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

                                  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, 2005

                                       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
          CHESTNUT RIDGE, NEW YORK                        10977
   (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: (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
                                YES ___X___       NO _______

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
September 1, 2005, was 12,658,150 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 $267,092,737.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Definitive Proxy Statement for the 2005 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, 2005

                                TABLE OF CONTENTS



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

                                     PART I

   Item 1.      Business...................................................................................     4
   Item 2.      Properties.................................................................................    17
   Item 3.      Legal Proceedings..........................................................................    18
   Item 4.      Submission of Matters to a Vote of Security Holders........................................    19

                                     PART II
   Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters......................    19
   Item 6.      Selected Consolidated Financial Data.......................................................    20
   Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations......    22
   Item 7A.     Quantitative and Qualitative Disclosure About Market Risk..................................    47
   Item 8.      Financial Statements and Supplementary Data................................................    49
   Item 9.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.......    83
   Item 9A.     Controls and Procedures....................................................................    83

                                    PART III
   Item 10.     Directors and Executive Officers of the Registrant ........................................    86
   Item 11.     Executive Compensation.....................................................................    86
   Item 12.     Security Ownership of Certain Beneficial Owners and Management.............................    86
   Item 13.     Certain Relationships and Related Transactions.............................................    86
   Item 14.     Principal Accounting Fees and Services.....................................................    86

                                     PART IV
   Item 15.     Exhibits and Financial Statement Schedule..................................................    87
                Signatures.................................................................................    91

</TABLE>



    LeCroy(R), Wavelink(TM), WaveMaster(R), WavePro(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.




                                       2
<PAGE>



            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


     This annual Report on Form 10-K and certain information incorporated herein
by reference contain forward-looking statements within the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. All
statements contained in this Report on Form 10-K that are not purely historical
are forward-looking statements, including, without limitation, statements
regarding our expectations, objectives, anticipations, plans, hopes, beliefs,
intentions or strategies regarding the future. Forward-looking statements are
not guarantees of future performance and are subject to risks and uncertainties
that could cause actual results to differ materially from the results
contemplated by the forward-looking statements. Forward-looking statements
include, without limitation, the statements regarding:

o    Our intention to continue to focus our marketing efforts on corporate and
     development strategies, increasing our brand and product awareness, and
     technical and strategics sales support;

o    Our intention to continue to provide our customers with comprehensive
     technical support services and our belief that doing so is critical to
     remaining competitive;

o    Our intention to expand our distribution efforts by pursuing relationships
     with additional distributors and manufacturer's representatives in our
     current markets and with new distributors and manufacturer's
     representatives in future markets;

o    Our belief that our future success depends largely upon our ability to
     develop new products for established and emerging communications standards
     and to improve our existing products;

o    Our belief that we have a competitive advantage as a result of our
     knowledge and expertise covering multiple communications standards,
     computer and software architecture and advanced ASIC and programmable logic
     design;

o    Our intention to extend our technology base to support additional emerging
     standards;

o    Our intent to invest cash generated from operations, if any, to support the
     development of our business and our anticipation not to pay cash dividends
     for the foreseeable future;

o    Our expectation that our operating cash flow requirements will increase in
     the future in connection with the expanding scope and level of our
     activities;

o    Our belief that our judgments and assumptions are reasonable and
     appropriate with respect to the recoverability of our assets and our future
     prospects for earnings and cash flows;

o    Our belief that our current cash and cash equivalents, together with funds
     generated from operations and funds available under our revolving credit
     lines will be sufficient to meet our working capital, capital expenditure
     and debt repayment requirements for the foreseeable future;

o    Our belief that we must work closely with core or promoter companies in our
     target market to gain valuable insight into new market demands, obtain
     early access to standards as they develop and help us design new products
     or enhance existing products;

o    Our anticipation that future frequency increases will further enhance
     bandwidth; and

o    Our belief that we must continue to develop and introduce on a timely basis
     new products that incorporate features that can be sold at higher average
     selling prices.

     These forward-looking statements involve risks and uncertainties. We may
make other forward-looking statements from time to time, including in press
releases and public conference calls and webcasts. All forward-looking
statements made by LeCroy Corporation are based on information available to the
Company at the time the statements are made, and the Company assumes no
obligation to update any forward-looking statements. It is important to note
that actual results are subject to a number of risks and uncertainties that
could cause actual results to differ materially from those included in such
forward-looking statements. Some of these risks and uncertainties are discussed
below in the Risk Factors section of Item 7 Management's Discussion and Analysis
of Financial Condition and Results of Operations.



