       41
<PAGE>

Agreement. Included in Other, net were foreign exchange gains of approximately
$0.2 million and $0.3 million for the year ended June 30, 2005 and 2004,
respectively, resulting from the changes in our foreign exchange forward
contracts and on transactions denominated in other than our functional currency
or that of our subsidiaries. In addition, included in Other, net in fiscal 2004,
was $0.4 million in transaction costs related to the repurchase of our
redeemable convertible preferred stock.

     A tax provision of $0.9 million was recorded in fiscal 2005, compared to a
tax provision of $4.7 million in fiscal 2004. The Company's effective tax rate
was 28.9% and 37.0% in fiscal 2005 and fiscal 2004, respectively. The net
statutory tax rate for the year ended June 30, 2005 was 35.0%, increased by a
discrete nondeductible IPR&D tax expense of $767,000 associated with the Merger,
and decreased by two discrete tax benefits aggregating $950,000 associated with
the reversal of a prior year valuation allowance related to a favorable
conclusion to a tax audit and a fiscal 2004 provision-to-return adjustment
determined when we filed our fiscal 2004 tax returns.

     On October 22, 2004, the American Jobs Creation Act (the "Act") was signed
into law. The Act includes a provision for the deduction of 85% of certain
foreign earnings that are repatriated, as defined in the Act. We elected to
apply this provision to certain repatriations of qualifying earnings in fiscal
year 2005. We elected to repatriate $23.1 million during the quarter ended
December 31, 2004, pursuant to our approved domestic reinvestment plan. The
income tax effect recognized under the repatriation provision was approximately
$1.1 million which was substantially offset by the release of a tax reserve
related to a favorable foreign tax audit settlement during the three months
ended December 31, 2004.

     In fiscal 2004, we recorded a $0.1 million gain on sale of discontinued
operations in the Consolidated Statements of Operations, net of income tax
provisions, for the reversal of unused accrued discontinued operations reserves.
In fiscal 2005, there were no such transactions.

     On September 23, 2003, we repurchased all 500,000 issued and outstanding
shares of our redeemable convertible preferred stock from the holders thereof
(the "Holders") for $23.0 million (the "Repurchase"). In accordance with the
Securities and Exchange Commission's position published in an Emerging Issues
Task Force ("EITF") Topic No. D-42 relating to induced conversions of preferred
stock, we recorded the $7.7 million premium paid to purchase the preferred stock
as a charge to arrive at net income applicable to common stockholders in fiscal
2004. In fiscal 2005, there were no such transactions.

     LeCroy and the Holders agreed that the Repurchase would be transacted as of
the beginning of the first quarter of fiscal 2004. As a result, we accounted for
the Repurchase as though no dividends had accrued in fiscal 2004 and that the
unaccreted value attributed to the warrants at the point of issue was
accelerated and combined with the redemption premium to reflect the total charge
related to the Repurchase in the Consolidated Statement of Operations.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents at June 30, 2006 were $17.0 million, compared to
$13.9 million at June 30, 2005.

     Net cash provided by operating activities for the year ended June 30, 2006
was $16.0 million compared to $12.7 million for the year ended June 30, 2005, an
increase of approximately $3.3 million. In fiscal 2006, the net income and cash
generative effects of non-cash charges in net income were partially offset by
$5.6 million of cash consumed by working capital requirements. This compared to
$4.7 million of cash consumed by working capital in the same period last year.
Cash consumed by working capital in fiscal 2006 resulted primarily from
continued strategic investments in inventory and increases in other current and
non-current assets due to a prepaid technology engineering services agreement.

     Net cash used in investing activities was ($5.6) million in fiscal 2006
compared to ($74.6) million in fiscal 2005. Net cash used in the fiscal 2006
period was mainly for the purchase of property and equipment, but also included
the purchase of intangible assets resulting from the agreements with Iwatsu.


                                       42
<PAGE>

     Net cash used in financing activities was ($6.9) million for the year ended
June 30, 2006 as to compared to net cash provided by financing activities of
approximately $46.9 million for the same period last year. Net cash used in
financing activities in the fiscal 2006 period was mainly for repayment of the
Term Loan and capital leases of $10.9 million and for the purchase of treasury
shares of $1.7 million, partially offset by borrowings under the revolving line
of credit of $3.5 million and proceeds received from the exercise of stock
options and purchase of stock under the employee stock purchase plan of $2.4
million.

     We have a $2.0 million capital lease line of credit to fund certain capital
expenditures that bears interest at an annual rate of 12.2% on outstanding
borrowings. This line of credit, originally set to expire in November 2005 was
renewed for one additional year. As of June 30, 2006 and 2005, we had $0.1
million outstanding under this line of credit, all of which was current and
included within Current portion of long-term debt and capital leases on the
Consolidated Balance Sheets.

     On October 29, 2004, we entered into a $75.0 million senior, secured,
five-year credit agreement with the lenders listed therein and The Bank of New
York, as administrative agent for such lenders (the "Credit Agreement"). The
terms of the Credit Agreement provided us with a $50.0 million term loan (the
"Term Loan") and a $25.0 million revolving credit facility (the "Revolver"),
which includes a $1.0 million swing-line loan sub-facility and a $1.0 million
letter of credit sub-facility. The borrowings by us under the Credit Agreement
are secured by all of our assets and the assets of our domestic subsidiaries,
and our performance thereunder is guaranteed by our domestic subsidiaries.
Proceeds of $50.0 million Term Loan were used to finance the acquisition of CATC
and pay transaction expenses related to the Merger. Proceeds from the Revolver
may be used for general corporate purposes, including the financing of working
capital requirements, capital expenditures and acquisitions. As of June 30,
2006, there was an outstanding balance of $3.5 million against the Revolver
included in Short-Term borrowings on the Consolidated Balance Sheet which was
repaid in July 2006, and $34.1 million on the Term Loan.

     Borrowings under the Credit Agreement, as amended, bear interest at
variable rates equal to, at our election, (1) the higher of (a) the prime rate
or (b) the federal funds rate plus 0.5%, plus an applicable margin of between
0.00% and 1.50% based on our leverage ratio, as defined in the Credit Agreement,
or (2) LIBOR plus an applicable margin of between 1.25% and 2.75% based on our
leverage ratio. In addition, we must pay commitment fees on unused Revolver
borrowings during the term of the Credit Agreement at rates between 0.375% and
0.5% dependent upon our leverage ratio.

     Under the Credit Agreement, we are required to comply with certain
financial covenants, measured quarterly, including a minimum interest coverage
ratio, minimum total net worth, maximum leverage ratio, minimum fixed charge
coverage ratio and limitations on capital expenditures. As of and for the year
ended June 30, 2006, we were in compliance with our financial covenants under
the Credit Agreement.

     Beginning March 31, 2005, outstanding borrowings of $50.0 million under the
Term Loan were required to be repaid quarterly through October 2009, based on an
annualized amortization rate starting at 15% in calendar year 2005 and
increasing 250 basis points per year during the term of the Credit Agreement. As
of June 30, 2006, we have repaid $15.9 million of the principal balance of this
loan including voluntary repayments in excess of those required by the Credit
Agreement aggregating $4.1 million.

     On May 9, 2006, we amended the Credit Agreement ("Amendment No.2") to,
among other terms, (a) increase the Revolver Commitments from $25.0 million to
$50 million, (b) amend the financial covenants and reduce certain fees and
margins, (c) extend the Revolver termination date from October 29, 2009 to
October 29, 2010, (d) increase the aggregate amount we are permitted to pay for
acquisitions and (e) permit LeCroy to make certain payments for cash dividends
and repurchases of common stock.

     We incurred approximately $1.4 million of transaction fees in connection
with entering into the Credit Agreement, which have been deferred and are being
amortized over the term of the Credit Agreement using the effective interest
method for the Term Loan and the straight-line method for the Revolver. We
incurred additional fees of approximately $0.2 million in connection with
Amendment No. 2 which have been deferred and are being amortized on a straight
line basis over the term of Amendment No. 2 in accordance with EITF 98-14,
"Debtor's Accounting for Changes in Line-of-Credit or Revolving-Debt
Arrangements" ("EITF 98-14"). Amortization of the remaining balance of the
transaction fees under the Credit Agreement has been adjusted to coincide with
the one year extension of the Revolver. At June 30, 2006, of the total
unamortized fees under the Credit Agreement, as amended, of $0.9 million, $0.3
million were included in Other current assets, and $0.6 million were included in
Other non-current assets on the Consolidated Balance Sheet.


                                       43
<PAGE>

     In addition to the above U.S.-based credit facilities, we maintain certain
short-term foreign credit facilities, principally with two Japanese banks
totaling 150.0 million yen (approximately $1.3 million as of June 30, 2006). No
amounts were outstanding under these facilities as of June 30, 2006. Our Swiss
subsidiary, LeCroy S.A., also has an overdraft facility totaling 1.0 million
Swiss francs (approximately $0.8 million as of June 30, 2006). As of both June
30, 2006 and 2005, approximately 0.4 million Swiss francs were held against
supplier obligations leaving an available balance of 0.6 million Swiss francs
under this credit facility. These obligations to suppliers, such as rent and
utilities, are payable under the credit facility only in the event that we are
unable to meet our financial obligations to those suppliers.

     On May 25, 2006, the Board of Directors approved the adoption of a share
repurchase plan authorizing the purchase of up to 2 million shares, not to
exceed $25 million, of its common stock for the treasury. Purchases under this
buyback program may be made from time to time on the open market and in
privately negotiated transactions, including pursuant to the terms of a 10b5-1
plan. A 10b5-1 plan allows a company to purchase shares during a blackout
period, provided the company communicates its share purchase instructions to the
broker prior to the blackout period, pursuant to a written plan that may not be
changed. The timing of these purchases is dependent upon several factors,
including market conditions, the market price of the Company's common stock, the
effect of the share dilution on earnings, available cash and any other potential
risks we may encounter. The share repurchase plan may be discontinued at any
time at our discretion. As of June 30, 2006, we have spent $1.9 million to
purchase 142,283 shares under this buyback program.

     We believe that our cash on hand, cash flow generated by our continuing
operations and availability under our revolving credit lines will be sufficient
to fund our operations, working capital, debt repayment and capital expenditure
requirements for the foreseeable future and provide funds for potential
acquisition opportunities and share purchases.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

     Our contractual obligations and commitments include obligations associated
with our capital and operating leases, employee severance agreements,
commitments to contract suppliers, the Revolver and the Term Loan as set forth
in the table below (in thousands):

<TABLE>
<CAPTION>
                                                            PAYMENTS DUE BY PERIOD AS OF JUNE 30, 2006
                                                   ------------------------------------------------------------
                                                                LESS THAN                          MORE THAN 5
                                                       TOTAL     1 YEAR     1-3 YEARS  3-5 YEARS      YEARS
                                                    ---------  ---------   ----------  ----------  ------------
                                                                         (IN THOUSANDS)
<S>                                                <C>        <C>          <C>         <C>          <C>
   Capital leases..............................    $      674 $      555   $     119   $     --     $      --
   Severance...................................           255        255          --         --            --
   Operating lease obligations.................         4,665      2,033       2,274        286            72
   Supplier agreements.........................         5,701      5,701          --         --            --
   Short Term Borrowing........................         3,500      3,500          --         --            --
   Term Loan obligations.......................        34,075      9,375      22,500      2,200            --
                                                     --------   --------    --------   --------     ---------
     Total.....................................      $ 48,870   $ 21,419    $ 24,893   $  2,486     $      72
                                                     ========   ========    ========   ========     =========
</TABLE>

     Supplier agreements. We purchase goods from a variety of suppliers and use
contract suppliers for specific components for our products. During the normal
course of business, we issue non-cancelable purchase orders with 90-day lead
times ahead of the delivery dates.

RECENT ACCOUNTING PRONOUNCEMENTS

     In May 2005, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 154, "Accounting Changes and Error Corrections," ("SFAS 154") which will be
effective for LeCroy for reporting changes in accounting principles and for
correction of errors beginning in fiscal year 2007. SFAS 154 requires a change
in accounting principle to be applied retrospectively to prior periods'
financial statements, unless explicit transition provisions are provided for in
new accounting pronouncements or existing pronouncements that are in the
transition phase when SFAS 154 becomes effective. There will be no immediate
effect on our financial statements from our adoption of SFAS 154.

                                       44
<PAGE>

     In June 2005, the FASB issued FASB Staff Position ("FSP") 143-1,
"Accounting for Electronic Equipment Waste Obligations." FSP 143-1 addresses the
accounting related to obligations associated with Directive 2002/96/ EC on Waste
Electrical and Electronic Equipment (the "Directive") adopted by the European
Union. Under the Directive, the waste management obligation for historical
equipment (products put on the market on or prior to August 13, 2005) remains
with the commercial user until the equipment is replaced. FSP 143-1 is effective
the later of the end of the first quarter of fiscal year 2006 or the date of
adoption of the law by the applicable EU-member country. It is expected that the
law will be adopted by certain EU countries in calendar year 2006 and that we
will be required to adopt the provisions of FSP-143-1 at that time. The effects
will depend on the respective laws adopted by the EU member countries.

     On February 3, 2006, the FASB issued FSP 123(R)-4, "Classification of
Options and Similar Instruments as Employee Compensation That Allow for Cash
Settlement upon the Occurrence of a Contingent Event." This amends paragraphs 32
and A229 of SFAS 123R, which required that share options with contingent cash
settlement features be classified as liabilities regardless of the event's
likelihood of occurrence. FSP 123(R)-4 requires companies with cash-settleable
provisions in their employee share-option awards to assess the probability of
the contingent event's occurrence when determining the classification of the
awards as liability or equity. If the event's likelihood of occurrence is less
than probable and the award would otherwise be classified as equity, under FSP
123(R)-4, it would be equity classified. We would be required to make an ongoing
assessment of the probability of the contingent event occurring and reclassify
the award as a liability should the event become probable. We were required to
adopt the provisions of this FSP as of the beginning of the fourth quarter of
fiscal 2006, the first reporting period after the FSP was posted to the FASB
website. The adoption of FSP 123(R)-4 had no impact on our results of operations
or financial condition as we have not issued any share options with contingent
cash settlement features.

     On February 16, 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Instruments, an amendment of FASB Statements No. 133 and 140" ("SFAS
155"). SFAS 155 allows financial instruments that have embedded derivatives to
be accounted for as a whole (eliminating the need to separate the derivative
from its host) if the holder elects to account for the whole instrument on a
fair value basis. It also clarifies which interest-only strips and
principal-only strips are not subject to the requirements of Statement 133;
establishes a requirement to evaluate interest in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring separation;
clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives; and amends Statement 140 to eliminate the prohibition
on a qualifying special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than another derivative
financial instrument. SFAS 155 is effective for all financial instruments
acquired or issued after the beginning of an entity's first fiscal year that
begins after September 15, 2006. The adoption of SFAS 155 is not expected to
have any impact on our results of operations or financial condition as we do not
currently use hybrid instruments.

     In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--An Interpretation of FASB Statement No. 109" ("FIN
48"), which 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 will be effective for fiscal years
beginning after December 15, 2006. Management is currently evaluating the effect
that adoption of this interpretation will have on our consolidated financial
position and results of operations.


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

     We purchase materials from suppliers and sell our products around the world
and maintain investments in foreign subsidiaries, all denominated in a variety
of currencies. As a consequence, we are exposed to risks from fluctuations in
foreign currency exchange rates with respect to a number of currencies, changes
in government policies and legal and regulatory requirements, political
instability, transportation delays and the imposition of tariffs and export
controls. Among the more significant potential risks to us of relative
fluctuations in foreign currency exchange rates is the relationship among and
between the U.S. dollar, Euro, Swiss franc, British pound, Swedish krona,
Japanese yen, Korean won and Singapore dollar.

                                       45
<PAGE>

     We have a program of entering into foreign exchange forward contracts to
minimize the risks associated with currency fluctuations on assets or
liabilities denominated in other than our functional currency or the functional
currency of our subsidiaries. It cannot be assured, however, that this program
will effectively offset all of our foreign currency risk related to these assets
or liabilities. These foreign exchange forward contracts do not qualify for
hedge accounting in accordance with SFAS No. 133, "Accounting for Derivative
Investments and Hedging Activities", as amended ("SFAS No. 133").

     Other than this program, we do not attempt to reduce our foreign currency
exchange risks by entering into foreign currency management programs. As a
consequence, there can be no assurance that fluctuations in foreign currency
exchange rates in the future resulting in mismatches between local currency
revenues and expenses will not adversely affect our results of operations.
Moreover, fluctuations in exchange rates could affect the demand for our
products.

     During fiscal 2006, 2005 and 2004, foreign currency exchange gains (losses)
on these derivatives and on transactions denominated in other than their
functional currencies were ($0.3) million, $0.2 million, and $0.3 million,
respectively. These net gains (losses) are included in Other, net in the
Consolidated Statements of Operations and include foreign exchange contract
gross gains of $0.6 million, $0.6 million and $0.5 million in fiscal 2006, 2005
and 2004, respectively. At June 30, 2006 and 2005, the notional amounts of the
Company's open foreign exchange forward contracts, all with maturities of less
than six months, were $13.7 million and $9.8 million, respectively.

     We performed a sensitivity analysis for the fourth quarter of fiscal 2006
assuming a hypothetical 10% adverse change in foreign currency exchange rates on
our foreign exchange forward contracts and our assets and liabilities
denominated in other than their functional currencies. In management's opinion,
a 10% adverse change in foreign currency exchange rates would have an immaterial
effect on these instruments and therefore, on our consolidated results of
operations, financial position or cash flows.

     We are exposed to adverse changes in interest rates primarily due to our
investment in cash equivalents as well as our $100.0 million credit facility.
Market risk is estimated as the potential change in fair value resulting from a
hypothetical 1% adverse change in interest rates, which would have been
immaterial to our results of operations, financial position or cash flows.
Borrowings under the Term Loan and revolving line of credit have variable rates
and the carrying amounts are considered by management to be a reasonable
estimate of their fair value. Please refer to Note 13 - Long Term Debt and
Capital Leases for specifics related to our credit facility.

     As required by the terms of the Credit Agreement (See Note 13 - Long Term
Debt and Capital Leases), on January 27, 2005 we entered into a Master Agreement
with Manufacturers & Traders Trust Co. ("M&T Bank"), the purpose of which is to
protect against rising interest rates during the term of the Credit Agreement.
Under the Credit Agreement we are obligated to enter into one or more interest
rate swap agreements covering the interest payable with respect to at least 50%
of the outstanding principal amount of the Term Loan for a period of at least
three years. In connection with the Master Agreement (See Note 13 - Long Term
Debt and Capital Leases), we entered into an interest rate swap transaction
effective January 31, 2005 and continuing through January 31, 2008,
corresponding with the repayment terms of the Term Loan. In accordance with the
interest rate swap transaction, we pay interest quarterly on the notional amount
at a fixed annualized rate of 3.87% to M&T Bank, and receive interest quarterly
on the same notional amount at the three-month LIBOR rate in effect at the
beginning of each quarterly reset period; except for the initial period, which
covered the two months ending March 31, 2005, in which we received interest at a
LIBOR rate of 2.64%. The initial notional amount was $25.0 million and resets
quarterly to 50% of the outstanding principal balance with respect to the
original amortization schedule as set forth in the Credit Agreement. The net
interest expense incurred on the swap was approximately $0.1 million income for
the year ended June 30, 2006 and ($0.1) million expense for the year ended June
20, 2005. The notional amount as of June 30, 2006 was approximately $19.1
million as compared to approximately $23.1 million as of June 30, 2005. The fair
value of the interest rate swap as of June 30, 2006 and 2005, was approximately
$0.4 million and $0.1 million, respectively, and approximates the amount that we
would have received from M&T Bank if we had canceled the transaction at those
dates. The fair value is recorded in Other non-current assets in the
Consolidated Balance Sheets as of June 30, 2006 and 2005 and the change in fair
value of $0.3 million and $66,000 for the year ended June 30, 2006 and 2005
respectively, is recognized in Interest expense in the Consolidated Statements
of Operations. This interest rate swap does not qualify for hedge accounting in

                                       46
<PAGE>
accordance with SFAS No. 133, "Accounting for Derivative Investments and Hedging
Activities" ("SFAS No. 133").


                                       47
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

<TABLE>
<CAPTION>
                                                     LECROY CORPORATION
                                         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<S>                                                                                                          <C>
Report of Independent Registered Public Accounting Firm.....................................................    49

Consolidated Balance Sheets as of June 30, 2006 and 2005....................................................    50

Consolidated Statements of Operations for the years ended June 30, 2006, 2005 and 2004......................    51

Consolidated Statements of Stockholders' Equity for the years ended June 30, 2006, 2005 and 2004............    52

Consolidated Statements of Comprehensive Income for the years ended June 30, 2006, 2005 and 2004............    54

Consolidated Statements of Cash Flows for the years ended June 30, 2006, 2005 and 2004......................    55

Notes to Consolidated Financial Statements..................................................................    56

Financial Statement Schedule -- Valuation and Qualifying Accounts for the years ended June 30, 2006, 2005 and
2004........................................................................................................    85

</TABLE>



                                       48
<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
LeCroy Corporation:

We have audited the accompanying consolidated balance sheets of LeCroy
Corporation and subsidiaries as of June 30, 2006 and 2005, and the related
consolidated statements of operations, stockholders' equity, comprehensive
income and cash flows for each of the years in the three-year period ended June
30, 2006. In connection with our audits of the consolidated financial
statements, we also have audited the valuation and qualifying accounts financial
statement schedule. These consolidated financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of LeCroy Corporation
and subsidiaries as of June 30, 2006 and 2005, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 2006, 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 consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of LeCroy
Corporation and subsidiaries' internal control over financial reporting as of
June 30, 2006, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated September 13, 2006 expressed an
unqualified opinion on management's assessment of, and the effective operation
of, internal control over financial reporting.

/s/ KPMG LLP

Short Hills, New Jersey
September 13, 2006






                                       49
<PAGE>


<TABLE>
<CAPTION>

                                                          LECROY CORPORATION
                                                      CONSOLIDATED BALANCE SHEETS
                                            (IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA)
                                                                                                    JUNE 30,
                                                                                               2006          2005
                                                                                           ------------  -----------

                                                       ASSETS
<S>                                                                                        <C>           <C>
Current assets:
  Cash and cash equivalents...........................................................     $    16,972   $    13,866
  Accounts receivable, net of reserves of $458 and $380 at
     June 30, 2006 and 2005, respectively.............................................          28,867        28,275
  Inventories, net....................................................................          34,041        27,661
  Other current assets................................................................          13,237        12,615
                                                                                           -----------   -----------
          Total current assets........................................................          93,117        82,417

Property and equipment, net...........................................................          20,359        19,078
Goodwill..............................................................................          78,473        78,848
Other non-current assets..............................................................          10,025        12,825
                                                                                           -----------   -----------
          Total assets................................................................     $   201,974   $   193,168
                                                                                           ===========   ===========

                                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable....................................................................     $    19,282   $    14,806
  Accrued expenses and other current liabilities......................................          13,408        14,642
  Short-term borrowings...............................................................           3,500            --
  Current portion of long-term debt and capital leases................................           9,930         8,656
                                                                                           -----------   -----------
          Total current liabilities...................................................          46,120        38,104

Long-term debt........................................................................          24,700        36,833
Deferred revenue and other non-current liabilities....................................           1,451         1,413
                                                                                           -----------   -----------
          Total liabilities...........................................................          72,271        76,350

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.01 par value (authorized 5,000,000 shares; none issued and
    outstanding as of June 30, 2006 and 2005)........................................               --            --
  Common stock, $.01 par value (authorized 45,000,000 shares; 12,883,664 shares issued
   at June 30, 2006 and 12,634,233 shares issued and outstanding at June 30, 2005)....             129           127
  Additional paid-in capital..........................................................         114,447       115,394
  Accumulated other comprehensive income..............................................           1,292           779
  Deferred stock compensation.........................................................              --        (8,602)
  Retained earnings...................................................................          15,693         9,120
  Treasury stock, at cost (142,283 shares at June 30, 2006)...........................          (1,858)           --
                                                                                           -----------   -----------
          Total stockholders' equity..................................................         129,703       116,818
                                                                                           -----------   -----------
          Total liabilities and stockholders' equity..................................     $   201,974   $   193,168
                                                                                           ===========   ===========


                        The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>



                                       50
<PAGE>


<TABLE>
<CAPTION>
                                                          LECROY CORPORATION
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                                       YEARS ENDED JUNE 30,
                                                                                2006          2005           2004
                                                                            ------------  ------------   --------
                                                                             (52 Weeks)    (53 Weeks)     (52 Weeks)

<S>                                                                         <C>           <C>            <C>
Revenues:
  Test and measurement products.......................................      $   153,441   $   156,440    $   117,290
  Service and other...................................................            7,095         8,538          7,650
                                                                            -----------   -----------    -----------
     Total revenues...................................................          160,536       164,978        124,940

Cost of revenues......................................................           63,476        73,632         52,594
                                                                            -----------   -----------    -----------
     Gross profit.....................................................           97,060        91,346         72,346
                                                                            -----------   -----------    -----------
Operating expenses:
 Selling, general and administrative..................................           51,622        57,341         43,997
 Legal settlements....................................................            2,792         1,000             --
 Research and development.............................................           30,123        28,050         15,760
                                                                            -----------   -----------    -----------
     Total operating expenses.........................................           84,537        86,391         59,757
                                                                            -----------   -----------    -----------

Operating income......................................................           12,523         4,955         12,589

Other (expense) income:
 Interest income......................................................              813           564            716
 Interest expense.....................................................           (3,096)       (2,742)          (720)
 Other, net...........................................................             (204)          238             (7)
                                                                            -----------   -----------    -----------
    Other expense, net................................................           (2,487)       (1,940)           (11)
                                                                            -----------   -----------    -----------
Income from continuing operations before income taxes.................           10,036         3,015         12,578
Provision for income taxes............................................           (3,463)         (872)        (4,653)
                                                                            -----------   -----------    -----------
Income from continuing operations.....................................            6,573         2,143          7,925

Discontinued operations:
  Gain on sale, net of provision for income taxes of
    $70 in 2004.......................................................               --            --            119
                                                                            -----------   -----------    -----------
Net income............................................................            6,573         2,143          8,044

Redemption of convertible preferred stock.............................               --            --          7,665
                                                                            -----------   -----------    -----------
Net income applicable to common stockholders..........................      $     6,573   $     2,143    $       379
                                                                            ===========   ===========    ===========

Net income per common share - basic:
  Income from continuing operations applicable to
  common stockholders.................................................      $      0.54   $      0.18    $      0.02
  Gain from discontinued operations...................................               --            --           0.01
  Net income applicable to common stockholders........................             0.54          0.18           0.04

Net income per common share - diluted:
  Income from continuing operations applicable to
  common stockholders.................................................      $      0.53   $      0.17    $      0.02
  Gain from discontinued operations...................................               --            --           0.01
  Net income applicable to common stockholders........................             0.53          0.17           0.03

Weighted average number of common shares:
  Basic...............................................................           12,218        11,774         10,754
  Diluted.............................................................           12,474        12,258         11,074

                        The accompanying notes are an integral part of these consolidated financial statements.


</TABLE>


                                       51
<PAGE>


<TABLE>
<CAPTION>
                                                          LECROY CORPORATION
                                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                            (IN THOUSANDS)

FOR THE YEARS ENDED JUNE 30,                                       2006            2005            2004
------------------------------------------------------------- --------------- ---------------- --------------

<S>                                                                  <C>              <C>           <C>
COMMON STOCK - SHARES
Balance, beginning of year                                           12,634           11,974        10,413
Public sale of common stock, net                                          -                -           725
Exercise of stock options and employee stock purchases                  209              394           471
Issuance of restricted stock to employees                                73              182           365
Forfeitures of restricted stock for terminated employees                (33)              (2)            -
Issuance of vested restricted stock to employees
      in lieu of cash bonus                                               -               86             -
------------------------------------------------------------- --------------- ---------------- --------------
Balance, end of year                                                 12,883           12,634        11,974
------------------------------------------------------------- --------------- ---------------- --------------

COMMON STOCK - AMOUNT
Balance, beginning of year                                           $  127           $  120        $  104
Public sale of common stock, net                                          -                -             7
Exercise of stock options and employee stock purchases                    2                4             5
Issuance of restricted stock to employees                                 -                2             4
Issuance of vested restricted stock to employees
      in lieu of cash bonus                                               -                1             -
------------------------------------------------------------- --------------- ---------------- --------------
Balance, end of year                                                 $  129           $  127        $  120
------------------------------------------------------------- --------------- ---------------- --------------

------------------------------------------------------------- --------------- ---------------- --------------

ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year                                        $ 113,229         $ 98,421       $79,864
Public sale of common stock, net                                          -               (7)       11,997
Exercise of stock options and employee stock purchases                2,382            4,589         5,374
Issuance of restricted stock to employees                                 -            2,939         6,570
Amortization of employee stock compensation                               -                -            23
Tax benefit from exercise of stock options                                -            1,057         1,212
Redemption of convertible preferred stock                                 -                -        (6,619)
Modification of director stock option grants                              -               64             -
Forfeitures of restricted stock for terminated employees                  -              (24)            -
Issuance of vested restricted stock to employees
       in lieu of cash bonus                                              -            1,205             -
Issuance of LeCroy stock options in Merger                                -            3,166             -
Assumption of unvested options in Merger                                  -            1,945             -
Reversal of deferred stock compensation on assumed
       unvested options for terminated employees                          -             (126)            -
Reclass warrants to additional paid-in capital                        2,165                -             -
Reclass deferred stock compensation to additional
      paid-in capital upon adoption of SFAS 123R                     (8,602)               -             -
Share-based compensation expense                                      5,273                -             -
------------------------------------------------------------- --------------- ---------------- --------------
Balance, end of year                                              $ 114,447        $ 113,229       $98,421
------------------------------------------------------------- --------------- ---------------- --------------
</TABLE>


                                       52
<PAGE>

<TABLE>
<CAPTION>
                                             LECROY CORPORATION
                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
                                               (IN THOUSANDS)

FOR THE YEARS ENDED JUNE 30,                                       2006            2005            2004
------------------------------------------------------------- --------------- ---------------- --------------

<S>                                                                <C>              <C>          <C>
ACCUMULATED OTHER COMPREHENSIVE
        INCOME (LOSS)
Balance, beginning of year                                         $    779          $   434       $ (1,598)
Foreign currency translation                                            513              325          2,052
Unrealized loss on marketable securities
        (net of tax benefit of $12)                                       -                -            (20)
Reclassification adjustment for loss on marketable
       securities included in net income,
       (net of tax benefit of $12)                                        -               20             -
------------------------------------------------------------- --------------- ---------------- --------------
Balance, end of year                                               $  1,292          $   779       $    434
------------------------------------------------------------- --------------- ---------------- --------------

DEFERRED STOCK COMPENSATION
Balance, beginning of year                                         $ (8,602)         $(6,509)      $     -
Issuance of restricted stock to employees                                 -           (2,941)        (6,574)
Amortization of employee stock compensation                               -            2,648            65
Forfeitures of restricted stock for terminated employees                  -               19             -
Assumption of unvested options in Merger                                  -           (1,945)            -
Reversal of deferred stock compensation on assumed
       unvested options for terminated employees                          -              126             -
Reclass deferred stock compensation to additional
      paid-in capital upon adoption of SFAS 123R                      8,602                -             -
------------------------------------------------------------- --------------- ---------------- --------------
Balance, end of year                                               $      -          $(8,602)      $ (6,509)
------------------------------------------------------------- --------------- ---------------- --------------

RETAINED EARNINGS
Balance, beginning of year                                         $  9,120          $ 6,977       $    (21)
Net income                                                            6,573            2,143          8,044
Redemption of convertible preferred stock                                 -                -         (1,046)
------------------------------------------------------------- --------------- ---------------- --------------
Balance, end of year                                               $ 15,693         $  9,120       $  6,977
------------------------------------------------------------- --------------- ---------------- --------------

TREASURY STOCK
Balance, beginning of year                                         $      -         $      -       $    -
Purchase of treasury shares                                          (1,858)               -            -
------------------------------------------------------------- --------------- ---------------- --------------
Balance, end of year                                               $ (1,858)        $      -       $    -
------------------------------------------------------------- --------------- ---------------- --------------

------------------------------------------------------------- --------------- ---------------- --------------
TOTAL STOCKHOLDER'S EQUITY                                         $129,703         $116,818       $101,608
------------------------------------------------------------- --------------- ---------------- --------------

                 The accompanying notes are an integral part of these consolidated statements.

</TABLE>


                                       53
<PAGE>

<TABLE>
<CAPTION>
                                             LECROY CORPORATION
                              CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                               (IN THOUSANDS)

FOR THE YEARS ENDED JUNE 30,                                       2006            2005            2004
<S>                                                           <C>               <C>          <C>
------------------------------------------------------------- --------------- ---------------- --------------

------------------------------------------------------------- --------------- ---------------- --------------
CONSOLIDATED COMPREHENSIVE INCOME
------------------------------------------------------------- --------------- ---------------- --------------
Net income                                                         $  6,573          $  2,143     $  8,044
------------------------------------------------------------- --------------- ---------------- --------------
Other Comprehensive Income (Loss), net of tax
------------------------------------------------------------- --------------- ---------------- --------------
    Foreign currency translation adjustments                            513               325         2052
------------------------------------------------------------- --------------- ---------------- --------------
    Unrealized loss on marketable securities                              -                 -          (20)
        (net of tax benefit of $12)
------------------------------------------------------------- --------------- ---------------- --------------
    Reclassification adjustment for loss on marketable
       securities included in net income,
       (net of tax benefit of $12)                                        -                20            -
------------------------------------------------------------- --------------- ---------------- --------------
COMPREHENSIVE INCOME                                               $  7,086          $  2,488     $ 10,076
------------------------------------------------------------- --------------- ---------------- --------------


                   The accompanying notes are an integral part of these consolidated statements.

</TABLE>


                                       54
<PAGE>

<TABLE>
<CAPTION>
                                                          LECROY CORPORATION
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                            (IN THOUSANDS)
                                                                                        YEARS ENDED JUNE 30,
                                                                                   2006         2005         2004
                                                                               -----------  -----------  -----------

<S>                                                                            <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income.............................................................      $    6,573   $    2,143   $    8,044
  Adjustments to reconcile net income to net cash
     provided by operating activities:
    Write-off of acquired in-process research and development............              --        2,190           --
    Depreciation and amortization........................................           7,558        8,241        6,366
    Share-based compensation.............................................           5,315        3,913           88
    Amortization of debt issuance costs..................................             377          370           28
     Deferred income taxes...............................................           2,282         (921)       2,963
     Impairment of intangible assets.....................................              --        1,500           --
     Recognition of deferred license revenue.............................            (665)      (1,296)      (1,296)
     Loss on disposals of property and equipment, net....................             196          194          124
     Tax benefit from exercise of stock options..........................              --        1,057        1,212
     Gain on sale of discontinued operations.............................              --           --         (189)
   Gross profit on non-cash transactions.................................              --           --         (132)
  Change in operating asset and liabilities:
     Accounts receivable.................................................             (65)      (1,435)      (3,265)
     Inventories.........................................................          (7,731)      (3,669)       3,421
     Other current and non-current assets................................          (1,636)         447         (649)
     Accounts payable, accrued expenses and other liabilities............           3,790          (11)       3,535
                                                                               ----------   -----------  ----------
Net cash provided by operating activities................................          15,994       12,723       20,250
                                                                               ----------   ----------   ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment.....................................          (4,823)      (3,687)      (5,845)
  Business acquisition costs, net of acquired cash.......................              --      (80,363)          --
  Purchase of marketable securities......................................              --           --       (9,566)
  Purchase of intangible assets..........................................            (812)        (100)      (1,800)
  Proceeds from the sale of marketable securities........................              --        9,534           --
  Proceeds from the sale of property and equipment.......................              --           --          584
                                                                               ----------   ----------   ----------
Net cash used in investing activities....................................          (5,635)     (74,616)     (16,627)
                                                                               ----------   ----------   ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under credit agreement......................................           3,500       50,000       10,000
  Repayment of borrowings under credit agreement and capital leases......         (10,862)      (6,038)     (10,096)
  Debt issuance costs....................................................            (187)      (1,378)          --
  Proceeds from issuance of common stock, net of direct costs............              --           --       12,004
  Payment related to issuance of common stock............................              --           (7)          --
  Purchase of treasury shares............................................          (1,715)          --           --
  Redemption of convertible preferred stock..............................              --           --      (23,000)
  Payment of seller-financed intangible assets...........................              --         (250)        (500)
  Proceeds from employee stock purchase and option plans.................           2,384        4,593        5,379
                                                                               ----------   ----------   ----------
Net cash provided by (used in) financing activities......................          (6,880)      46,920       (6,213)
                                                                               -----------  ----------   -----------

Effect of exchange rate changes on cash..................................            (373)         273          305
                                                                               -----------  ----------   ----------
  Net increase (decrease) in cash and cash equivalents...................           3,106      (14,700)      (2,285)
  Cash and cash equivalents, beginning of year...........................          13,866       28,566       30,851
                                                                               ----------   ----------   ----------
  Cash and cash equivalents, end of year.................................      $   16,972   $   13,866   $   28,566
                                                                               ==========   ==========   ==========

Supplemental Cash Flow Disclosure
  Cash paid during the year for:
     Interest............................................................      $    2,541   $    1,984   $      190
     Income taxes........................................................           1,805        1,215          249
  Non-cash transactions:
    Acquisition of seller-financed intangible assets.....................              --        1,331           --
    Property and equipment acquired under capital lease..................             125           --           --
    Issuance of LeCroy stock options for business acquisition............              --        3,166           --
    Acquisition of intangible asset and equipment in exchange for
    oscilloscopes........................................................              --           --          167
    Treasury stock purchased but unpaid at June 30, 2006.................             143           --           --

                  The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       55
<PAGE>

                               LECROY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   ORGANIZATION

     LeCroy Corporation (the "Company" or "LeCroy"), was founded and
incorporated in the State of New York in 1964 and reincorporated in the State of
Delaware in 1995. The Company develops, manufactures, sells and licenses
high-performance oscilloscopes and global communications protocol analyzers.
Oscilloscopes are tools used by designers and engineers to measure and analyze
complex electronic signals in order to develop high-performance systems, to
validate electronic designs and to improve time to market. Protocol analyzers
are tools used by designers and engineers to generate and monitor traffic over
high speed serial data interfaces, including USB2.0, Bluetooth, PCI Express,
Serial ATA, Serial Attached SCSI (SAS), Wireless USB, and others. The Company's
products are sold into a broad range of end markets, including
computer/semiconductor/consumer electronics, data storage,
automotive/industrial, and military/aerospace. Revenues are also generated from
the sale of probes, accessories, and applications solutions, and to a lesser
extent, extended warranty and maintenance contracts, repairs and calibrations
performed on instruments after the expiration of their warranties.

   BASIS OF PRESENTATION AND USE OF ESTIMATES

     The consolidated financial statements include the accounts of LeCroy and
its wholly-owned subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been made to
prior-years' amounts to conform to the current-year presentation.

     The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America, which require management to make estimates and assumptions. These
estimates and assumptions affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the revenues and expenses reported during
the period. The most significant of these estimates and assumptions relate to
revenue recognition, reserve for accounts receivable, allowance for excess and
obsolete inventory, valuation of long-lived and intangible assets, goodwill and
deferred tax assets, and share-based compensation expense and warranty. These
estimates and assumptions are based on management's judgment and available
information and, consequently, actual results could differ from these estimates.

   FISCAL YEAR ENDING DATES

     The Company's fiscal year ends on the Saturday closest to June 30 (July 1,
2006, July 2, 2005 and June 26, 2004). Fiscal years 2006 and 2004 represented
52-week periods and fiscal year 2005 represented a 53-week period. For clarity
of presentation, the consolidated financial statement year-end references are
stated as June 30.

   REVENUE

     LeCroy recognizes product and service revenue, net of allowances for
anticipated returns, provided that (1) persuasive evidence of an arrangement
exists, (2) delivery has occurred, (3) the selling price is fixed or
determinable and (4) collection is reasonably assured. Delivery is considered to
have occurred when title and risk of loss have transferred to the customer, or
when services have been provided. The price is considered fixed or determinable
when it is not subject to refund or adjustments.

     The Company maintains an allowance for doubtful accounts relating to
accounts receivable estimated to be non-collectible. The Company analyzes
historical bad debts, customer concentrations, customer creditworthiness,
current economic trends and changes in customer payment terms when evaluating
the adequacy of the allowance for doubtful accounts. In addition, the Company
maintains an allowance for anticipated sales returns. The Company analyzes
historical return trends as well as in-transit product returns to evaluate the
adequacy of the allowance for anticipated returns.