                                       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. Through the quarter ended March 31, 2005, we offered
four families of oscilloscopes, which address different solutions for the
markets we serve: 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; and WaveSurfer, designed for
value-oriented users in the low-performance bandwidth sector of the market. 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. On April 4, 2005, we launched a
fifth family of oscilloscopes, the WaveExpert, which is our highest performance
oscilloscope targeted at design engineers requiring a high bandwidth, accurate,
fast and flexible sampling oscilloscope.

    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.
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. Our customers include leading original equipment manufacturers, such as
BAE Systems, IBM, Maxtor, Raytheon, Robert Bosch, Seagate, Samsung and Siemens
VDO.

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 wireline communications and
broadcast networks. These test and measurement equipment products aid 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 $6
billion in 2004. 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.


                                       4
<PAGE>

These improvements rely on advanced semiconductor technology and require the
design of faster, more powerful and complex 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, the largest
single product category is oscilloscopes. We estimate that oscilloscopes
represented approximately $990 million of the overall $6 billion market in 2004.
In addition, protocol analyzers, an emerging product category represented
approximately $325 million in sales in 2004. Protocol analyzers address specific
communications standards in the wide area network (WAN), local area network
(LAN), storage area network (SAN) 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. We believe the market for oscilloscope products
will reach $1.1 billion in 2005. 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; and memory length, or
the number of points per channel. 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. Oscilloscopes
with real-time bandwidths ranging from 20 megahertz ("MHz") up to 15 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.


                                       5
<PAGE>

    o   Handheld oscilloscopes. The lowest end of the market 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.

    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.



                                       6
<PAGE>

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

     o    Bluetooth. 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. Bluetooth
          products are just reaching the consumer markets at the present time
          and already Bluetooth is being enhanced further through version 1.2 of
          the Bluetooth specification published in late 2003. These recent
          changes in the specification are designed to enhance the usability and
          acceptance of Bluetooth including: shorter connection times, less
          interference with other devices operating in the same 2.4 GHz band,
          improved voice channel capabilities, better support for devices that
          operate simultaneously in multiple "piconets" and increased security.

     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


                                       7
<PAGE>

          compatibility. The promoter group consists of Hewlett-Packard, Dell,
          IBM, Intel and Microsoft. PCI Express currently runs at 2.5 Gbps per
          lane in each direction, providing a total bandwidth of 160 Gbps in a
          32-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 320 Gbps. Adoption of PCI Express Gen2 will begin
          in the first half of fiscal 2006.

     o    Serial ATA. The Serial ATA standard 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. The promoter group consists of APT
          Technologies, Dell, Intel, Maxtor and Seagate. Serial ATA operates
          over copper wire at speeds up to 3 Gbps over distances of up to one
          meter.

     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 devices. 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.

     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. 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.

     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 US 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 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.

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:



                                       8
<PAGE>

    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 52 U.S. patents and 21
foreign patents, with approximately 60 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 16% 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. 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 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 new 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
available to our customers at the right time in the most important applications
will allow us to continue to grow in this market segment.



                                       9
<PAGE>


PRODUCTS AND SERVICES

   OSCILLOSCOPES

We currently offer four major real-time oscilloscope families: WaveMaster,
WavePro, WaveRunner and WaveSurfer. 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.


<TABLE>
<CAPTION>
                            NUMBER
   PRODUCT                    OF        BANDWIDTH        MAXIMUM SAMPLING RATE         U.S. LIST         MARKET
   FAMILY                   MODELS        RANGE            AND MEMORY LENGTH          PRICE RANGE     INTRODUCTION
------------               -------- ----------------  --------------------------   ----------------   ------------
<S>                       <C>       <C>               <C>                         <C>                 <C>
WaveMaster/SDA/DDA             9          3 - 11 GHz  40 billion samples per      $42,490 - $106,000  January 2002
Series...............                                 second;
                                                      100 million points
WavePro                        4           1 - 3 GHz  20 billion samples per       $18,500 - $34,990  January 2003
7000A Series.........                                 second;
                                                      48 million points
WaveRunner                     5     350 MHz - 2 GHz  10 billion samples per        $8,250 - $26,250  October 2003
6000A Series.........                                 second;
                                                      24 million points
WaveSurfer                     8       200 - 500 MHz  2 billion samples per          $4,490 - $8,790  April 2004
400 Series...........                                 second;
                                                      2 million points
</TABLE>

In addition, the Company released the WaveExpert sampling oscilloscope family in
April 2005.