                                       56
<PAGE>

     Test and measurement products revenue. The Company generates Test and
measurement product revenue from the sales of oscilloscopes and application
solutions, protocol analyzers, probes and accessories. Provisions for warranty
costs are recorded at the time products are shipped. Application solutions,
which provide oscilloscopes with additional analysis capabilities, are either
delivered via compact disc or are already loaded in the oscilloscopes and
activated via a key code after the sale is made to the customer. No
post-contract support is provided on the application solutions. All sales of
test and measurement products are based upon separately established prices for
the items and are recorded as revenue according to the above revenue recognition
criteria. Revenues from these products are included in revenues from Test and
measurement products in the Consolidated Statements of Operations. Certain
software is embedded in the Company's oscilloscopes, but the embedded software
component is considered incidental.

     In the first quarter of fiscal 2006, in an effort to provide end-user
customers an alternative to purchasing the Company's higher end products under
its standard terms and conditions, the Company began offering customers an
opportunity to enter into sales-type or direct financing leases for these
products. The Company is accounting for these leases in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 13, "Accounting for
Leases." Lease and rental revenues are reported within Test and measurement
product revenue.

     Due to the significant software content of its protocol analyzer products,
the Company recognizes revenue on the sale of these products, in accordance with
American Institute of Certified Public Accountants Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"), as amended by Statement of Position
98-9, "Modifications of SOP 97-2 with Respect to Certain Transactions" ("SOP
98-9"), upon shipment, provided there is persuasive evidence of an arrangement,
the product has been delivered, the price is fixed or determinable and
collectibility is probable. Software maintenance support revenue is deferred
based on its vendor specific objective evidence of fair value ("VSOE") and
recognized ratably over the maintenance support periods. Provisions for warranty
costs are recorded at the time of product revenue recognition. Revenues from
protocol analyzer products are included in Test and measurement products in the
Consolidated Statements of Operations.

     Software license revenue. The Company recognizes software license revenue
in accordance with SOP 97-2 as amended by SOP 98-9. Revenues from perpetual
software license agreements are recognized upon delivery of the software if
evidence of an arrangement exists, pricing is fixed and determinable, and
collectibility is probable. If an acceptance period is required, revenues are
recognized upon the earlier of customer acceptance or the expiration of the
acceptance period. The Company allocates revenue on software arrangements
involving multiple elements to each element based on the relative fair values of
the elements. The determination of fair value of each element in multiple
element arrangements is based on VSOE. The Company analyzes all of the elements
and determines if there is sufficient VSOE to allocate revenue to maintenance
included in multiple element arrangements. Accordingly, assuming all other
revenue recognition criteria are met, revenue is recognized upon delivery using
the residual method in accordance with SOP 98-9, where the VSOE of the
undelivered elements is deferred and the remaining portion of the arrangement
fee is recognized as license revenue. The revenue allocated to software
maintenance is recognized ratably over the term of the support agreement. The
revenue allocated to licenses is recognized upon delivery of the licenses.
Revenues from perpetual software license agreements are included in Service and
other in the Consolidated Statements of Operations. There was no revenue from
perpetual software license agreements for the years ended June 30, 2006, 2005
and 2004.

     Service and other revenue. Service and other revenue includes extended
warranty contracts, software maintenance agreements and repairs and calibrations
performed on instruments after the expiration of their normal warranty period.
The Company defers revenue for extended warranty contracts, software maintenance
agreements and calibration services and then recognizes such revenue on a
straight-line basis over the related service period. When arrangements include
multiple elements, the Company uses relative fair values in accordance with
Emerging Issues Task Force ("EITF") Issue No. 00-21, "Revenue Arrangements with
Multiple Deliverables," to allocate revenue to the elements and recognizes
revenue when the criteria for revenue recognition have been met for each
element.

                                       57
<PAGE>

     Deferred product revenue. During the third quarter of fiscal 2004, the
Company began shipping the WaveSurfer oscilloscope product line. One component
of the Company's strategy for distributing this product line was the use of a
buy-sell distribution channel. This was the Company's initial entry into this
distribution channel and, because of the associated uncertainty about
sell-through volumes, the Company was unable to sufficiently estimate the
amounts of potential product returns. In the fourth quarter of fiscal 2005,
having had four full quarters of experience with this product and channel with
no significant returns, the Company had sufficient data to estimate potential
returns and, in accordance with SFAS No. 48, "Revenue Recognition When Right of
Return Exists" ("SFAS 48"), recognized previously deferred revenue of $2.6
million. Revenue related to WaveSurfers sold to distributors, beginning with the
fourth quarter of fiscal 2005, is recognized upon shipment to the distributor,
rather than upon the sale of the unit by the distributor to the end user, and a
provision for expected returns is recognized.

     Deferred license revenue. Revenue from license fees under agreements that
have exclusivity clauses and, from the licensee's perspective, have ongoing
requirements or expectations that are more than perfunctory, are recognized on a
straight-line basis over the terms of the related agreements. An ongoing
requirement or expectation would be considered more than perfunctory if any
party to the contract considers it to be "essential to the functionality" of the
delivered product or service or failure to complete the activities would result
in the customer receiving a full or partial refund or rejecting the products
delivered or services performed to date.

     Beginning in fiscal 2001 with the adoption of the SEC's Staff Accounting
Bulletin, ("SAB") No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," (superseded by SAB 104), certain previously recognized license fee
revenue was deferred and recognized in future periods over the terms of the
agreements. The adoption of SAB 101 was recorded as of the beginning of fiscal
2001 and resulted in a non-cash charge for the cumulative effect of an
accounting change of $4.4 million, net of a tax benefit of $2.7 million. The
deferred revenue is being amortized into revenue on a straight-line basis over
5.5 years, the remaining terms of the license agreements. The Company recognized
pretax license fee revenue of $0.7 million, $1.3 million and $1.3 million during
fiscal years 2006, 2005 and 2004, respectively. Such license fees were included
in Service and other revenue in the Consolidated Statements of Operations. As of
June 30, 2006, there is no remaining deferred license revenue from the adoption
of SAB 101.

   SHARE - BASED COMPENSATION

     In the first quarter of fiscal 2006, the Company adopted the provisions of
SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R") which requires
that the cost resulting from all share-based payment transactions be recognized
in the financial statements at their fair values. The Company adopted SFAS 123R
using the modified prospective application method under which the provisions of
SFAS 123R apply to new awards and to awards modified, repurchased, or cancelled
after the adoption date. Additionally, compensation cost for the portion of the
awards for which the requisite service has not been rendered that are
outstanding as of the adoption date is recognized in the Consolidated Statement
of Operations over the remaining service period after the adoption date based on
the award's original estimate of fair value. The Company uses the Black-Scholes
option pricing model to estimate the fair value of options on the date of grant
which requires certain estimates by management including the expected volatility
and expected term of the option. Management also makes decisions regarding the
risk free interest rate used in the model and makes estimates regarding
forfeiture rates. Fluctuations in the market that affect these estimates could
have an impact on the resulting compensation cost. The fair value of the
compensation cost is recognized on a straight-line basis over the requisite
service period of the award.

     Historically, through fiscal 2005, the Company accounted for stock-based
compensation under the recognition and measurement principles of Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. No compensation expense
related to stock options was reflected in the Company's Consolidated Statements
of Operations, with the exception of the CATC Plans, as all options had an
exercise price equal to the market value of the underlying common stock on the
date of grant. Compensation cost for restricted stock (non-vested stock) was
recorded based on its market value on the date of grant and was expensed in the
Company's Consolidated Statements of Operations ratably over the vesting period.
Upon the grant of restricted stock, deferred stock compensation was recorded as
an offset to additional paid-in capital and was amortized on a straight-line
basis as compensation expense over the vesting period. (See Note 14 to the
Consolidated Financial Statements for additional information.)


                                       58
<PAGE>


   WARRANTY

     The Company provides a warranty on its products, typically extending three
years after delivery and accounted for in accordance with SFAS No. 5,
"Accounting for Contingencies" ("SFAS 5"). Estimated future warranty obligations
related to products are provided by charges to Cost of revenues in the period
that the related revenue is recognized. These estimates are derived from
historical data of product reliability and, for new products, published (by a
third party) expected failure rates. The expected failure rate is arrived at in
terms of units, which are then converted into labor hours to which an average
fully burdened cost per hour is applied to derive the amount of accrued warranty
required. On a quarterly basis, the Company studies trends of warranty claims
and performance of specific products and adjusts its warranty obligation through
charges or credits to Cost of revenues.

    SHIPPING AND HANDLING COSTS

     The Company records the costs and fees associated with transporting its
products to customers as a component of Selling, general and administrative
expense in the Consolidated Statements of Operations. These costs totaled $3.5
million, $3.1 million and $2.2 million for the fiscal years ended June 30, 2006,
2005 and 2004, respectively.

   ADVERTISING COSTS

     The costs of general advertising, promotion and marketing programs are
charged to Selling, general and administrative expense in the Consolidated
Statements of Operations in the fiscal year incurred. The costs of advertising
related to new product introductions are deferred until such advertising first
takes place, which generally coincides with product introduction. Advertising
expense for the fiscal years ended June 30, 2006, 2005 and 2004 was $2.6
million, $2.7 million and $2.3 million, respectively.

   RESEARCH AND DEVELOPMENT

     Research and development costs are expensed as incurred. The Company
evaluates the requirement to capitalize certain software development costs for
protocol analyzers in accordance with SFAS No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed" ("SFAS 86"). Under
SFAS 86, costs incurred to develop or significantly enhance computer software
products are charged to research and development expense as incurred until
technological feasibility has been established. The nature of the Company's
development for protocol analyzers is generally such that the Company can
measure technological feasibility most effectively using the working model
method where the time between establishment of a working model and general
availability is of short duration which results in very little or no costs that
qualify for capitalization. As such, the Company has not capitalized any
software development costs for the years ended June 30, 2006, 2005 or 2004.

   CASH AND CASH EQUIVALENTS

     Cash in excess of current operating requirements are invested in cash
equivalents, which are short-term, highly liquid interest bearing investments
with maturities of three months or less at the date of purchase and are stated
at cost, which approximates market value.

   PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost less accumulated depreciation.
Replacements, maintenance and repairs which do not improve or extend the life of
the respective asset are expensed as incurred. Depreciation and amortization of
property and equipment is provided on a straight-line basis over the asset's
estimated useful life or related lease term, if shorter, as follows:

   Building and improvements.......................         10-32 years
   Furniture, machinery and equipment..............          2-10 years
   Computer software and hardware..................           2-7 years


                                       59
<PAGE>

   INVENTORIES

     Inventories, with the exception of demonstration units in finished goods,
are stated at the lower of cost (first-in, first-out method) or market.
Demonstration units are stated at lower of cost (specific identification method)
or market.

   IMPAIRMENT OF LONG-LIVED ASSETS AND ACQUIRED INTANGIBLE ASSETS

     The Company monitors events and changes in circumstances that could
indicate carrying amounts of long-lived assets, including amortizable intangible
assets, may not be recoverable. When such events or changes in circumstances
occur, the Company assesses the recoverability of long-lived assets by
determining whether the carrying value of such assets will be recovered through
undiscounted expected future cash flows. If the undiscounted cash flows are less
than the carrying amount, an impairment loss is recorded to the extent that the
carrying amount exceeds the fair value. During 2005, an intangible asset that
provided for manufacturing rights to, and the use of, certain intellectual
property failed the impairment test due to a change in product strategy and,
accordingly, a $1.5 million pre-tax loss was recognized in Cost of revenues in
the fiscal 2005 Consolidated Statement of Operations. There were no other
impairment indicators for other long-lived assets during the fiscal years ended
June 30, 2006, 2005 or 2004.

   GOODWILL

     Goodwill is recognized for the excess of the purchase price over the fair
value of assets acquired and liabilities assumed in a purchase business
combination. The Company tests goodwill for impairment annually under a two-step
approach, or more frequently, if events or changes in circumstances indicate
that the asset might be impaired. Impairment is assessed at the "reporting unit"
level by applying a fair value-based test using the Company's market
capitalization. The Company has one reporting unit for the purposes of
impairment testing.

     The Company completed the annual impairment test during the fourth quarter
of fiscal 2006 and determined that there was no impairment to its recorded
goodwill balance of $78.5 million at June 30, 2006. There were no impairment
indicators during fiscal years 2006, 2005 or 2004.

   CONCENTRATION OF CREDIT RISK

     The Company develops, manufactures, sells and licenses high-performance
oscilloscopes and global communication protocol test solutions. The Company's
products are sold into a broad range of end markets, including the computer and
semiconductor, consumer electronics, data storage devices, automotive and
industrial, and military and aerospace markets. Sales occur in all regions of
the United States as well as a multitude of foreign countries. No customer
accounted for more than 10% of the Company's consolidated revenues in any of the
last three fiscal years. There is no significant concentration of the Company's
accounts receivable portfolio in any customer or geographical region that
presents a risk to the Company based on that concentration. Credit losses have
been minimal in fiscal 2006, 2005 and 2004.

   INCOME TAXES

     Deferred tax assets and liabilities are recognized under the asset and
liability method based upon the difference between the amounts reported for
financial reporting and tax purposes. These deferred taxes are measured by
applying current enacted tax rates. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in operations in the period
that includes the enactment date. A valuation allowance is provided when it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the period in which related
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. The Company's policy is not to
provide for U.S. taxes on undistributed earnings of foreign subsidiaries to the
extent such earnings are determined to be permanently invested outside the
United States.


                                       60
<PAGE>

   FOREIGN EXCHANGE

     The Company's foreign subsidiaries use their local currency as the
functional currency and translate all assets and liabilities at fiscal year-end
exchange rates and all income and expenses at average fiscal year exchange rates
with translation adjustments recorded in Accumulated other comprehensive income,
a separate component of stockholders' equity in the Consolidated Balance Sheets.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are
included in Other, net in the Consolidated Statements of Operations. Foreign
currency transaction gains and losses, related to short-term intercompany loans,
are recorded in the Consolidated Statements of Operations as incurred.
Intercompany loans that are of a long-term-investment nature are accounted for
in accordance with SFAS 52, "Foreign Currency Translation," whereby foreign
currency transaction gains and losses are recorded in accumulated other
comprehensive income, a component of stockholders' equity.

   FINANCIAL INSTRUMENTS

     Cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and other current liabilities reported in the Consolidated Balance
Sheets equal or approximate their fair value due to their short term to
maturity. The Term Loan, totaling $34.1 million at June 30, 2006, is included
within Current portion of long-term debt and capital leases and Long term debt.
Borrowings under the revolving line of credit totaling $3.5 million at June 30,
2006 are included in Short-term borrowings. Borrowings under the Term Loan and
revolving line of credit have variable rates and the carrying amounts are
considered by management to be a reasonable estimate of their fair value. See
below for the fair value of derivative instruments.

   DERIVATIVE INSTRUMENTS

     The Company accounts for derivatives and hedging activities in accordance
with SFAS No. 133, "Accounting for Derivative Investments and Hedging
Activities," as amended ("SFAS 133"), which requires that all derivative
instruments be recorded on the balance sheet at their respective fair values.
The accounting for changes in the fair value (i.e., gains or losses) of a
derivative instrument is dependent upon whether the derivative has been
designated and qualifies as part of a hedging relationship and further, on the
type of hedging relationship. The Company's foreign exchange forward contracts
and interest rate swap agreements are not accounted for as hedges in accordance
with SFAS 133; therefore, any changes in fair value of these contracts are
recorded in Other (expense) income, net in the Consolidated Statements of
Operations. These derivatives are also recorded on the Consolidated Balance
Sheets at fair value.

     The Company does not use derivative financial instruments for trading or
other speculative purposes and does not enter into fair value hedges.

     The Company enters into foreign exchange forward contracts to minimize the
risks associated with foreign currency fluctuations on assets or liabilities
denominated in other than the functional currency of the Company or its
subsidiaries. The Company also entered into an interest rate swap transaction
with the Manufacturers & Traders Trust Co. ("M&T Bank") effective January 31,
2005 and continuing through January 31, 2008, corresponding with the repayment
terms of the $50.0 million Term Loan portion of the senior, secured, five-year
credit agreement entered into with the lenders listed therein and The Bank of
New York, as administrative agent for such lenders on October 29, 2004 (the
"Credit Agreement"). These foreign exchange forward contracts and interest rate
swap agreements are not accounted for as hedges in accordance with SFAS 133;
therefore, any changes in fair value of these contracts are recorded in Other
(expense) income, net in the Consolidated Statements of Operations. These
derivatives are also recorded on the Consolidated Balance Sheets in Other assets
or liabilities at fair value. The fair value of the foreign exchange forward
contracts is a liability of approximately ($0.2) million at June 30, 2006 as
compared to an asset of approximately $0.1 million at June 30, 2005.

     The changes in fair value of the foreign exchange contracts are highly
inversely correlated to changes in the value of certain of the Company's foreign
currency-denominated assets and liabilities. At June 30, 2006 and 2005, the
notional amounts of the Company's open foreign exchange forward contracts, all
with maturities of less than six months, were approximately $14.6 million and
$10.6 million, respectively.

                                       61
<PAGE>

     The notional amount of the interest rate swap as of June 30, 2006 and 2005
was approximately $19.1 million and $23.1 million, respectively. The fair value
of the interest rate swap as of June 30, 2006 and 2005, was $0.4 million and
$66,000, respectively, is recorded in Other assets on the Consolidated Balance
Sheets and approximates the amount that the Company would have received from M&T
Bank if the Company had canceled the transaction at that date.

   COMPREHENSIVE INCOME

     Comprehensive income comprises net income, foreign currency translation
adjustments and unrealized gains and losses on marketable securities classified
as available-for-sale, net of reclassification adjustments for realized gain and
losses on marketable securities included in net income.

   NEW ACCOUNTING PRONOUNCEMENTS

     In May 2005, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 154, "Accounting Changes and Error Corrections," ("SFAS 154") which will be
effective for the Company for reporting changes in accounting principles and for
correction of errors beginning in fiscal year 2007. SFAS 154 requires a change
in accounting principle to be applied retrospectively application to prior
periods' financial statements, unless explicit transition provisions are
provided for in new accounting pronouncements or existing pronouncements that
are in the transition phase when SFAS 154 becomes effective. There will be no
immediate effect from our adoption of SFAS 154.

     In June 2005, the FASB issued FASB Staff Position ("FSP") 143-1,
"Accounting for Electronic Equipment Waste Obligations." FSP 143-1 addresses the
accounting related to obligations associated with Directive 2002/96/ EC on Waste
Electrical and Electronic Equipment (the "Directive") adopted by the European
Union. Under the Directive, the waste management obligation for historical
equipment (products put on the market on or prior to August 13, 2005) remains
with the commercial user until the equipment is replaced. FSP 143-1 is effective
the later of the end of the first quarter of fiscal year 2006 or the date of
adoption of the law by the applicable EU-member country. It is expected that the
law will be adopted by certain EU countries in calendar year 2006 and that the
Company will be required to adopt the provisions of FSP-143-1 at that time. The
effects will depend on the respective laws adopted by the EU member countries.

     On February 3, 2006, the FASB issued FSP 123(R)-4, "Classification of
Options and Similar Instruments as Employee Compensation That Allow for Cash
Settlement upon the Occurrence of a Contingent Event." This amends paragraphs 32
and A229 of SFAS 123R , which required that share options with contingent cash
settlement features be classified as liabilities regardless of the event's
likelihood of occurrence. FSP 123(R)-4 requires companies with cash-settleable
provisions in their employee share-option awards to assess the probability of
the contingent event's occurrence when determining the classification of the
awards as liability or equity. If the event's likelihood of occurrence is less
than probable and the award would otherwise be classified as equity, under FSP
123(R)-4, it would be equity classified. The Company would be required to make
an ongoing assessment of the probability of the contingent event occurring and
reclassify the award as a liability should the event become probable. The
Company was required to adopt the provisions of this FSP as of the beginning of
the fourth quarter of fiscal 2006, the first reporting period after the FSP was
posted to the FASB website. The adoption of FSP 123(R)-4 had no impact on the
Company's results of operations or financial condition as it has not issued any
share options with contingent cash settlement features.

     On February 16, 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Instruments, an amendment of FASB Statements No. 133 and 140" ("SFAS
155"). SFAS 155 allows financial instruments that have embedded derivatives to
be accounted for as a whole (eliminating the need to separate the derivative
from its host) if the holder elects to account for the whole instrument on a
fair value basis. It also clarifies which interest-only strips and
principal-only strips are not subject to the requirements of Statement 133;
establishes a requirement to evaluate interest in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring separation;
clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives; and amends Statement 140 to eliminate the prohibition
on a qualifying special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than another derivative
financial instrument. SFAS 155 is effective for all financial instruments
acquired or issued after the beginning of an entity's first fiscal year that
begins after September 15, 2006. The adoption of SFAS 155 is not expected to
have any impact on the Company's results of operations or financial condition as
it does not currently use hybrid instruments.

                                       62
<PAGE>

     In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--An Interpretation of FASB Statement No. 109" ("FIN
48"), which 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 will be effective for fiscal years
beginning after December 15, 2006. Management is currently evaluating the effect
that adoption of this interpretation will have on the Company's consolidated
financial position and results of operations.


2. CATC ACQUISITION

     On October 29, 2004, the Company completed its acquisition of 100% of the
outstanding common stock of Computer Access Technology Corporation ("CATC") via
the merger of a newly-formed, wholly-owned subsidiary of LeCroy with and into
CATC, with CATC surviving as a wholly-owned subsidiary of LeCroy (the "Merger").
CATC is a provider of advanced verification systems for existing and emerging
digital communications standards. CATC's products are used by semiconductor,
device, system and software companies at each phase of their products'
lifecycles from development through production and market deployment. CATC had
approximately 70 employees at the time of the Merger. Through its acquisition of
CATC, LeCroy expects to capitalize on the increasing demand for serial data test
instruments, leverage its global, technical, direct sales force to accelerate
the growth of CATC's products, strengthen its position in the data storage
market, increase penetration into the computer market, expand gross profit,
increase operating leverage leading to expanded operating profit and increase
cash generation capabilities.

     Total consideration paid to acquire CATC was $130.0 million. The Merger was
recorded under the purchase method of accounting, in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations,"
which requires that the total consideration be allocated to the assets acquired
and liabilities assumed based on their fair values. On the effective date of the
Merger, each share of CATC common stock issued and outstanding immediately prior
thereto was canceled and converted into the right to receive $6.00 in cash. In
addition, LeCroy paid cash to the holders of CATC's outstanding, vested,
in-the-money stock options and employee stock purchase plan (the "CATC ESPP")
purchase rights. Further, LeCroy assumed CATC's outstanding unvested stock
options, as well as certain vested but unexercised stock options, by granting to
CATC employees a total of 648,284 options to purchase LeCroy common stock (the
"LeCroy Options"). The LeCroy Options were recorded at their fair values using
the Black-Scholes option pricing model based on a stock price of $16.83 per
share, which was the closing price of LeCroy common stock on October 29, 2004,
less the intrinsic value of unvested options, which was to be charged as
compensation expense to operations as earned by employees over their remaining
vesting periods. (See Note 14 - Share-Based Compensation for further discussion
of the accounting for these options following the Company's adoption of SFAS No.
123R.) LeCroy paid cash of $80.4 million, net of cash acquired, using $30.4
million of cash on hand and borrowings of $50.0 million under the Company's
$75.0 million senior, secured, five-year credit agreement entered into on
October 29, 2004, with the lenders listed therein and The Bank of New York, as
administrative agent for such lenders. (See Note 13 - Long-term Debt and Capital
Leases). The Merger consideration is summarized below (in thousands):


Cash for shares................................................. $   120,242
Cash for options and CATC ESPP purchase rights..................       3,965
Fair value of stock options assumed.............................       5,111
Intrinsic value of unearned stock compensation
    on unvested options assumed.................................      (1,945)
Transaction costs...............................................       2,622
                                                                 -----------
     Total purchase price....................................... $   129,995
                                                                 ===========


     The fair value of tangible and intangible assets acquired and liabilities
assumed was established based upon the unaudited October 28, 2004 Consolidated



                                       63
<PAGE>

Balance Sheet of CATC, as well as certain assumptions made regarding fair
values. The fair value of finished goods and work in process inventory was
valued based on estimated selling prices less direct costs to sell and a profit
margin on the selling effort. The fair value of the in-process research and
development ("IPR&D"), purchased technology, trade name and purchase orders was
determined by an independent appraisal firm. The fair value of the IPR&D was
based on the total estimated costs to develop the related technologies less the
costs incurred to date for the projects, and the intangible asset values were
based on estimates of future cash flows associated with those assets. The
purchased technology, trade name and purchase orders related to this acquisition
are being amortized over their estimated economic useful lives ranging from two
to twenty-nine months. The excess of the purchase price over the fair value of
the net assets acquired has been allocated to goodwill. The principle factors
that contributed to a purchase price that resulted in the recognition of
goodwill was the fair value of the going-concern element of the CATC business,
which includes the assembled workforce and their technology position within
emerging communication standards, as well as the expected synergies that will be
achieved by combining both companies. The goodwill is not deductible for tax
purposes. During the fourth quarter of fiscal 2006, the Company reduced its CATC
goodwill by approximately $0.4 million, a result of a reversal of a
pre-acquisition tax contingency reserve. In fiscal 2005, the Company reduced its
CATC goodwill by approximately $2.9 million, a result of a reversal of a
valuation allowance against the CATC deferred tax assets and a reversal of a
pre-acquisition contingency reserve. The final purchase price allocation is
summarized below (in thousands):

Cash                                                   $ 46,466
Accounts receivable                                       2,296
Inventory                                                 3,710
Other current assets                                        133
Fixed assets                                                663
Other assets                                                 28
Deferred tax asset, net                                     367
In-process research and development                       2,190
Purchased technology                                      3,080
Purchased trade name                                         70
Purchased purchase orders                                    90
Goodwill                                                 76,599
Current liabilities assumed                              (5,045)
Long-term liabilities assumed                              (652)
                                                       --------
Total purchase price                                   $129,995
                                                       ========


     The $2.2 million allocated to IPR&D was written off during the second
quarter of fiscal 2005 in accordance with FASB Interpretation No. 4,
"Applicability of FASB Statement No. 2 to Business Combinations Accounted for by
the Purchase Method." This charge was included in Research and development
expense in the Consolidated Statement of Operations for that fiscal year.

     The Consolidated Statements of Operations include the results of operations
of CATC since October 29, 2004. The following (unaudited) pro forma consolidated
results of operations have been prepared as if the Merger had occurred at the
beginning of each year presented (in thousands, except per share data).

<TABLE>
<CAPTION>
                                                                    YEAR ENDED JUNE 30,
                                                                   ---------------------
                                                                     2005         2004
                                                                   ---------    --------
<S>                                                                <C>         <C>
Revenues........................................................   $ 170,002   $ 142,613
Income (loss) from continuing operations before non-recurring
  charges directly attributable to the Merger ..................   $   1,189     ($3,058)
Income (loss) per share from continuing operations before
  non-recurring charges directly attributable to the Merger -
  basic.........................................................   $    0.10      ($0.28)
Income (loss) per share from continuing operations before
  non-recurring charges directly attributable to the Merger -
  diluted.......................................................   $    0.10      ($0.28)
</TABLE>

     The write-off of IPR&D of $2.2 million is excluded from the calculation of
net income (loss) and net income (loss) per share in the table shown above as
the charge is non-recurring.

                                       64
<PAGE>

     The pro forma information is presented for informational purposes only and
is not necessarily indicative of the results of operations that actually would
have been achieved had the Merger been consummated as of that time, nor is it
intended to be a projection of future results.

     3. RESTRUCTURING AND ASSET IMPAIRMENT

     In the fourth quarter of fiscal 2006, the Company realigned some of its
business processes and as a result, incurred severance and related expenses of
approximately $0.4 million of which approximately $0.1 million was charged to
Cost of revenues, $0.2 million was expensed to Selling, general and
administrative and $0.1 million was expensed to Research and development. The
implementation of this plan resulted in headcount reductions of sixteen
employees or 3.5% of the workforce as compared to June 30, 2005. As of June 30,
2006, approximately $0.2 million has been paid in cash and $0.2 million remains
in Accrued expenses and other current liabilities on the Consolidated Balance
Sheet. Severance and other related amounts under this plan will be paid by the
end of the third quarter of fiscal 2007.

     During the fourth quarter of fiscal 2005, the Company realigned some of its
business processes and, as a result, incurred expenses of approximately $1.0
million, consisting of $0.7 million of severance and related expenses and $0.3
million of facility closure expenses which included lease termination costs and
asset write-downs. Of these costs, $0.1 million was recorded in Cost of
revenues, $0.8 million was recorded in Selling, general and administrative and
$0.1 million was recorded in Research and development. As of June 30, 2006,
approximately $0.7 million of severance has been paid and $0.3 million of
facility charges have been paid in cash or written off and approximately $19,000
remains in Accrued expenses and other current liabilities on the Consolidated
Balance Sheet. The remaining balance is expected to be paid by the end of fiscal
2007.

     Finally, during the second quarter of fiscal 2005, as a result of the
Merger, the Company adopted a plan to restructure its organization and refine
its product strategy. In connection with the adoption of this plan, the Company
recorded a charge for severance and related expenses in fiscal 2005 of
approximately $0.6 million in Selling, general and administrative expense. The
implementation of this plan resulted in headcount reductions of six employees or
approximately 2% of the workforce as compared to June 30, 2004. As of June 30,
2006, approximately $554,000 of severance has been paid and approximately
$46,000 remains in Accrued Expenses and other current liabilities on the
Consolidated Balance Sheet. Severance and other related amounts under this plan
are expected to be paid by the end of the second quarter of fiscal 2007.
Additionally, in the second quarter of fiscal 2005, as a result of a change in
the Company's organization stemming from the Merger and a subsequent change in
the Company's low to mid-range oscilloscope manufacturing strategy, the Company
took a $1.5 million non-cash charge to Cost of revenues for the impairment of a
related intangible asset.

     The below table summarizes the restructuring charges for the fiscal years
ended June 30, 2006 and 2005 (no similar charges were recorded in fiscal 2004)
(in thousands):

                                                FOR THE YEAR ENDED JUNE 30,
                                                ---------------------------
                                                    2006             2005
                                                    ----             ----

     Charges for:
       Impaired intangible assets.............  $      --     $     1,500
       Service center closure.................         --              59
       Severance and related costs............         77              18
                                                ---------    ------------
          Cost of revenues....................  $      77     $     1,577
                                                =========    ============

     Charges for:
       Severance and related costs............  $     127     $         77
                                                ---------     ------------
          Research and development............  $     127     $         77
                                                =========     ============

     Charges for:
       Severance and related costs............  $     176     $      1,328
       Facility closure.......................         --              171
                                                ---------     ------------
          Selling, general and administrative.  $     176     $      1,499
                                                =========     ============

                                       65
<PAGE>

4.  DISCONTINUED OPERATIONS

     In August 2000, the Company closed the sale of the assets and business of
its Vigilant Networks, Inc. subsidiary ("Vigilant") and a portion of the assets
and business of its Digitech Industries, Inc. subsidiary ("Digitech") for gross
proceeds of $12.0 million. The remaining business of Digitech was classified as
discontinued operations. The buyer also assumed certain liabilities of Vigilant.

     In fiscal 2004, the Company recorded $0.1 million of gain on sales of
discontinued operations in the Consolidated Statements of Operations, net of
income tax provisions, for the reversal of unused accrued discontinued
operations reserves. As of June 30, 2006, the Company has accrued discontinued
operations reserves of $0.2 million due to environmental matters at Digitech's
previously leased facilities (See Note 22- Commitments and Contingencies).

5.  ACCOUNTS RECEIVABLE, NET

     In fiscal 2006, the Company had an agreement with one of its customers, who
is also a vendor, that provided the Company with the legal right to offset
outstanding accounts receivable balances against outstanding accounts payable
balances. At June 30, 2006, the Company netted $25,000 of accounts receivable
against accounts payable on the Consolidated Balance Sheet related to this
agreement. During fiscal 2005, the Company had agreements with two of its
customers, who were also vendors, that provided the Company with the legal right
to offset outstanding accounts receivable balances against outstanding accounts
payable balances. At June 30, 2005, the Company netted $2.3 million of accounts
receivable against accounts payable on the Consolidated Balance Sheet related to
these agreements.

     The allowance for doubtful accounts and sales returns was approximately
$0.5 million and $0.4 million as of June 30, 2006 and June 30, 2005,
respectively.

6. INVENTORIES

    Inventories consist of the following (in thousands):

                                                  JUNE 30,
                                           ---------------------
                                              2006      2005 (1)
                                           ----------  ---------
   Raw materials......................     $    7,726  $    4,488
   Work in process....................          6,933       3,425
   Finished goods.....................         19,382      19,748
                                           ----------  ----------
                                           $   34,041  $   27,661
                                           ==========  ==========

(1)  Approximately $5.6 million of inventory classified as raw materials as of
     June 30, 2005 has been reclassified to finished goods to conform to the
     current year presentation.

     The value of demonstration units included in finished goods was $10.9
million and $10.8 million at June 30, 2006 and 2005, respectively. The Company's
demonstration units are held for sale and are sold regularly in the ordinary
course of business through its normal sales distribution channels and existing
customer base. The allowance for excess and obsolete inventory, included above,
amounted to $1.6 million and $1.1 million at June 30, 2006 and 2005,
respectively.

     In fiscal 2005, as a result of the Merger, the Company reviewed the
long-term product support policies in place at LeCroy and at CATC prior to the
Merger with an aim toward developing one policy to best serve customers. In
connection with the resultant change in policy, as well as changes in the
Company's product support strategy, for the year ended June 30, 2005, the
Company recorded a $2.7 million charge to Cost of revenues in the Consolidated
Statements of Operations for the write-off of excess parts. In addition, in
fiscal 2005 the Company expensed approximately $1.8 million for the write-down
of inventory primarily related to a lower of cost or market adjustment due to
renegotiated pricing with a particular vendor.

                                       66
<PAGE>

7.  OTHER CURRENT ASSETS

    Other current assets consist of the following (in thousands):


                                                            JUNE 30,
                                                   ----------------------
                                                      2006        2005
                                                   ----------  ----------
   Deferred tax assets, net.....................   $    8,200  $    9,000
   Prepaid taxes................................          762           7
   Other receivables............................          488         390
   Prepaid probes and accessories...............           43         195
   Value-added tax receivable...................          433         565
   Other........................................        3,311       2,458
                                                   ----------  ----------
                                                   $   13,237  $   12,615
                                                   ==========  ==========



8.  PROPERTY AND EQUIPMENT, NET

    Property and equipment consist of the following (in thousands):

                                                               JUNE 30,
                                                      -------------------------
                                                          2006          2005
                                                      ------------  -----------
   Land, building and improvements................... $    16,890   $    15,494
   Furniture, machinery and equipment................      30,153        28,638
   Computer software and hardware....................      17,250        15,712
                                                      -----------   -----------
                                                           64,293        59,844
   Less: Accumulated depreciation and amortization...     (43,934)      (40,766)
                                                      -----------   -----------
                                                      $    20,359   $    19,078
                                                      ===========   ===========

     Depreciation and amortization expense for the fiscal years ended June 30,
2006, 2005 and 2004 was $5.0 million, $5.1 million and $5.0 million,
respectively.

9.  GOODWILL AND OTHER NON-CURRENT ASSETS

     Goodwill and Other non-current assets consist of the following (in
thousands):

                                                               JUNE 30,
                                                        ----------------------
                                                           2006        2005
                                                        ----------  ----------
   Goodwill..........................................   $   78,473  $   78,848
                                                        ==========  ==========

   Intangibles, net..................................   $    4,022  $    5,783
   Deferred tax assets, net..........................        3,964       5,446
   Other.............................................        2,039       1,596
                                                        ----------  ----------
                                                        $   10,025  $   12,825
                                                        ==========  ==========

     The fiscal 2006 decrease in Goodwill of $0.4 million is attributable to the
release of a CATC pre-acquisition tax contingency reserve for rights which
expired in fiscal 2006. In fiscal 2005, the Company reduced its CATC goodwill by
approximately $2.9 million, a result of a reversal of a valuation allowance
against the CATC deferred tax assets and a reversal of a pre-acquisition
contingency reserve. (See Note 2 - CATC Acquisition)

     The following table reflects the gross carrying amount and accumulated
amortization of the Company's intangible assets included in Other non-current
assets on the Consolidated Balance Sheets as of the dates indicated (in
thousands):

<TABLE>
<CAPTION>
                                                                          WEIGHTED            JUNE 30,
                                                                                      -----------------------
                                                                        AVERAGE LIVES    2006         2005
                                                                        ------------- ----------   ----------
   Amortizable intangible assets:                                       (AS OF JUNE
                                                                         30, 2006)
<S>                                                                     <C>          <C>          <C>
    Technology, manufacturing and distribution rights.............      3.1 years    $     7,025   $   11,737
     Patents and other intangible assets...........................      5.6 years         1,593        1,073
     Accumulated amortization......................................                       (4,596)      (7,027)
                                                                                      ----------   ----------
   Net carrying amount.............................................                   $    4,022   $    5,783
                                                                                      ==========   ==========
</TABLE>

                                       67
<PAGE>

     During the year ended June 30, 2006, the Company completed a purchase and
settlement agreement with Iwatsu Electric Company, Ltd. ("Iwatsu") that included
a non-compete agreement, whereby Iwatsu agreed not to engage in competition with
the Company for a period of ten years and the purchase of certain other
intellectual property rights (see Note 21). The asset for the intellectual
property rights is being amortized over a period of seven years based on the
estimated useful life.

     During the year ended June 30, 2005, the Company entered into capital lease
agreements for $1.0 million for the use of electronic design automation software
and a license for $0.2 million for the ability to use certain computer aided
design software tools. Additionally, the Company increased an existing license
by $0.1 million for the use of embedded memory macro technology. The assets for
the design software licenses are being amortized over a period of three years
based on the terms of the license agreements. The asset for the use of the
embedded memory technology has an amortization period of five years based on the
terms of the license agreement.

     Amortization for assets under capital leases is included in total
depreciation and amortization expense. The net carrying value of assets under
capital leases at June 30, 2006, is $0.7 million.

     As part of the Merger, LeCroy purchased technology, the CATC trade name and
purchase orders at their fair value of $3.2 million.

     Also during the year ended June 30, 2005, as a result of a change in the
Company's organization stemming from the Merger and a subsequent change in the
Company's low to mid-range oscilloscope manufacturing strategy, the Company
recorded a $1.5 million non-cash charge for the write-off of an intangible
asset.

     Amortization expense for those intangible assets with finite lives was $2.6
million, $3.1 million, and $1.4 million for fiscal 2006, 2005 and 2004,
respectively. The cost of an amortizable intangible asset is amortized on a
straight-line basis over the estimated economic life of the asset. As of June
30, 2006, certain technology rights totaling $5.0 million were fully amortized
due to contract expiration and were removed from the Consolidated Balance Sheet
in the first quarter of fiscal 2006. Management estimates intangible assets
amortization expense on a straight-line basis in fiscal 2007 through 2011 and
beyond will approximate $1.9 million, $1.0 million, $0.5 million, $0.1 million,
$0.1 million and $0.4 million, respectively.

10.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     Accrued expenses and other liabilities consist of the following (in
thousands):

                                                                 JUNE 30,
                                                          ----------------------
                                                             2006        2005
                                                          ----------  ----------
    Compensation and benefits...........................  $    5,450  $    5,279
    Income taxes........................................       2,718       3,046
    Deferred license fee revenue, current portion.......          --         665
    Warranty............................................       1,005         971
    Deferred revenue, current portion...................       1,144       1,049
    Retained liabilities from discontinued operations...         160         160
    Other current liabilities...........................       2,931       3,472
                                                          ----------  ----------
                                                          $   13,408  $   14,642
                                                          ==========  ==========

11.  WARRANTIES AND GUARANTEES

     The following table is a reconciliation of the changes in the Company's
aggregate product warranty liability during the years ended June 30, 2006, 2005
and 2004 (in thousands):

<TABLE>
<CAPTION>
                                                                        JUNE 30,
                                                           ----------------------------------
                                                              2006        2005        2004
                                                           ----------  ----------  ----------
<S>                                                        <C>         <C>         <C>
    Balance at beginning of year.........................  $      971  $    1,247  $    1,235
      Warranty accrual assumed in CATC acquisition                  -         105           -
      Accruals for warranties issued during the year.....         797         537         690
      Warranty costs incurred during the year............        (763)       (568)       (678)
      Change in accrual estimate.........................           -        (350)          -
    Balance at end of year...............................  $    1,005  $      971  $    1,247
                                                                =====  ==========  ==========
</TABLE>


                                       68
<PAGE>

     In the fourth quarter of fiscal 2006, management determined that certain
amounts previously reported as warranty costs were services expense that had
been misclassified. This caused an overstatement of the related warranty
accruals in the table above. The warranty accrual and cost activity for all
years presented above has been revised to properly reflect only warranty
expense. These revisions had no impact on the Company's beginning or ending
warranty liability balance, financial position or Cost of revenue for any of the
periods presented.