   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, DDA5000
        series and DDA3000 series, using WaveMaster and WavePro platforms;

    o   Serial data applications -- Serial Data Analyzer products, SDA3000
        series, SDA5000 series, SDA6000 series and the SDA11000 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
       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.



                                       10
<PAGE>

    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 CATC'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 aftermarket support, repair, 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 customers include leading original equipment manufacturers, such as BAE
Systems, IBM, Intel, Maxtor, Raytheon, Robert Bosch, Seagate, Samsung and
Siemens VDO.

    Our 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
components. We currently provide products to customers in four primary end
markets, including Computer/Semiconductor/Consumer Electronics, Data Storage,
Automotive/Industrial, and Military/Aerospace.

    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;



                                       11
<PAGE>

    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; 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 verification.

    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, interface
        standard.

    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

    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.


                                       12
<PAGE>

    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. In
addition, in Japan we maintain a strategic alliance with Iwatsu, a
communications and test and measurement company that sells and distributes some
of our products under the "Iwatsu/LeCroy" and "Iwatsu" labels.

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

    In order to raise market awareness of our products, we 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 expires 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
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.



                                       13
<PAGE>

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 and WavePro oscilloscopes
and related products are manufactured at our facility in Chestnut Ridge, New
York. Protocol analyzer products are manufactured in our Santa Clara, California
facility. 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 WaveRunner 2 and WaveSurfer products are manufactured by
our strategic partner, Iwatsu, and our WaveRunner 6000A 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 ($4,400 to $106,000) 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,
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;


                                       14
<PAGE>

    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 $8.5 million and
$10.8 million as of June 30, 2005 and 2004, respectively. Backlog at June 30,
2005 and 2004 excludes $0.7 million and $2.0 million, respectively, 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. Customers may cancel
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 52 U.S. and 21 foreign patents, and approximately
60 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. 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.
Currently, we are actively supplying oscilloscope components and software
support to Iwatsu, with whom we maintain a strategic alliance in Japan, pursuant
to long-standing joint development agreements with Iwatsu. The license contained
in our agreement with Iwatsu is perpetual.


                                       15
<PAGE>

    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 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, 2005, we had 402 full-time employees, 194 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 June
30, 2005:

  NAME                  AGE                      POSITION(S)
-------                 ---  ---------------------------------------------------
Thomas H. Reslewic....  46   President; Chief Executive Officer and Director
R. Scott Bausback.....  44   Executive Vice President, Chief Operating Officer
Carmine Napolitano....  37   Vice President, President- Serial Data Division
David C. Graef........  48   Vice President, Chief Technology Officer
Scott D. Kantor.......  42   Vice President, Finance; Chief Financial Officer;
                             Secretary and Treasurer
Conrad J. Fernandes...  44   Vice President, Worldwide Sales
Corey Hirsch..........  48   Vice President, Chief Information Officer
Sean B. O'Connor......  40   Vice President, Legal Affairs; Chief Compliance
                             Officer


    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. Previously, he held a variety of sales


                                       16
<PAGE>

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, 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.

    Scott D. Kantor has served as Vice President, Finance and Chief Financial
Officer since February 2003. Previously, he served as our Vice President and
Corporate Controller since August 1999. Before joining us, Mr. Kantor was with
Sappi Fine Paper N.A., from April 1996 to August 1999, where he served as
Assistant Financial Controller. Mr. Kantor previously held accounting and
financial reporting positions at Genzyme Corporation and Costar Corporation and
was a Senior Accountant with Deloitte & Touche, LLP. Mr. Kantor has a Bachelor
of Science degree from California State University and a Master of Business
Administration degree from Boston University.

    Conrad J. Fernandes has served as Vice President, Worldwide Sales since July
2001. Previously, Mr. Fernandes served as 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 Sept. 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).

    Sean B. O'Connor was appointed Vice President, Legal Affairs and Chief
Compliance Officer in May 2005. Since August 2001 he has 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.

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 around the world to support our local sales and
service operations and to support our research and development activities. We
believe that our facilities are in good condition and are suitable and
sufficient for our current operations.