     During the year ended June 30, 2005, the Company's management revisited
labor and cost estimates utilized in its existing warranty model in light of the
Company's fiscal 2005 product introductions, and determined that the actual
labor and cost estimates to repair the warranty units were lower than previously
estimated given the Company's success in reducing the time and costs necessary
to fix the newer models currently under warranty. As a result of this evaluation
and conclusion the Company changed the labor and cost estimates used to
calculate the warranty accrual commencing with the period ended March 31, 2005.
This change in estimate was recorded in the quarter ended March 31, 2005, and
reduced the accrual required by approximately $350,000.

     In connection with an agreement to license the Company's MAUI Instrument
Operating System technology entered into by the Company during the third quarter
of fiscal 2003, the Company agreed to indemnify the licensee against losses
arising from any third party claim against the licensee to the extent such claim
arose directly out of the infringement of a U.S. or Japanese patent by any
LeCroy software components delivered under the license agreement. As of June 30,
2006, there have been no claims under such indemnification provisions.

     As is customary in the test and measurement industry, and as provided for
by local law in the U.S. and other jurisdictions, the Company's standard terms
of sale provide remedies to customers, such as defense, settlement or payment of
a judgment for intellectual property claims related to the use of the Company's
products. Such indemnification provisions are accounted for in accordance with
SFAS No. 5. To date, there have been no claims under such indemnification
provisions.

12.  INCOME TAXES


     The components of income from continuing operations before income taxes are
as follows (in thousands):

                                                     YEARS ENDED
                                         ------------------------------------
                                                       JUNE 30,
                                            2006         2005          2004
                                         ----------  ------------  ----------
    Domestic.........................    $    5,896  $      142    $   10,546
    Foreign..........................         4,140       2,873         2,032
                                         ----------  ----------    ----------
                                         $   10,036  $    3,015    $   12,578
                                         ==========  ==========    ==========

     The income tax (provision) benefit from continuing operations consists of
the following (in thousands):

                                                    YEARS ENDED
                                        -----------------------------------
                                                     JUNE 30,
                                           2006        2005          2004
                                        ----------  ----------    ---------
    Current:
      U.S. federal...................   $     (81)  $    (105)    $     (36)
      U.S. state and local...........        (245)       (161)         (133)
      Foreign........................      (1,289)       (945)         (421)
    Deferred:
      U.S. federal...................      (1,567)         89        (3,554)
      U.S. state and local...........        (322)          9          (313)
      Foreign........................          41         241          (196)
                                        ---------   ---------     ---------
                                        $  (3,463)  $    (872)    $  (4,653)
                                        =========   =========     =========

     The reconciliations between the income tax (provision) benefit at the U.S.
federal statutory rate and the Company's effective tax rate from continuing
operations is as follows (in thousands):


                                       69
<PAGE>

<TABLE>
<CAPTION>
                                                                                      YEARS ENDED
                                                                         -----------------------------------
                                                                                        JUNE 30,
                                                                            2006        2005          2004
                                                                         ----------  ----------    ---------
<S>                                                                      <C>         <C>           <C>
    (Provision) benefit at U.S. federal statutory rate...............    $  (3,512)  $  (1,055)    $  (4,402)
    (Increase) reduction to statutory tax from:
      Difference between U.S. and foreign rates......................          214         302           317
      Non-deductible purchased in-process research technology........           --        (767)           --
      Adjustment of net deferred tax assets..........................          607      (4,181)           40
      State income taxes, net of federal benefit.....................         (484)       (114)         (389)
      Decrease (increase) in valuation allowance.....................           92       4,954          (218)
      Non-deductible share-based compensation.........................        (514)         --            --
      Other, net.....................................................          134         (11)           (1)
                                                                         ---------   ----------    ---------
    Income tax (provision) benefit...................................    $  (3,463)  $    (872)    $  (4,653)
                                                                         =========   =========     =========

</TABLE>


     Significant components of the Company's net deferred tax assets as of June
30, 2006 and 2005 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                             JUNE 30,
                                                                                     -----------------------
     Deferred tax assets:                                                                2006         2005
                                                                                     -----------  ----------
<S>                                                                                 <C>          <C>
        U.S. net operating loss carryforwards...................................     $    2,624   $    4,763
        Acquired U.S. net operating loss carryforwards..........................          1,902        2,026
        Foreign net operating loss carryforwards................................            142          176
        Tax credit carryforwards................................................          2,813        2,073
        Inventory reserves......................................................            400          311
        Deferred revenue........................................................            314          547
        Share-based compensation................................................          1,863          885
        Accrued compensation/benefits...........................................            309          616
        Deferred research expenses..............................................          3,809        5,204
        Other...................................................................          1,536        1,949
                                                                                     ----------   ----------
          Deferred tax assets before valuation allowance........................         15,712       18,550
        Valuation allowance.....................................................           (258)        (350)
                                                                                     ----------   ----------
           Deferred tax assets after valuation allowance........................         15,454       18,200
                                                                                     ----------   ----------

     Deferred tax liabilities:
        Unrepatriated foreign earnings .........................................         (1,622)      (1,622)
        Depreciation and amortization...........................................         (1,142)      (1,590)
        Other...................................................................           (686)        (542)
                                                                                     ----------   ----------
        Deferred tax liabilities................................................         (3,450)      (3,754)
                                                                                     ----------   ----------
            Net deferred tax assets.............................................     $   12,004   $   14,446
                                                                                     ==========   ==========
</TABLE>

     At June 30, 2006 and 2005, $8.2 million and $9.0 million, respectively, of
the Company's net deferred tax assets were included on the Consolidated Balance
Sheets in Other current assets, $4.0 million and $5.4 million, respectively,
were included in Other non-current assets, and $0.2 million and zero of foreign
deferred tax liabilities, respectively, were included in Accrued expenses and
other current liabilities.

     The Company is required to recognize all or a portion of its deferred tax
assets if it believes that it is more likely than not, given the weight of all
available evidence, that all or a portion of its deferred tax assets will be
realized. Management assesses the realizability of the deferred tax assets at
each interim and annual balance sheet date based on actual and forecasted
operating results. The Company assessed both its positive and negative evidence
to determine the proper amount of its required valuation allowance. Factors
considered include the Company's current utilization of net operating loss
carryforwards as well as management's projection that the Company expects to
utilize the net operating loss carryforwards within one year, prior to the
initial expiration period in fiscal 2022.

     As a result of profits realized in certain subsidiaries in Europe during
fiscal 2006, resulting in the utilization of foreign net operating losses, the
valuation allowance recorded in those subsidiaries were accordingly reduced by
$92,000. A valuation allowance totaling $258,000 as of June 30, 2006, continues
to be recorded for certain tax credits and foreign net operating loss
carryforwards due to the uncertainty surrounding the utilization of these
deferred tax assets. As such, management believes that it is more likely than
not that the Company will realize the benefits of the Company's deductible


                                       70
<PAGE>

differences, net of the valuation allowance. The valuation allowance against
deferred tax assets decreased in fiscal 2005 by $5.0 million principally due to
a change in estimate that resulted in a corresponding reduction of the gross
carrying values of the deferred tax assets related to certain tax credits and
amended return net operating loss carryforwards. Management will continue to
assess the realizability of the deferred tax assets at each interim and annual
balance sheet date based on actual and forecasted operating results.

     On October 22, 2004, the American Jobs Creation Act (the "Act") was signed
into law. The Act included a provision for the deduction of 85% of certain
foreign earnings that were repatriated, as defined in the Act. In fiscal 2005,
the Company elected to repatriate $23.1 million of qualifying earnings pursuant
to its approved domestic reinvestment plan. The income tax effect recognized
under the repatriation provision was approximately $1.1 million which was
substantially offset by the release of a tax reserve related to a favorable
foreign tax audit settlement during fiscal 2005.

     Historically, it has been the practice of the Company to reinvest
unremitted earnings of foreign subsidiaries. During the fourth quarter of fiscal
2001, however, the Company determined that it would repatriate approximately
$7.0 million in future periods from its foreign subsidiaries. The Company
believes repatriation of these earnings will result in additional taxes in the
amount of $1.6 million and provided for that amount in the fiscal 2001 tax
provision. The cumulative amount of all other undistributed earnings of
consolidated foreign subsidiaries, for which U.S. federal income tax has not
been provided, was $5.5 million and $4.0 million at June 30, 2006 and 2005,
respectively. These earnings, which reflect full provision for non-U.S. income
taxes, are anticipated to be reinvested permanently outside the United States.
Determining the U.S. income tax liability that might result if these earnings
were remitted is not practicable.

     At June 30, 2006, the Company has federal and state net operating loss
carryforwards of approximately $9.6 million and acquired net operating loss
carryforwards of $5.3 million available to offset future taxable income. The
carryforwards begin to expire at various dates starting in 2022 through 2025.
Foreign tax net operating loss carryforwards of approximately $0.3 million at
June 30, 2006 are available to offset future taxable income of certain foreign
subsidiaries. These foreign net operating loss carryforwards do not have an
expiration period. The Company has approximately $1.4 million of foreign tax
credits, $2.5 million of state tax credits, $1.2 million of acquired state tax
credits, $3.7 million of federal general business credits, and $0.9 million of
acquired federal general business credits. The foreign, state and federal tax
credits expire at various dates between fiscal 2007 and 2022.

13.  LONG-TERM DEBT AND CAPITAL LEASES

     On October 29, 2004, LeCroy entered into a $75.0 million senior, secured,
five-year credit agreement with the lenders listed therein and The Bank of New
York, as administrative agent for such lenders (the "Credit Agreement"), which
replaced LeCroy's prior $25.0 million revolving credit facility with The Bank of
New York. The terms of the Credit Agreement provide LeCroy with a $50.0 million
term loan (the "Term Loan") and a $25.0 million revolving credit facility (the
"Revolver"), which includes a $1.0 million swingline loan subfacility and a $1.0
million letter of credit subfacility. The performance by LeCroy of its
obligations under the Credit Agreement is secured by all of the assets of LeCroy
and its domestic subsidiaries, and is guaranteed by LeCroy's domestic
subsidiaries. The proceeds under the Term Loan were used to finance the
acquisition of CATC and pay transaction expenses related to the Merger. Proceeds
from the Revolver may be used for general corporate purposes, including the
financing of working capital requirements, capital expenditures and
acquisitions. As of June 30, 2006, the Company had an outstanding loan balance
of $3.5 million against the Revolver and $34.1 million on the Term Loan. The
Company has not borrowed against the letter of credit sub-facility or swingline
loan subfacility.

     On May 9, 2006, the Company amended the Credit Agreement ("Amendment No.2")
to, among other terms, (a) increase the Revolver Commitments from $25.0 million
to $50 million, (b) amend the financial covenants and reduce certain fees and
margins, (c) extend the Revolver termination date from October 29, 2009 to
October 29, 2010, (d) increase the aggregate amount the Company is permitted to
pay for acquisitions and (e) permit the Company to make certain payments for
cash dividends and repurchases of common stock.

     Borrowings under the Credit Agreement, as amended, bear interest at
variable rates equal to, at the Company's election, (1) the higher of (a) the
prime rate or (b) the federal funds rate plus 0.5%, plus an applicable margin of
between 0.00% and 1.50% based on the Company's leverage ratio, as defined in the
Credit Agreement, or (2) the London Interbank Offering Rate ("LIBOR") plus an
applicable margin of between 1.25% and 2.75% based on the Company's leverage
ratio. In addition, the Company must pay commitment fees on unused Revolver
borrowings during the term of the Credit Agreement at rates between 0.375% and
0.5% dependent upon its leverage ratio.

                                       71
<PAGE>

     Under the Credit Agreement, the Company is required to comply with certain
financial covenants, measured quarterly, including a minimum interest coverage
ratio, minimum total net worth, maximum leverage ratio, minimum fixed charge
coverage ratio and limitations on capital expenditures. As of June 30, 2006, the
Company was in compliance with its financial covenants under the Credit
Agreement.

     Beginning March 31, 2005, outstanding borrowings of $50.0 million under the
Term Loan were required to be repaid quarterly through October 2009, based on an
annualized amortization rate starting at 15% in calendar year 2005 and
increasing 250 basis points per year during the term of the Credit Agreement. As
of June 30, 2006, the Company has repaid $15.9 million of the principal balance
of this loan including voluntary repayments in excess of those required by the
Credit Agreement aggregating $4.1 million. The remaining outstanding balance to
be repaid annually is approximately $9.4 million, $10.6 million, $11.9 million
and $2.2 million for the years ended June 2007, 2008, 2009 and 2010,
respectively.

     As of June 30, 2006, there was an outstanding balance of $3.5 million
against the Revolver included in Short-Term borrowings on the Consolidated
Balance Sheets which was repaid in July 2006.

     The Company incurred approximately $1.4 million of transaction fees in
connection with entering into the Credit Agreement, which have been deferred and
are being amortized over the term of the Credit Agreement using the effective
interest method for the Term Loan and the straight-line method for the Revolver.
The Company incurred additional fees of approximately $0.2 million in connection
with entering into Amendment No. 2 which have been deferred and are being
amortized on a straight line basis over the term of Amendment No. 2 in
accordance with EITF 98-14. Amortization of the remaining balance of the
transaction fees under the Credit Agreement has been adjusted to coincide with
the one-year extension of the Revolver. At June 30, 2006, of the total
unamortized fees of $0.9 million under both agreements, $0.3 million were
included in Other current assets, and $0.6 million were included in Other
non-current assets on the Consolidated Balance Sheets.

     As required by the terms of the Credit Agreement, the Company entered into
an interest rate swap transaction effective January 31, 2005 (See Note 24 -
Derivative Instruments).

     In addition to the above U.S.-based credit facilities, the Company
maintains certain short-term foreign credit facilities, principally with two
Japanese banks totaling 150.0 million yen (approximately $1.3 million as of June
30, 2006 and 2005). No amounts were outstanding under these facilities as of
June 30, 2006 and 2005. The Company's Swiss subsidiary, LeCroy S.A., also has an
overdraft facility totaling 1.0 million Swiss francs (approximately $0.8 million
as of June 30, 2006 and 2005). As of June 30, 2006 and 2005, 0.4 million Swiss
francs were held against supplier obligations leaving an available balance of
0.6 million Swiss francs under this credit facility. These obligations to
suppliers, such as rent and utilities, are payable under the credit facility
only in the event that the Company is unable to meet its financial obligations
to those suppliers.

     The Company had a five-year $2.0 million capital lease line of credit to
fund certain capital expenditures that bore interest at an annual rate of 12.2%
on outstanding borrowings. This line of credit, originally set to expire in
November 2005, was renewed for one additional year. As of June 30, 2006 and
2005, the Company had $0.1 million outstanding under this line of credit, all of
which was current and included within Current portion of long-term debt and
capital leases on the Consolidated Balance Sheets.

     During fiscal 2005, the Company entered into vendor supplied capital lease
agreements for technology rights of $1.3 million. These leases bear interest at
4.5% to 4.88% with three-year terms. At June 30, 2006, the Company's outstanding
balance under these agreements was $0.6 million of which $0.5 million was
included within Current portion of long-term debt and capital leases and $0.1
million was included within Deferred revenue and other non-current liabilities
in the Consolidated Balance Sheet. Under these capital lease obligations, the
annual payments, including interest, for fiscal year 2007 and 2008 are $0.5
million and $0.1 million, respectively.


                                       72
<PAGE>

14. SHARE-BASED COMPENSATION

    Share-Based Compensation

     Historically, through fiscal 2005, the Company accounted for stock-based
compensation under the recognition and measurement principles of Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. No compensation expense
related to stock option plans was reflected in the Company's Consolidated
Statements of Operations, with the exception of the CATC Plans described below,
as all options had an exercise price equal to the market value of the underlying
common stock on the date of grant. Compensation cost for restricted stock
(non-vested stock) was recorded based on its market value on the date of grant
and was expensed in the Company's Consolidated Statements of Operations ratably
over the vesting period. Upon the grant of restricted stock, deferred stock
compensation was recorded as an offset to additional paid-in capital and was
amortized on a straight-line basis as compensation expense over the vesting
period.

     On July 3, 2005, the start of the first quarter of fiscal 2006, the Company
adopted the provisions of SFAS 123R, which requires that the costs resulting
from all share-based payment transactions be recognized in the financial
statements at their fair values. The Company adopted SFAS 123R using the
modified prospective application method under which the provisions of SFAS 123R
apply to new awards and to awards modified, repurchased, or cancelled after the
adoption date. Additionally, compensation cost for the portion of the awards for
which the requisite service has not been rendered that are outstanding as of the
adoption date is recognized in the Consolidated Statement of Operations over the
remaining service period after the adoption date based on the award's original
estimate of fair value. In connection with the adoption of SFAS 123R, the
deferred stock compensation at June 30, 2005 of $8.6 million relating to
previous grants of restricted stock and stock options assumed in the Merger was
eliminated against additional paid-in capital during the first quarter of fiscal
2006. Results for prior periods have not been restated. Total share-based
compensation expense recorded in the Consolidated Statement of Operations for
the year ended June 30, 2006 is $5.3 million.

     As a result of applying SFAS 123R during fiscal 2006, the Company's income
before income taxes and net income for the year ended June 30, 2006 are $2.3
million and $1.3 million lower, respectively, than if it had continued to
account for share-based compensation under APB No. 25. Basic and diluted
earnings per share for the year ended June 30, 2006 are $0.11 and $0.10 per
share lower, respectively, than if the Company had continued to account for
share-based compensation under APB No. 25. Under APB No. 25, restricted stock
was historically being expensed although under APB No. 25, forfeitures were
accounted for as they occurred.

     On November 10, 2005, the FASB issued FASB Staff Position 123(R)-3 ("FSP
123R-3"), "Transition Election Related to Accounting for the Tax Effects of
Share-based Payment Awards," that provides an elective alternative transition
method of calculating the pool of excess tax benefits available to absorb tax
deficiencies recognized subsequent to the adoption of SFAS 123R (the "APIC
Pool") to the method otherwise required by paragraph 81 of SFAS 123R. The
Company may take up to one year from the effective date of this FSP to evaluate
its available alternatives and make its one-time election. The Company is
currently evaluating the alternative methods; however, neither alternative would
have an impact on the Company's results of operations or financial condition for
the year ended June 30, 2006, due to the fact that the Company is currently
using prior period net operating losses and has not realized any tax benefits
under SFAS 123R. Until and unless the Company elects the transition method
described in this FSP, the Company will follow the transition method described
in paragraph 81 of SFAS 123R.

     The following table illustrates the effect on net income and net income per
common share for the years ended June 30, 2005 and 2004, as if the Company had
applied the fair value recognition provisions for stock-based employee
compensation under Statement of Financial Accounting Standards No. 123
"Accounting for Stock-based Compensation", ("SFAS 123"), as amended. For
purposes of the pro forma presentation, option and restricted stock forfeitures
are accounted for as they occurred and no amounts of compensation expense have
been capitalized into inventory or other assets, but instead were considered as
period expenses (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED JUNE 30,
                                                                               -----------------------
                                                                                  2005          2004
                                                                               ----------   ----------
<S>                                                                            <C>          <C>
Net income, as reported..................................................      $    2,143   $    8,044
Add: stock-based compensation expense included in reported
  net income, net of income taxes........................................           2,547           55
Deduct: stock-based compensation expense determined under
  fair value-based method for all awards, net of income taxes............          (4,928)      (2,901)
                                                                               ----------   ----------
Pro forma net (loss) income..............................................            (238)       5,198

Charges related to convertible preferred stock...........................              --        7,665
                                                                               -----------   ----------
Pro forma net loss applicable to common stockholders.....................      $     (238)  $   (2,467)
                                                                               ==========   ==========

Net income (loss) per common share applicable to common stockholders:
  Basic, as reported.....................................................      $     0.18    $    0.04
  Diluted, as reported...................................................      $     0.17    $    0.03
  Basic, pro forma.......................................................      $    (0.02)   $   (0.23)
  Diluted, pro forma.....................................................      $    (0.02)   $   (0.23)
</TABLE>

                                       73
<PAGE>

     Prior to the adoption of SFAS 123R, the Company presented all tax benefits
of deductions resulting from the exercise of stock options as operating cash
flows in the Consolidated Statement of Cash Flows. SFAS 123R requires the cash
flows resulting from tax benefits resulting from tax deductions in excess of the
compensation cost recognized for those options (excess tax benefits) to be
classified as financing cash flows. For the year ended June 30, 2006, there was
no excess tax benefit recognized resulting from share-based compensation cost.

     The fair value of options granted is estimated on the date of grant using a
Black-Scholes option pricing model. Expected volatilities are calculated based
on the historical volatility of the Company's stock. Management monitors share
option exercise and employee termination patterns to estimate forfeiture rates.
Separate groups of employees that have similar historical exercise behavior are
considered separately for valuation purposes. The expected holding period of
options represents the period of time that options granted are expected to be
outstanding. The risk-free interest rate is based on the interest rate of a
5-year U.S. Treasury note in effect on the date of the grant or such other
period that most closely equals the term of the option.

     The table below presents the assumptions used to calculate the fair value
of options granted during the years ended June 30, 2006, 2005 and 2004:

<TABLE>
<CAPTION>
                                                              YEARS ENDED JUNE 30,
                                             -------------------------------------------------------
                                                   2006               2005               2004
                                                   ----               ----               ----

<S>                                          <C>                <C>                <C>
Expected holding period (years).........            5.0                3.9                4.5
Risk-free interest rate ................       3.86% - 4.99%     3.31% - 4.30%       3.27% - 3.88%
Weighted average risk-free interest rate            4.46%              3.41%              3.37%
Dividend yield..........................            0.0%               0.0%               0.0%
Expected volatility.....................       47.3% - 64.9%     41.5% - 74.4%       63.9% - 70.1%
Weighted average expected volatility....           55.4%              51.2%              69.0%
Fair value of options granted...........       $6.86 - $8.43     $7.88 - $14.52      $9.43 - $11.25
Weighted average fair value of options
granted.................................          $7.64               $8.95              $9.79

</TABLE>

     Additionally, the Company has an Employee Stock Purchase Plan ("ESPP") with
a look-back option that allows employees to purchase shares of common stock at
85% of the market value at the lower of either the date of enrollment or the
date of purchase. Payment for the ESPP is a fixed amount, set at the beginning
of the period, made through payroll withholding over the enrollment period which
is six months. The number of shares the participant can acquire is variable
based on the fixed amount withheld and the applicable fair value. SFAS No. 123R
requires an ESPP with a purchase price discount of greater than 5% and a
look-back option to be compensatory. The fair value of the `put' and `call'
features of the estimated shares to be purchased are estimated at the beginning
of the purchase period using a Black-Scholes option pricing model. Expected
volatilities are calculated based on the historical six-month volatility of the
Company's stock. The expected holding period is equal to the six-month
enrollment period. The risk-free interest rate is based on the interest rate of
a six-month U.S. Treasury note in effect on the first day of the enrollment
period. The fair value of the shares is liability classified until the end of
the six-month period at which time the fair value is re-calculated as of the end
of the period and compared to the estimate. The lower amount is then equity
classified and any over accrual reversed. As of June 30, 2006, there is
approximately $42,000 of liability classified share-based compensation expense
included in Accrued expenses and other current liabilities on the Consolidated
Balance Sheet.


                                       74
<PAGE>

   Stock Option Plans

     The Company maintains share-based payment arrangements under the following
plans: (i) the Amended and Restated 1993 Stock Incentive Plan ("1993 Plan"),
(ii) the Amended and Restated 1995 Employee Stock Purchase Plan ("ESPP"), (iii)
the Amended and Restated 1998 Non-Employee Director Stock Plan ("1998 Plan"),
(iv) the 2003 Stock Incentive Plan ("2003 Plan"), (v) the 2004 Employment
Inducement Stock Plan ("2004 Plan"), (vi) the LeCroy Corporation (CATC) Special
2000 Stock Option Plan, (vii) the LeCroy Corporation (CATC) 2000 Stock Incentive
Plan, and (viii) the LeCroy Corporation (CATC) 1994 Stock Option Plan (items
(vi), (vii) and (viii) collectively the "LeCroy (CATC) Plans"). The Company has
a policy of issuing new shares to satisfy share option exercises.

     The 1993 Plan expired on January 4, 2003. All options outstanding under the
1993 Plan at the time of its expiration will continue in full force and effect
in accordance with their terms. The vesting period and expiration of each grant
was determined by the Compensation Committee of the Board of Directors. In
general, the vesting period is 25% per annum over a four-year period, or 50%
after the second year and 25% for the third and fourth years. The lives of the
options are generally ten years from the date of grant. As of June 30, 2006,
there were 1,310,582 options outstanding under the 1993 Plan, of which 1,243,458
options were vested.

     The ESPP has reserved for issuance an aggregate of 1,060,000 shares of
Common Stock and is set to expire on November 30, 2011. The purpose of the ESPP
is twofold: first, to encourage stock ownership by employees by establishing a
program that permits them to purchase shares of Common Stock on a regular basis
through payroll deductions; and second, to offer employees an opportunity,
without adverse tax consequences, to purchase stock at a price equal to 85% of
the market value on the first or last business day of the offering period.
Through June 30, 2006, a total of 570,921 shares have been issued under the ESPP
including 78,408, 56,214 and 49,141 shares for the years ended June 30, 2006,
2005 and 2004, respectively. As of June 30, 2006, 489,079 shares are available
for future issuance.

     In October 1998, the Board of Directors and stockholders terminated the
1995 Non-Employee Director Stock Option Plan ("1995 Plan") and adopted the 1998
Plan. As of June 30, 2006, stock options to purchase 901 shares of Common Stock
issued pursuant to the 1995 Plan are outstanding and fully vested. On October
26, 2005, the Company's shareholders approved amendments to the 1998 Plan to
extend the termination date of the 1998 Plan to October 27, 2010 and to provide
for the ability to grant restricted stock awards under the 1998 Plan. Pursuant
to the 1998 Plan, each non-employee director receives annually either a stock
option grant of 15,000 shares to vest ratably over 36 months, or a restricted
stock award of 10,000 shares of Common Stock, subject to such vesting and other
conditions and restrictions as the Board may determine at its discretion.
Additionally, each non-employee director will receive annually a restricted
stock award of 5,000 shares of Common Stock subject to such vesting and other
conditions and restrictions as the Board may determine at its discretion. A
total of 500,000 shares of Common Stock can be issued during the term of the
1998 Plan. As of June 30, 2006, there were 238,670 options outstanding under the
1998 Plan, of which 234,086 options were vested. As of June 30, 2006, 212,330
shares are available for future issuance under the 1998 Plan.

     The 2003 Plan provides for the grant of incentive stock options,
nonqualified stock options and restricted stock awards to employees (including
officers and employee directors) and consultants. Unless approved by
stockholders owning a majority of shares present and entitled to vote at a duly
convened meeting of stockholders of the Company, the purchase price of any
option granted under the 2003 Plan may not be less than 100% of the fair value
of the Company's common stock on the date of grant. The aggregate number of
shares of Common Stock that may be issued or transferred pursuant to options or
restricted stock awards under the 2003 Plan is 1,560,167 shares. The 2003 Plan
also allows for awards based on performance criteria which awards may then
qualify as "performance-based compensation" under Section 162(m) of the Internal
Revenue Code. The Compensation Committee of the Board of Directors administers
the 2003 Plan and has the authority to determine the terms of such options or
awards including the number of shares, exercise or purchase prices and times at
which the options become and remain exercisable or restricted stock is no longer
restricted. There have been no performance-based awards granted under the 2003
Plan. The 2003 Plan expires on October 29, 2013. As of June 30, 2006, there were
57,968 options outstanding under the 2003 Plan, of which 9,018 options were
vested. As of June 30, 2006, 966,577 shares are available for future issuance
under the 2003 Plan.


                                       75
<PAGE>

     In connection with the Merger, on October 29, 2004, the Company's Board of
Directors approved the 2004 Plan to promote the interests of the Company and its
stockholders by strengthening the Company's ability to attract and induce
persons to become employees of the Company, including certain of CATC's
employees. The adoption of the 2004 Plan did not require stockholder approval.
The number of shares of LeCroy common stock that may be issued or transferred
pursuant to options or restricted stock awards granted under the 2004 Plan is
750,000 shares. On October 29, 2004, the Company issued the following grants
under the 2004 Plan: (i) 70,000 shares of restricted common stock to certain
former officers of CATC, and (ii) options to purchase an aggregate of 230,984
shares of common stock to 61 former CATC employees who became non-officer
employees of LeCroy (none of whom received an option grant of more than 20,000
shares). The options were issued with vesting periods of four to six years. On
September 13, 2005, the Board of Directors resolved that no further grants would
be made under the 2004 Plan. The 2004 Plan expires on October 29, 2014. As of
June 30, 2006, there were 172,152 options outstanding under the 2004 Plan, of
which 16,126 options were vested.

     In connection with the Merger, LeCroy assumed the LeCroy CATC Plans. On
October 27, 2004, the Board of Directors of CATC approved technical amendments
to each of the CATC Stock Plans in anticipation of their assumption by LeCroy
pursuant to the Merger including, without limitation, amendments reflecting that
any stock option or other award granted thereunder would be exercisable for
LeCroy common stock. Pursuant to SFAS No. 141 and FIN 44, the 648,284 unvested
stock options and certain vested but unexercised stock options, granted by the
Company in exchange for the stock options held by the employees of CATC were
considered part of the purchase price for CATC. The $5.1 million fair value of
the new awards was included in the purchase price, less the intrinsic value of
unvested options of $1.9 million, which, during the period from October 29, 2004
to June 30, 2005, was being charged as compensation expense to operations on a
straight-line basis as earned by employees over their remaining vesting periods.
In connection with the adoption of SFAS 123R, the remaining unamortized deferred
compensation was eliminated against additional paid-in capital on the date of
adoption and compensation cost for unvested options under the LeCroy (CATC)
Plans is being recognized over the remaining vesting period using the fair value
of the options on the date of the Merger. On September 13, 2005, the Board of
Directors resolved that no further grants would be made under the LeCroy (CATC)
Plans. As of June 30, 2006, there were 450,575 options outstanding under the
LeCroy (CATC) Plans, of which 289,122 options were vested.

     Stock option transactions for fiscal years 2006, 2005 and 2004 under all
plans are as follows:

<TABLE>
<CAPTION>
                                                                             WEIGHTED AVERAGE
                                                                                  REMAINING          AGGREGATE
                                            NUMBER OF      WEIGHTED AVERAGE   CONTRACTUAL LIFE    INTRINSIC VALUE
                                               SHARES       EXERCISE PRICE          (YEARS)     AS OF JUNE 30, 2006
                                            -----------   -----------------  ------ --------    -------------------
                                                                                                       ($000)
<S>                                        <C>            <C>                <C>               <C>
   Outstanding at June 30, 2003........       2,788,944              $16.02
   Granted.............................         104,000               17.23
   Exercised...........................        (439,785)              11.00
   Expired.............................             (61)               6.33
   Forfeited...........................        (113,451)              18.27
                                            -----------
   Outstanding at June 30, 2004........       2,339,647               16.91

   Granted.............................         977,736               12.31
   Exercised...........................        (337,889)              11.56
   Expired.............................          (5,741)               6.33
   Forfeited...........................        (189,465)              15.79
                                            -----------
   Outstanding at June 30, 2005........       2,784,288               16.05

   Granted.............................          36,400               14.64
   Exercised...........................        (130,398)              11.29
   Expired.............................         (31,000)              18.88
   Forfeited...........................        (428,442)              18.13
                                            -----------
   Outstanding at June 30, 2006........       2,230,848              $15.85        4.81               $3,284
                                            ===========

   Vested and expected to vest at
   June 30, 2006.......................       2,221,643              $15.85        4.77               $3,279

   Exercisable at June 30,
   2006............ ...................       1,792,711              $16.27        4.13               $2,628

</TABLE>

                                       76
<PAGE>

     The weighted-average grant-date fair value of the stock options granted
during the years ended June 30, 2006, 2005 and 2004 was $7.64, $8.95 and $9.79
per option, respectively. The total intrinsic value of stock options exercised
during the years ended June 30, 2006, 2005 and 2004 was $0.5 million, $3.7
million and $3.3 million, respectively. The fair value of stock options vested
during the years ended June 30, 2006, 2005 and 2004, was $3.3 million, $2.3
million and $3.1 million, respectively.

     The following table summarizes information about stock options outstanding
at June 30, 2006:

<TABLE>
<CAPTION>
                                                         OPTIONS OUTSTANDING AT               OPTIONS EXERCISABLE AT
                                                              JUNE 30, 2006                        JUNE 30, 2006
                                               -----------------------------------------     ------------------------
                                                                WEIGHTED   WEIGHTED AVERAGE                  WEIGHTED
                                                                 AVERAGE       REMAINING                      AVERAGE
                                                NUMBER OF       EXERCISE   CONTRACTUAL LIFE    NUMBER OF     EXERCISE
         RANGE                                   SHARES           PRICE         (YEARS)         SHARES         PRICE
   ---------------                             ----------     ----------- -----------------  -----------   ---------
<S>                                            <C>          <C>               <C>             <C>        <C>
   $ 1.35 - $12.00..........................       462,311      $  8.57           5.71            370,970    $  8.33
   $12.01 - $18.00..........................     1,064,604        14.85           5.52            734,942      14.76
   $18.01 - $24.00..........................       641,622        21.45           3.26            624,488      21.49
   $24.01 - $37.00..........................        62,311        29.16           2.01             62,311      29.16
                                                ----------                                     ----------
     Total..................................     2,230,848      $ 15.85           4.81          1,792,711    $ 16.27
                                                ==========                                     ==========
</TABLE>

     Of the total stock options outstanding, 1,792,711, 1,860,699 and 1,771,859
options were exercisable at June 30, 2006, 2005 and 2004, respectively. Shares
available for grant under all plans were 1,667,986, 1,415,772 and 977,648 at
June 30, 2006, 2005 and 2004, respectively.

     As of June 30, 2006, there was approximately $3.2 million of unrecognized
compensation cost (net of estimated forfeitures) related to stock options
granted under the plans. That cost is expected to be recognized over a
weighted-average period of 2.62 years. No compensation cost related to stock
options was capitalized in inventory or any other assets for the years ended
June 30, 2006, 2005 or 2004.

   Restricted Stock

     Compensation cost for restricted stock (referred to as non-vested stock)
was historically recorded based on its market value on the date of grant as
deferred stock compensation, a component of Stockholder's Equity, and then
recognized ratably over the associated service period, the period in which
restrictions are removed. Forfeitures were accounted for as they occurred. With
the adoption of SFAS 123R, effective July 3, 2005, deferred stock compensation
was eliminated against additional paid-in capital. The fair value of new grants
is determined based on the closing price on the date of grant. Related
compensation expense is recognized ratably over the associated service period,
giving effect to estimated forfeitures. During the year ended June 30, 2006
there were 73,500 shares of restricted stock granted. Of these shares, 25,000
were issued under the 1998 Plan to non-employee directors and were immediately
vested and 48,500 shares were issued to employees under the 2003 Plan with
4-year vesting. In fiscal 2005, 198,030 and 70,000 shares of restricted stock
were granted under the 2003 Plan and 2004 Plan, respectively, with various
vesting conditions ranging from three to four years. In fiscal 2004, 365,000
shares of restricted stock were granted under the 2003 Plan with long-term cliff
vesting conditions of three to five years to certain key employees. During the
years ended June 30, 2006 and 2005, 32,375 and 2,300 shares, respectively, of
non-vested stock were forfeited as a result of employee terminations and $0.1
million and $24,000 of compensation expense was reversed in fiscal 2006 and
2005, respectively. As of June 30, 2006, 528,075 shares are unvested.

     The following table summarizes transactions related to restricted
(non-vested) stock for the years ended June 30, 2006, 2005 and 2004:

                                       77
<PAGE>

                                                               Weighted
                                                                Average
                                              Number of       Grant-Date
                                               Shares         Fair Value
                                             ------------    --------------
   Non-vested stock at June 30, 2003.....              -              $  -

   Granted...............................        365,000             18.01
   Vested................................              -                 -
   Forfeited ............................              -                 -
                                             ------------
   Non-vested stock at June 30, 2004.....        365,000             18.01

   Granted...............................        268,030             13.82
   Vested................................       (86,130)             14.00
   Forfeited ............................        (2,300)             13.21
                                             ------------
   Non-vested stock at June 30, 2005.....        544,600             17.39

   Granted...............................         73,500             15.22
   Vested................................       (57,650)             15.33
   Forfeited ............................       (32,375)             17.74
                                             ------------
   Non-vested stock at June 30, 2006.....        528,075           $ 17.33
                                             ============

     As of June 30, 2006, there was approximately $5.2 million of unrecognized
compensation cost (net of estimated forfeitures) related to non-vested stock
granted under the plans. That cost is expected to be recognized over a
weighted-average period of 2.28 years. No compensation cost related to
restricted stock grants was capitalized in inventory or any other assets for the
years ended June 30, 2006, 2005 and 2004.

15.  COMMON STOCK, TREASURY STOCK AND WARRANTS TO PURCHASE COMMON STOCK

     On April 14, 2004, the Company closed an underwritten public follow-on
offering of 500,000 shares of its common stock at $19.00 per share (less the
underwriting discount) raising aggregate net proceeds of approximately $7.9
million, net of $1.1 million in offering costs and expenses. On April 27, 2004,
pursuant to the exercise of an over-allotment option, the Company sold an
additional 225,000 shares at $19.00 per share (less the underwriting discount),
raising additional net proceeds of $4.1 million, net of expenses. On April 23,
2004, the Company used $4.0 million of proceeds from this offering to repay $4.0
million of indebtedness outstanding under its revolving credit facility.

     On May 25, 2006, the Company's Board of Directors approved the adoption of
a share repurchase plan authorizing the Company to purchase up to 2 million
shares, not to exceed $25 million, of its common stock for the treasury. During
the fourth quarter of fiscal 2006, the Company repurchased 142,283 shares for
total consideration of $1.9 million.

     Purchases under this buyback program may be made from time to time on the
open market and in privately negotiated transactions, including pursuant to the
terms of a 10b5-1 plan. A 10b5-1 plan allows a company to purchase shares during
a blackout period, provided the company communicates its share purchase
instructions to the broker prior to the blackout period, pursuant to a written
plan that may not be changed. The timing of these purchases is dependent upon
several factors, including market conditions, the market price of the Company's
common stock, the effect of the share dilution on earnings, available cash and
any other potential risks the Company may encounter. The share repurchase plan
may be discontinued at any time at the discretion of the Company.

     At June 30, 2006 the Company had outstanding warrants to purchase 28,571
shares of common stock at a purchase price of $17.50 per share. These warrants
expired on August 15, 2006. Warrants to purchase 250,000 shares of common stock
at a purchase price of $20.00 per share expired on June 30, 2006. No warrants
were exercised during the fiscal years ended June 30, 2006, 2005 or 2004.


16.  EARNINGS PER COMMON SHARE

     The following is a presentation of the numerators and the denominators of
the basic and diluted income per common share computations for the years
ended June 30, 2006, 2005 and 2004 (in thousands):

<TABLE>
<CAPTION>
                                                                     YEARS ENDED JUNE 30,
                                                            --------------------------------------
                                                               2006          2005         2004
                                                            ----------   ------------  -----------
<S>                                                         <C>          <C>           <C>
Numerator:
     Income from continuing operations..................    $   6,573    $   2,143     $     7,925
     Redemption of convertible preferred stock..........           --           --           7,665
                                                            ---------    ---------     -----------
          Income from continuing operations applicable
            to common stockholders......................        6,573        2,143             260
           Discontinued operations......................           --           --             119
                                                            ---------    ----------    ===========
           Net income applicable to common stockholders.    $   6,573    $    2,143    $       379
                                                            =========    ==========    ===========

Denominator:
     Weighted average shares outstanding:
            Basic ......................................       12,218        11,774         10,754
            Employee stock options and other............          256           484            320
                                                            ---------    ----------    -----------
            Diluted.....................................       12,474        12,258         11,074
                                                            =========    ==========    ===========
</TABLE>

                                       78
<PAGE>

     The computations of diluted net income per common share available to common
stockholders for the years ended June 30, 2006, 2005 and 2004 do not include
approximately 1.7 million, 1.6 million and 1.1 million, respectively, of stock
options, restricted stock and warrants to purchase common stock as the effect of
their inclusion would have been anti-dilutive to earnings per share.

17.  STOCKHOLDER RIGHTS PLAN

     On November 2, 1998, the Company's Board of Directors declared a dividend
distribution of one right in respect to each share of LeCroy's Common Stock
outstanding at the record date, November 18, 1998. To date, the rights have been
traded together with the Common Stock and are not exercisable or separately
tradable. The rights will be exercisable if a person or group acquires, in the
future, 15% or more of the Company's stock or announces a tender offer. Right
holders, other than the acquiring person or group, are then entitled to purchase
an amount of the Company's stock at a 50% discount to the share price at that
time. The number of shares of stock that a right holder is entitled to purchase
is based on the exercise price. Under certain circumstances, the right will
entitle the stockholder to buy shares in an acquiring entity at a discount.

     The Board of Directors may redeem the rights at a price of $0.001 per right
up until 10 days following a public announcement that any person or group has
acquired 15% or more of LeCroy's Common Stock. The rights will expire on
November 2, 2008, unless redeemed prior to that date.

18.  REDEEMABLE CONVERTIBLE PREFERRED STOCK

     On June 30, 1999, the Company completed a private placement of 500,000
shares of its redeemable convertible preferred stock for proceeds of $10.0
million. The shares of preferred stock were entitled to a 12% cumulative
dividend on the original purchase price of $10.0 million, with redemption rights
beginning on June 30, 2004 at the sole discretion of the holders of such shares.
On September 27, 2003, the Company repurchased from the holders of its
redeemable convertible preferred stock all 500,000 issued and outstanding shares
for $23.0 million in cash. In connection with the repurchase of preferred stock,
the Company recorded a charge of approximately $7.7 million to stockholders'
equity representing the premium paid to the holders of its preferred stock ($1.0
million charged to Retained earnings and $6.7 million charged to Additional
paid-in capital) and recognized transaction costs of $0.4 million included in
Other, net in the fiscal 2004 Consolidated Statement of Operations. In
accordance with the SEC's position published in EITF Topic No. D-42 relating to
induced conversions of preferred stock, the Company recorded the $7.7 million
premium paid to purchase the preferred stock as a charge to arrive at Net income
applicable to common stockholders in fiscal 2004.

     The Company and the holders of its preferred stock agreed that the final
repurchase of preferred stock would be negotiated as though the transaction had
occurred at the beginning of the first quarter of fiscal 2004. As a result, the
Company accounted for the transaction as though no dividends had accrued in
fiscal 2004 and that the charge for the value originally attributed to the
warrants at the point of issue that remained unaccreted at the time of
redemption was accelerated and combined with the redemption premium to reflect
the total charge related to the redemption of convertible preferred stock in the
fiscal 2004 Consolidated Statement of Operations.

                                       79
<PAGE>

19.  EMPLOYEE BENEFIT PLANS

     The Company had two employee 401(k) savings plans. One is a trusted,
employee 401(k) savings plan for eligible U.S. employees under which it
contributes an unconditional match of up to 50% of employee contributions up to
a maximum employer contribution of 5% of the employee's eligible compensation,
as defined.

     The other plan is the CATC 401(k) Profit Sharing Plan (the "CATC 401(k)
Plan") which the Company assumed in the Merger, and which covered all full-time
former CATC employees employed by LeCroy. The CATC 401(k) Plan permitted, but
did not require, that the Company provide matching contributions to the CATC
401(k) Plan on behalf of all participants. Effective January 11, 2006 the
Company decided to merge the CATC 401(k) Plan into the trusted, employee 401(k)
savings plan. For fiscal 2006, 2005 and 2004, the Company has expensed $0.6
million, $0.6 million and $0.4 million, respectively, for those plans.

     The Company's subsidiary in Switzerland maintains a defined contribution
plan, which requires employee contributions based upon a percentage of the
employee's earnings, as defined, currently ranging from 4.6% to 8.4%. The
Company makes a matching contribution based also upon a percentage of the
employee's earnings, as defined, currently ranging from 5.4% to 9.6%. For fiscal
2006, 2005, and 2004, the Company has expensed $0.4 million, $0.5 million, and
$0.4 million, respectively, in matching contributions to this plan.

20.  SEGMENT AND GEOGRAPHIC INFORMATION

     The Company has defined one reportable segment in the test and measurement
market, in which it develops, manufactures, sells and licenses high-performance
oscilloscopes and global communication protocol test solutions. Design engineers
and researchers use oscilloscopes to measure and analyze complex electronic
signals in order to develop high performance systems and protocol analyzers to
validate electronic designs and to improve time to market. Revenue from the sale
of the Company's products, which are similar in nature, are reflected as Test
and measurement product revenue in our Consolidated Statements of Operations.

     Revenues are attributed to countries based on customer ship-to addresses.
Revenues by geographic area are as follows:

                                  2006         2005          2004
                              -----------  -----------   ----------
    North America..........   $   51,795   $   52,500    $   38,926
    Europe / Middle East...       48,767       49,650        37,716
    Japan..................       22,043       26,209        20,024
    Asia / Pacific.........       37,931       36,619        28,274
                              ----------   ----------    ----------
      Total revenues.......   $  160,536   $  164,978    $  124,940
                              ==========   ==========    ==========

    Total assets by geographic area are as follows:

                                       JUNE 30,      JUNE 30,
                                      ------------------------
                                          2006         2005
                                      -----------  -----------
    North America.................    $   180,070  $   170,685
    Europe / Middle East..........         12,053       11,241
    Japan.........................          5,360        6,328
    Asia / Pacific................          4,491        4,914
                                      ------------ -----------
                                      $   201,974  $   193,168
                                      ===========  ===========

    Total long-lived assets (1) by geographic area are as follows:

                                            JUNE 30,      JUNE 30,
                                              2006         2005
                                          -----------  -----------
    North America.....................    $   103,473  $   103,921
    Europe / Middle East..............            581          525
    Japan.............................            400          456
    Asia / Pacific....................            439          419
                                          -----------  -----------
                                          $   104,893  $   105,321
                                          ===========  ===========

(1)  Long lived assets presented in the table above exclude non-current deferred
     tax assets.

     No customer accounted for more than 10% of the Company's consolidated
revenues in any of the last three fiscal years.

                                       80
<PAGE>

     Revenue attributable to individual countries based on customer ship-to
addresses that account for 10% or more of total revenues in fiscal 2006 include
the United States ($46.0 million), Japan ($22.0 million) and Germany ($17.3
million); in fiscal 2005 include the United States ($47.0 million), Japan ($26.2
million) and Germany ($19.4 million); and in fiscal 2004 include the United
States ($37.3 million), Japan ($20.0 million) and Germany ($15.9 million).

21.  IWATSU SETTLEMENT/PURCHASE AGREEMENT

     On March 22, 2006, the Company completed a purchase and settlement
agreement with Iwatsu Electric Company, Ltd. ("Iwatsu") for a total of $3.6
million which included the settlement of an underlying dispute between the
Company and Iwatsu relating to the ownership of intellectual property contained
in Iwatsu's ViewGo product line, a non-compete agreement, whereby Iwatsu agreed
not to engage in competition with the Company for a period of ten years, and the
purchase of certain other intellectual property rights unrelated to the ViewGo
product line. The Company obtained an independent third-party appraisal to value
these elements of the Iwatsu agreement. As a result of the appraisal, in the
third quarter of fiscal 2006, the Company expensed $2.8 million of the total
purchase price as a legal settlement. The remaining $0.8 million was recorded as
intangible assets of which $0.5 million will be amortized over the 10-year
estimated life of the non-compete agreement and $0.3 million will be amortized
over the 7-year estimated useful life of the acquired intellectual property
assets. The ViewGo product line was re-engineered by the Company and launched as
the WaveJet family of products during the third quarter of fiscal 2006.

22.  COMMITMENTS AND CONTINGENCIES

   OPERATING LEASES

     Operating leases covering plant, certain office facilities and equipment
expire at various dates through 2013. Future minimum annual lease payments
required during the years ending June 30, 2007, 2008, 2009, 2010, 2011 and
thereafter, under non-cancelable operating leases having an original term of
more than one year, are $2.0 million, $1.6 million, $0.7 million, $0.2 million,
$0.1 million and $0.1 million, respectively. Aggregate rental expense on
non-cancelable operating leases for the years ended June 30, 2006, 2005 and 2004
approximated $2.1 million, $2.0 million and $2.1 million, respectively.

   ENVIRONMENTAL

     The Company's former subsidiary, Digitech, was notified prior to 1999 by
the Connecticut Department of Environmental Protection (the "DEP") that it may
be responsible for environmental damage that occurred at its previously leased
facilities in Ridgefield, Connecticut (the "Ridgefield Site"). Based upon
recommendations made by the DEP, Digitech engaged environmental consultants to
assist it in evaluating the costs associated with the DEP's recommendations for
monitoring and remediation of the environmental damage.

     In May 1999, LeCroy, Digitech and the former owners of the Ridgefield Site
entered into an agreement with the current owners of the Ridgefield Site. The
current owners purchased an insurance policy providing for $2.0 million of
coverage against certain environmental liabilities related to the Ridgefield
Site. This insurance policy names both LeCroy and Digitech as insured parties.
The current owners of the Ridgefield Site also agreed to remediate all
environmental problems associated with the property and to obtain all applicable
approvals and certifications from the DEP. The current owners of the Ridgefield
Site also agreed to hold both LeCroy and Digitech harmless in the event of a
claim made against them relating to these environmental matters. In return for
the above, forty-five days after the DEP has provided written notification to
the Company that the site remediation has been accomplished to its satisfaction,
the Company agreed to pay the former owners of the Ridgefield Site $0.2 million
as compensation for the reduced sale value of the property due to the
environmental problems existing on the site. The Company has retained this
liability after the sale of the Vigilant business and the residual assets of
Digitech, which amount is recorded in Accrued expenses and other current
liabilities on the June 30, 2006 and 2005 Consolidated Balance Sheets.


                                       81
<PAGE>

   LEGAL

     On April 28, 2003, Tektronix, Inc. ("Tektronix") filed a complaint against
the Company in the United States District Court for the District of Oregon
claiming that the Company infringed on eight of Tektronix' U.S. patents. In the
Company's responsive pleading, the Company denied that it has infringed, or is
infringing, any of these patents, and contends that the patents are invalid. The
Company furthermore filed a counterclaim on August 5, 2003, claiming Tektronix
is infringing three of the Company's patents. On April 11, 2005, all claims
related to two of the Tektronix patents were voluntarily dismissed from the
Tektronix complaint and the Company's counterclaim. All claims related to one of
the Company's patents were also voluntarily dismissed from the Company's
counterclaim. On November 30, 2004, the Company filed a Motion for Summary
Judgment of Non-infringement concerning one of the six Tektronix patents. In
response, Tektronix filed a Cross-Motion for Summary Judgment of Infringement by
the Company concerning the same patent. By order dated May 4, 2005, the court
granted the Company's Motion for Summary Judgment of Non-infringement and denied
Tektronix' Cross-Motion for Summary Judgment of Infringement. On May 11, 2005,
Tektronix and the Company entered into an agreement settling all claims and
counterclaims between the parties in connection with their respective patents.
As part of the settlement agreement, the Company paid $1.0 million to Tektronix
in fiscal 2005.

     From time to time, the Company may be involved in lawsuits, claims,
investigations and proceedings, including patent and environmental matters,
which arise in the ordinary course of business. There are no matters pending
that the Company expects to be material to its business, results of operations,
financial condition or cash flows.

23.  RELATED PARTY TRANSACTIONS

     On October 20, 2000, the Compensation Committee of the Board of Directors
approved a $0.3 million five-year loan to Thomas H. Reslewic, LeCroy's Chief
Executive Officer and President, secured by Mr. Reslewic's non-qualified stock
options. The loan accrued interest at 9.5% compounded annually with interest
payable at the maturity of the loan. If Mr. Reslewic remained an employee of
LeCroy for the entire five-year term of the loan or was terminated without cause
prior to the maturity date of the loan, the Company would forgive the loan
principal and all accrued interest. The loan was amortized on a straight-line
basis and the compensation expense was recorded within Selling, general and
administrative expenses. The loan reached maturity in the second quarter of
fiscal 2006 and was forgiven along with the accrued interest, in accordance with
the agreement.

     On July 19, 2005 the Compensation Committee of the Board of Directors
approved a $0.3 million retention bonus to Mr. Reslewic. This retention bonus
requires Mr. Reslewic to remain an employee for five years. If Mr. Reslewic
terminates his employment earlier than five years, he will be required to repay
the bonus in full. The retention bonus is being amortized over five years on a
straight line basis as compensation expense. At June 30, 2006 $0.2 million
remains on the balance sheet of which a portion is in Other current assets and
the remaining balance is in Other non-current assets on the Consolidated Balance
Sheet.

24. DERIVATIVE INSTRUMENTS

    The Company has the following derivative instruments:

    Interest Rate Swap

     As required by the terms of the Credit Agreement (See Note 13 - Long Term
Debt and Capital Leases), on January 27, 2005 the Company entered into a Master
Agreement with the M&T Bank, the purpose of which is to protect against rising
interest rates during the term of the Credit Agreement. The Credit Agreement
obligates the Company to enter into one or more interest rate swap agreements
covering the interest payable with respect to at least 50% of the outstanding
principal amount of the Term Loan for a period of at least three years. In
connection with the Master Agreement, the Company entered into an interest rate
swap transaction effective January 31, 2005 and continuing through January 31,
2008, corresponding with the repayment terms of the Term Loan. The swap
agreement is not designated as a cash flow hedge under SFAS 133. Accordingly,
changes in the fair value of the swap are charged or credited to operations. In
accordance with the interest rate swap transaction, the Company pays interest
quarterly on the notional amount at a fixed annualized rate of 3.87% to M&T
Bank, and receives interest quarterly on the same notional amount at the
three-month LIBOR rate in effect at the beginning of each quarterly reset
period; except for the initial period, which covered the two months ending March



                                       82
<PAGE>

31, 2005, in which the Company received interest at a LIBOR rate of 2.64%. The
initial notional amount was $25.0 million and resets quarterly to 50% of the
outstanding principal balance of the Term Loan with respect to the original
amortization schedule as set forth in the Credit Agreement. The net interest
incurred on the swap was approximately $0.1 million income for the year ended
June 30, 2006 and ($0.1) million expense for the year ended June 30, 2005. The
notional amount as of June 30, 2006 was approximately $19.1 million as compared
to approximately $23.1 million as of June 30, 2005. The fair value of the
interest rate swap as of June 30, 2006 and 2005, was $0.4 million and $0.1
million, respectively, and approximates the amount that the Company would have
received from M&T Bank if the Company had canceled the transaction at those
dates. The fair value is recorded in Other non-current assets in the
Consolidated Balance Sheets as of June 30, 2006 and 2005 and the change in fair
value of $0.3 million ad $66,000 for the year ended June 30, 2006 and 2005,
respectively, is recognized in Interest expense in the Consolidated Statements
of Operations.

Forward foreign exchange contracts

     The Company enters into short-term forward exchange agreements to purchase
foreign currencies at set rates in the future. These foreign currency forward
exchange agreements are used to limit exposure to fluctuations in foreign
currency exchange rates on assets and liabilities denominated in currencies
other than the subsidiaries' functional currency. Subsidiaries may also use
forward exchange agreements to offset the foreign currency risk for receivables
and payables not denominated in, or indexed to, their functional currencies. The
Company records these short-term forward exchange agreements on the balance
sheet at fair value and changes in the fair value are recognized currently in
Other (expense) income, net in the Consolidated Statement of Operations.

     During fiscal 2006, 2005 and 2004, foreign currency exchange gains (losses)
on these derivatives and on transactions denominated in other than their
functional currencies, were ($0.3) million, $0.2 million and $0.3 million,
respectively. These net gains (losses) are included in Other, net in the
Consolidated Statements of Operations and include foreign exchange contract
gross gains of $0.6 million, $0.6 million and $0.5 million in fiscal 2006, 2005
and 2004, respectively. At June 30, 2006 and 2005, the notional amounts of the
Company's open foreign exchange forward contracts, all with maturities of less
than six months, were approximately $14.6 million and $10.6 million,
respectively.


25.  UNAUDITED QUARTERLY RESULTS OF OPERATIONS

     The Company has periods ending on the Saturday closest to the end of the
month. For clarity of presentation, period-ends are stated as of the last day of
the month. Summarized unaudited quarterly operating results for fiscal years
2006 and 2005 (all quarters represent 13-week periods, except for the quarter
ended September 30, 2004 which was a 14-week period) are as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                                        QUARTERS ENDED
                                                   FISCAL YEAR 2006                       FISCAL YEAR 2005
                                        -------------------------------------- ----------------------------------------
                                        JUNE. 30, MAR. 31,  DEC. 31,  SEPT. 30,JUNE. 30,  MAR. 31,  DEC. 31,  SEPT. 30,
                                          2006      2006      2005      2005     2005       2005      2004      2004
                                        -------- --------  --------  --------  --------  --------  --------  --------
                                       (13 WEEKS)(13 WEEKS)(13 WEEKS)(13 WEEKS)(13WEEKS)(13 WEEKS)(13 WEEKS)(14 WEEKS)
<S>                                    <C>      <C>       <C>       <C>       <C>       <C>       <C>       <C>
Revenues(1)
  Test and measurement products(2)..    $ 37,137 $ 37,184  $ 39,996  $ 39,124  $ 41,875  $ 40,879  $ 40,380  $ 33,305
  Service and other(2)..............       1,438    1,697     2,026     1,934     1,919     2,011     2,408     2,200
                                        -------- --------  --------  --------  --------  --------  --------  --------
    Total revenues..................      38,575   38,881    42,022    41,058    43,794    42,890    42,788    35,505

Cost of revenue(3)..................      15,727   15,250    16,434    16,065    19,730    16,947    22,182    14,773
                                        -------- --------  --------  --------  --------  --------  --------  --------
    Gross profit....................      22,848   23,631    25,588    24,993    24,064    25,943    20,606    20,732

Selling, general and
  administrative expenses(4)........      12,424   12,361    13,594    13,243    15,908    14,126    15,044    12,310
Legal settlement....................
                                              --    2,792        --        --        --     1,000        --        --
Research and development
  expenses(5).......................       7,222    7,671     7,806     7,424     7,440     7,027     8,800     4,736
                                        -------- --------  --------  --------  --------  --------  --------  --------
    Operating income (loss).........       3,202      807     4,188     4,326       716     3,790    (3,238)    3,686

Other, net..........................        (693)    (403)     (682)     (709)     (980)     (898)      (29)      (32)
                                        -------- --------- --------- --------  --------  --------- --------- --------
    Income (loss) before income taxes      2,509      404     3,506     3,617      (264)    2,892    (3,267)    3,654
(Provision for)  benefit from
    income taxes....................        (498)    (252)   (1,329)   (1,384)       91       (10)      398    (1,352)
                                        -------- --------- --------- --------- --------  --------- --------  ---------
Net income

(loss)..............................    $  2,011 $    152  $  2,177  $  2,233  $   (173) $  2,882  $ (2,869) $  2,302
                                        ======== ========  ========  ========  ========- ========  ========  ========

Net income (loss) per common share-

  Basic.............................    $   0.16 $   0.01  $   0.18  $   0.18  $  (0.01) $   0.24  $  (0.25) $   0.20
  Diluted...........................    $   0.16 $   0.01  $   0.17  $   0.18  $  (0.01) $   0.23  $  (0.25) $   0.19

Weighted average number of shares:
  Basic.............................      12,297   12,275    12,195    12,106    11,995    11,847    11,655    11,612
  Diluted...........................      12,533   12,556    12,467    12,348    11,995    12,672    11,655    12,177

</TABLE>



                                       83
<PAGE>

(1)  Included in service and other revenue for the first two quarters of fiscal
     2006 and for each of the four quarters in fiscal 2005 is $0.3 million
     related to the recognition of deferred revenue associated with the adoption
     of SAB 101. For the third quarter in fiscal 2006, $0.1 million was
     recognized related to SAB 101 deferred revenue. The quarter ended June 30,
     2005, includes product revenue of approximately $2.6 million from
     previously deferred revenue related to the Company's WaveSurfer product
     line.

(2)  Certain quarterly amounts have been reclassified from service revenue to
     product revenue to conform to the fiscal 2006 and third and fourth quarter
     of fiscal 2005 presentation. These reclassifications had no impact on
     previously reported total revenues.

(3)  Included in cost of revenues in the quarter ended June 30, 2006 are charges
     of $0.1 million for severance and other related charges. Included in cost
     of revenues in the quarter ended June 30, 2005 are charges of $1.8 million
     for inventory adjustments and $0.1 million for severance and service center
     closure. Included in cost of revenues in the quarter ended December 31,
     2004 are $1.5 million of asset impairment charges and $2.7 million for
     inventory write-offs resulting from the change in long-term product support
     policies.

(4)  Included in selling, general and administrative expense are severance
     charges of $0.2 million, $0.6 million and $0.6 million for the quarters
     ended June 30, 2006, June 30, 2005 and December 31, 2004, respectively.
     During the quarter ended June 30, 2005, the Company adopted a plan to
     attain cost efficiencies by consolidating service operations into a fewer
     number of facilities. In connection with this plan, the Company recorded
     lease termination costs of $0.2 million in the quarter ended June 30, 2005.

(5)  Included in research and development expense in the quarters ended June 30,
     2006 and 2005 are severance charges of $0.1 million for each quarter.



                                       84
<PAGE>


                                                                     SCHEDULE II

<TABLE>
<CAPTION>
                                                          LECROY CORPORATION
                                                   VALUATION AND QUALIFYING ACCOUNTS

                                               YEARS ENDED JUNE 30, 2006, 2005 AND 2004
                                                            (IN THOUSANDS)

                                                                     BALANCE AT   CHARGED TO                 BALANCE AT
                                                                      BEGINNING    COSTS AND   DEDUCTIONS/     END OF
DESCRIPTION                                                           OF PERIOD    EXPENSES       OTHER        PERIOD
--------------------------                                           ----------   ----------  ------------   ----------
<S>                                                                  <C>           <C>        <C>         <C>
Against trade receivables --
Year ended June 30, 2004
  Net reserves..................................................         394           56         (14)  (1)       436
Year ended June 30, 2005
  Net reserves..................................................         436           93        (149)  (1)       380
Year ended June 30, 2006
  Net reserves..................................................         380           94         (16)  (1)       458

Against inventories --
Year ended June 30, 2004
  Allowance for excess and obsolete.............................       2,107          911        (498)  (2)     2,520
Year ended June 30, 2005
  Allowance for excess and obsolete.............................       2,520        3,272      (4,706)  (2)     1,086
Year ended June 30, 2006
  Allowance for excess and obsolete.............................       1,086          543          --           1,629

Against deferred tax assets --
Year ended June 30, 2004
  Valuation allowance...........................................       5,086          218          --           5,304
Year ended June 30, 2005
  Valuation allowance...........................................       5,304           --      (4,954)  (3)       350
Year ended June 30, 2006
  Valuation allowance...........................................         350           --         (92)            258

----------
</TABLE>

(1)  Uncollectible accounts receivable written-off and change in sales return
     estimates.

(2)  Inventory disposals and/or impact of foreign currency.

(3)  Adjustment associated with a change in estimate primarily related to a
     reduction of certain deferred tax assets.



                                       85
<PAGE>



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

    None.

ITEM 9A.  CONTROLS AND PROCEDURES.


     The Company, under the supervision and with the participation of its
management, including the Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of the Company's
"disclosure controls and procedures" (as defined in Rule 13a-15(e) under the
Exchange Act) as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information
relating to the Company and the Company's consolidated subsidiaries required to
be disclosed in the Company's reports filed or submitted under the Exchange Act.


     There have not been any changes in the Company's internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the quarter ended June 30, 2006 that have materially
affected, or are reasonably likely to materially affect, its internal control
over financial reporting.


     Section 404 of the Sarbanes-Oxley Act of 2002 requires that management
document and test the Company's internal controls over financial reporting and
include in this Annual Report on Form 10-K a report on management's assessment
of the effectiveness of the Company's internal controls over financial
reporting. See "Management's Report on Internal Control over Financial
Reporting." In addition, KPMG LLP, an independent registered public accounting
firm, has audited management's assessment of the effectiveness of internal
control over financial reporting as of June 30, 2006, as well as the
effectiveness of internal control over financial reporting as of June 30, 2006
and has issued their report thereon, also included in this Annual Report on Form
10-K.


        MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) of 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. Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based upon the
guidelines established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on that evaluation, our management has concluded that our internal control over
financial reporting is effective as of June 30, 2006. In addition, KPMG LLP, our
independent registered public accounting firm, has audited our assessment of the
effectiveness of internal control over financial reporting as of June 30, 2006,
as well as the effectiveness of internal control over financial reporting as of
June 30, 2006 and has issued their report thereon. That report appears below.








                                       86
<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
LeCroy Corporation:

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that LeCroy
Corporation and subsidiaries maintained effective internal control over
financial reporting as of June 30, 2006, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). LeCroy Corporation's management
is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process 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. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that LeCroy Corporation and subsidiaries
maintained effective internal control over financial reporting as of June 30,
2006, is fairly stated, in all material respects, based on criteria established
in Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Also, in our opinion, LeCroy
Corporation and subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of June 30, 2006, based on the
criteria established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
LeCroy Corporation and subsidiaries as of June 30, 2006 and 2005, and the
related consolidated statements of operations, stockholders' equity,
comprehensive income and cash flows for each of the years in the three-year
period ended June 30, 2006, and our report dated September 13, 2006, expressed
an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Short Hills, New Jersey
September 13, 2006


                                       87
<PAGE>


ITEM 9B. OTHER INFORMATION

         None




































                                       88
<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information with respect to our directors will be contained in the section
captioned "Structure and Compensation of the Board of Director's" of the
Definitive Proxy Statement relating to our 2006 Annual Meeting of Stockholders
("2006 Proxy Statement"), which is scheduled to be held October 25, 2006.
Information with respect to Item 405 disclosure of delinquent Form 3, 4 or 5
filers will be contained in the section captioned "Section 16(A) Beneficial
Ownership Reporting Compliance" in the 2006 Proxy Statement. Those portions of
the 2006 Proxy Statement are incorporated herein by reference. The discussion of
our executive officers is included in Part I, Item 1 of this report under
"Executive Officers of the Registrant."

     The Company has adopted a code of ethics entitled "Revised Principles of
Business Conduct Policy," which applies to its officers, directors and
employees. A copy is available to any person without charge upon written request
to:

     LeCroy Corporation
     Attention: Investor Relations
     700 Chestnut Ridge Road
     Chestnut Ridge, New York 10977

ITEM 11. EXECUTIVE COMPENSATION.

     A description of the compensation of our executive officers will be
contained in the section captioned "Executive Compensation" of the 2006 Proxy
Statement. That portion of the 2006 Proxy Statement is incorporated herein by
reference.

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

     A description of the security ownership of certain beneficial owners and
management will be contained in the section captioned "Security Ownership of
Certain Beneficial Owners and Management" of the 2006 Proxy Statement. That
portion of the 2006 Proxy Statement is incorporated herein by reference.

EQUITY COMPENSATION PLAN INFORMATION

     A description of our equity compensation plans will be contained in the
section captioned "Executive Compensation and Other Information" of the 2006
Proxy Statement. That portion of the 2006 Proxy Statement is incorporated herein
by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Certain relationships and related transactions with management will be
contained in the section captioned "Certain Relationships and Related
Transactions" in the 2006 Proxy Statement. That portion of the 2006 Proxy
Statement is incorporated herein by reference.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

     A description of the principal accounting fees and services will be
contained in the section captioned "Principal Accounting Fees and Services" in
the 2006 Proxy Statement. That portion of the 2006 Proxy Statement is
incorporated herein by reference.



                                       89
<PAGE>



                                     PART IV


ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

       The following documents are filed as part of this report:

       (a) (1) FINANCIAL STATEMENTS -- See Index to Consolidated Financial
               Statements at Item 8 of this report.
       (a) (2) FINANCIAL STATEMENT SCHEDULES -- See Index to Consolidated
               Financial Statements at Item 8 of this report (Schedule II).

              Schedules not listed above have been omitted because the
              information required to be set forth therein is not applicable,
              not required or is included elsewhere in the financial statements
              or notes thereto.

       (a) (3)    EXHIBITS

         The following exhibits are filed with this report:

        Exhibit
        Number                            Description
        --------                          ------------

         2.1      Agreement and Plan of Merger, dated as of September 1, 2004,
                  among the Registrant, Cobalt Acquisition Corporation and
                  Computer Access Technology Corporation, filed as Exhibit 2.1
                  to Form 8-K dated September 2, 2004, incorporated herein by
                  reference.

         3.1      Certificate of Incorporation of the Registrant as of July 24,
                  1995, filed as Exhibit 3.1 to Form S-1 Registration Statement
                  No. 33-95620, incorporated herein by reference.

         3.2      Amendment to the Certificate of Designation of the Series A
                  Convertible Redeemable Preferred Stock as of April 9, 2001,
                  filed as Exhibit 10.37 to Form 10-Q for the quarterly period
                  ended March 31, 2001, incorporated herein by reference.

         3.3      By-Laws of the Registrant, as amended, dated August 16, 2000,
                  filed as Exhibit 3.3 to Form 10-Q for the quarterly period
                  ended September 30, 2000, incorporated herein by reference.

         4.1      Warrant to purchase 28,571 shares of the Registrant's Common
                  Stock, dated June 15, 2004, issued by the Registrant to
                  Capital Ventures International, filed as Exhibit 10.52 to Form
                  S-3 Registration Statement No. 333-1119730, incorporated
                  herein by reference.

         10.1     Credit Agreement, dated as of October 29, 2004, among the
                  Registrant, the lenders party thereto and The Bank of New
                  York, as Administrative Agent, filed as Exhibit 10.14 to Form
                  8-K filed on November 2, 2004, incorporated herein by
                  reference.

         10.2     LeCroy Corporation Amended and Restated 1993 Stock Incentive
                  Plan filed as Exhibit 10.1 to Form S-1 Registration Statement
                  No. 33-95620, incorporated herein by reference.*

         10.3     Amendment to LeCroy Corporation Amended and Restated 1993
                  Stock Incentive Plan, filed as Exhibit 10.33 to Form 10-Q for
                  the quarterly period ended September 30, 2000, incorporated
                  herein by reference.*

         10.4     LeCroy Corporation 1995 Non-Employee Director Stock Option
                  Plan filed as Exhibit 10.2 to Form S-1 Registration Statement
                  No. 33-95620, incorporated herein by reference.*

         10.5     LeCroy Corporation 1995 Employee Stock Purchase Plan, filed as
                  Exhibit 10.3 to Form S-1 Registration Statement No. 33-95620,
                  incorporated herein by reference.*

         10.6     LeCroy Corporation 1998 Non-Employee Director Stock Option
                  Plan, incorporated by reference to Appendix A to the Company's
                  Definitive Proxy Statement filed on September 18, 1998.

         10.7     Amendment to the LeCroy Corporation 1998 Non-Employee Director
                  Stock Option Plan, dated August 16, 2000, filed as Exhibit
                  10.34 to Form 10-Q for the quarterly period ended September
                  30, 2000, incorporated herein by reference.*

         10.8     Amendment to the LeCroy Corporation 1998 Non-Employee Director
                  Stock Option Plan, dated October 25, 2000, filed as Exhibit
                  10.35 to Form 10-Q for the quarterly period ended September
                  30, 2000, incorporated herein by reference.*

         10.9     LeCroy Corporation's 2003 Stock Incentive Plan, incorporated
                  by reference to Appendix A to the Company's Definitive Proxy
                  Statement filed on September 26, 2003.*

         10.10    Form of Restricted Stock Purchase Agreement, filed as Exhibit
                  10.41 to Form 10-K for the fiscal year ended June 30, 2002,
                  incorporated herein by reference.*



                                       90
<PAGE>

         10.11    LeCroy Corporation Amended and Restated 1995 Employee Stock
                  Purchase Plan, incorporated by reference to Appendix B to the
                  Registrant's Definitive Proxy Statement filed on September 26,
                  2003.*

         10.12    LeCroy Corporation's 2004 Employment Inducement Stock Plan,
                  filed as Exhibit 10.5 to Form 8-K filed on November 2, 2004,
                  incorporated herein by reference.*

         10.13    Computer Access Technology Corporation Special 2000 Stock
                  Option Plan, filed as Exhibit 10.7 to Form 8-K filed on
                  November 2, 2004, incorporated herein by reference.*

         10.14    Amendments to Computer Access Technology Corporation 2000
                  Special Stock Option Plan, filed as Exhibit 10.11 to Form 8-K
                  filed on November 2, 2004, incorporated herein by reference.*

         10.15    Amendment to LeCroy Corporation (CATC) Special 2000 Stock
                  Option Plan, filed as Exhibit 10.2 to Form 8-K filed on
                  November 19, 2004, incorporated herein by reference.*

         10.16    Computer Access Technology Corporation 2000 Stock Incentive
                  Plan, filed as Exhibit 10.8 to Form 8-K filed on November 2,
                  2004, incorporated herein by reference.*

         10.17    Amendments to Computer Access Technology Corporation 2000
                  Stock Incentive Plan, filed as Exhibit 10.12 to Form 8-K filed
                  on November 2, 2004, incorporated herein by reference.*

         10.18    Amendment to LeCroy Corporation (CATC) 2000 Stock Incentive
                  Plan, filed as Exhibit 10.3 to Form 8-K filed on November 19,
                  2004, incorporated herein by reference.*

         10.19    Computer Access Technology Corporation 1994 Stock Option Plan,
                  filed as Exhibit 10.9 to Form 8-K filed on November 2, 2004,
                  incorporated herein by reference.*

         10.20    Amendments to Computer Access Technology Corporation 1994
                  Stock Option Plan, filed as Exhibit 10.13 to Form 8-K filed on
                  November 2, 2004, incorporated herein by reference.*

         10.21    Amendment to LeCroy Corporation (CATC) 1994 Stock Option Plan,
                  filed as Exhibit 10.4 to Form 8-K filed on November 19, 2004,
                  incorporated herein by reference.*

         10.22    Employee Agreement Regarding Inventions, Confidentiality and
                  Non-Competition, dated as of March 28, 1995, between the
                  Registrant and Walter O. LeCroy, Jr., filed as Exhibit 10.13
                  to Form S-1 Registration Statement No. 33-95620, incorporated
                  herein by reference.*

         10.23    Form of Indemnification Agreement, between the Registrant and
                  each of its executive officers and directors filed as Exhibit
                  10.29 to Form S-1 Registration Statement No. 33-95620,
                  incorporated herein by reference.*

         10.24    Employment Agreement, dated August 13, 2001, between the
                  Registrant and R. Scott Bausback, filed as Exhibit 10.38 to
                  Form 10-Q for the quarterly period ended December 31, 2001,
                  incorporated herein by reference.*

         10.25    Separation Agreement, dated August 19, 2004, between the
                  Registrant and R. Scott Bausback, filed as Exhibit 10.50 to
                  Form 10-K for the fiscal year ended June 30, 2004,
                  incorporated herein by reference.*

         10.26    Employment Agreement, dated January 1, 2002, between the
                  Registrant and Thomas H. Reslewic, filed as Exhibit 10.40 to
                  Form 10-Q for the quarterly period ended March 31, 2003,
                  incorporated herein by reference.*

         10.27    Amendment No. 1 to Employment Agreement, dated December 16,
                  2002, between the Registrant and Thomas H. Reslewic, filed as
                  Exhibit 10.43 to Form 10-Q for the quarterly period ended
                  March 31, 2003, incorporated herein by reference.*

         10.28    Separation Agreement, dated August 19, 2004, between the
                  Registrant and Thomas H. Reslewic, filed as Exhibit 10.49 to
                  Form 10-K for the fiscal year ended June 30, 2004,
                  incorporated herein by reference.*

         10.29    Separation Agreement, dated January 6, 2003, between the
                  Registrant and Raymond F. Kunzmann, filed as Exhibit 10.42 to
                  Form 10-Q for the quarterly period ended December 31, 2002,
                  incorporated herein by reference.*

         10.30    Form of Separation Agreement between the Registrant and
                  certain of its executive officers, filed as Exhibit 10.51 to
                  Form 10-K for the fiscal year ended June 30, 2004,
                  incorporated herein by reference.*

         10.31    Employment Agreement, dated September 1, 2004 and effective
                  October 29, 2004, between the Registrant and Carmine
                  Napolitano, filed as Exhibit 10.1 to Form 8-K filed on
                  November 2, 2004, incorporated herein by reference.*

         10.32    Amendment No. 1 to Employment Agreement, dated September 30,
                  2004 and effective October 29, 2004, between the Registrant
                  and Carmine Napolitano, filed as Exhibit 10.2 to Form 8-K
                  filed on November 2, 2004, incorporated herein by reference.*

         10.33    Services Agreement, dated August 31, 2004, between Computer
                  Access Technology Corporation and Dan Wilnai, filed as Exhibit
                  10.3 to Form 8-K filed on November 2, 2004, incorporated
                  herein by reference.*

         10.34    Employment Agreement, dated August 31, 2004, between Computer
                  Access Technology Corporation and Peretz Tzarnotsky, filed as
                  Exhibit 10.4 to Form 8-K filed on November 2, 2004,
                  incorporated herein by reference.*

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<PAGE>

         10.35    Amendment No. 2 to Credit Agreement, dated as of May 9, 2006,
                  among the Registrant, the lenders party thereto and The Bank
                  of New York, as Administrative Agent, filed as Exhibit 10.40
                  to Form 10-Q filed on May 10, 2006, incorporated herein by
                  reference.

         14.1     Code of Ethics- Principles of Business Conduct, filed as
                  Exhibit 14.1 to Form 10-K for the fiscal year ended June 30,
                  2003, incorporated herein by reference.

         14.2     Revised Code of Ethics- Principles of Business Conduct dated
                  December 14, 2005.

         21.1     Subsidiaries of LeCroy Corporation.

         23.1     Consent of Independent Registered Public Accounting Firm.

         31.1     Certification by the Chief Executive Officer pursuant to Rule
                  13a-14(a) under the Securities Exchange Act of 1934.

         31.2     Certification by the Chief Financial Officer pursuant to Rule
                  13a-14(a) under the Securities Exchange Act of 1934.

         32.1     Certification by the Chief Executive Officer pursuant to 18
                  U.S.C. Section 1350.

         32.2     Certification by the Chief Financial Officer pursuant to 18
                  U.S.C. Section 1350.

         *        Indicates management contract or compensatory plan, contract
                  or arrangement.



                                       92
<PAGE>



                                   SIGNATURES

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

                                             LeCroy CORPORATION

Date: September 13, 2006                     By /s/ Sean B. O'Connor
                                                --------------------
                                             Sean B. O'Connor
                                             Vice President Finance,
                                             Chief Financial Officer,
                                             Secretary and Treasurer


     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.

<TABLE>
<CAPTION>
               Signature                                 Title                                  Date
               ---------                                 -----                                  ----
<S>                                    <C>                                                <C>
  /s/ CHARLES A. DICKINSON                Chairman of the Board of Directors             September 13, 2006
-----------------------------------
     Charles A. Dickinson

  /s/ THOMAS H. RESLEWIC                  President, Chief Executive Officer             September 13, 2006
-----------------------------------                   and Director
     Thomas H. Reslewic                       (Principal Executive Officer)


  /s/ SEAN B. O'CONNOR                       Vice President Finance, Chief               September 13, 2006
-----------------------------------
     Sean B. O'Connor                        Financial Officer, Secretary
                                                     and Treasurer
                                            (Principal Accounting Officer)

  /s/ ROBERT E. ANDERSON                               Director                          September 13, 2006
-----------------------------------
     Robert E. Anderson

  /s/ WALTER O. LECROY, JR.                            Director                          September 13, 2006
-----------------------------------
     Walter O. LeCroy, Jr.

  /s/ NORMAN R. ROBERTSON                              Director                          September 13, 2006
-----------------------------------
     Norman R. Robertson

  /s/ WILLIAM G. SCHEERER                              Director                          September 13, 2006
-----------------------------------
     William G. Scheerer

  /s/ ALLYN C. WOODWARD, JR.                           Director                          September 13, 2006
----------------------------
     Allyn C. Woodward, Jr.

</TABLE>





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