                                       17
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

     On April 28, 2003, 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 infringed any of these
patents, and contended that the patents were invalid. The Company filed a
counterclaim on August 5, 2003, claiming infringement by Tektronix on three of
the Company's patents. On November 30, 2004, the Company filed a Motion for
Summary Judgment of Noninfringement 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 Noninfringement and denied
Tektronix' Cross-Motion for Summary Judgment of Infringement. 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 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.

    On January 15, 2003, LeCroy was sued by Sicom Systems ("Sicom") in the
United States District Court for the District of Delaware for patent
infringement of a U.S. patent relating to the graphical display of test limits.
LeCroy answered the complaint denying infringement and asserted a counterclaim
alleging the invalidity of the patent and that Sicom had abused the judicial
process by bringing a baseless patent infringement claim. On July 16, 2003,
LeCroy filed a Motion to Dismiss Sicom's case, contending that Sicom did not
have standing to bring the litigation. On November 20, 2003, the Court granted
LeCroy's Motion to Dismiss. On December 18, 2003, Sicom filed a Notice of Appeal
to the United States Court of Appeals for the Federal Circuit. On December 30,
2003, Sicom filed a new patent infringement lawsuit against LeCroy in the United
States District Court for the District of Delaware. Tektronix and Agilent
Technologies are also co-defendants in this new litigation. The complaint in
this new case is essentially the same as the complaint filed by Sicom on January
15, 2003, except that Sicom now states that it entered into an amendment to its
license agreement with the Canadian government on December 19, 2003, and that
Sicom now has the exclusive right to bring suit for infringement of the patent
in the United States. On January 5, 2004, Sicom filed a Notice and Order of
Dismissal of Appeal of its appeal to the Court of Appeals for the Federal
Circuit and the Order was entered on the following day. In LeCroy's responsive
pleading, LeCroy denied that it has infringed, or is infringing, the patent, and
contends that the patent is invalid. The defendants in this case, including us,
filed a Motion to Dismiss for lack of standing, contending that Sicom's amended
license agreement with Canada does not cure the standing defects that caused the
Court to dismiss the original lawsuit. The Court granted the Defendants' Motion
on October 5, 2004, dismissing the case with prejudice. On October 28, 2004,
Sicom filed a Notice of Appeal to the United States Court of Appeals for the
Federal Circuit from the September 30, 2004 order granting the Company's motion
to dismiss and the related memorandum opinion dated October 5, 2004. The appeal
is ongoing and the outcome cannot be predicted. LeCroy intends to defend itself
vigorously in this litigation.

    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 other matters
pending that the Company expects to be material to its business, results of
operations, financial condition or cash flows.


                                       18
<PAGE>

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

    During the fourth quarter of fiscal 2005, 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 AND RELATED STOCKHOLDER MATTERS.

PRICE RANGE OF COMMON STOCK

    Our common stock is traded on The Nasdaq National 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
National Market. As of August 24, 2005, there were 290 stockholders of record of
our common stock.

                                                           HIGH       LOW
                                                        ---------  ---------
Year Ended June 30, 2004:
  First Quarter.....................................    $   16.03  $    9.73
  Second Quarter....................................        18.45      15.72
  Third Quarter.....................................        23.99      18.08
  Fourth Quarter....................................        21.79      17.59

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

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 Shareowners and Proxy
Statement, to be filed within 120 days after LeCroy's fiscal year end of
July 2, 2005 (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.
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 revolving credit facility, we are not permitted to declare or pay dividends
other than dividends payable solely in additional shares of our equity
securities.


                                       19
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

    The following selected consolidated financial data as of the end of each
fiscal year has been derived from our consolidated financial statements for each
of the years in the five-year period ended June 30, 2005. 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,
                                                                  ------------------------------------------------------
                                                                    2005(7)     2004       2003       2002       2001
                                                                  ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Revenues:
<S>                                                              <C>        <C>        <C>        <C>         <C>
  Test and measurement products(1)....................            $ 156,440  $ 117,290  $  98,281  $  103,695  $ 131,646
  Service and other(1)(2).............................                8,538      7,650      9,578       7,761      9,742
                                                                  ---------  ---------  ---------  ----------  ---------
    Total revenues....................................              164,978    124,940    107,859     111,456    141,388
Cost of revenues(3)(4)................................               73,632     52,594     50,989      59,717     67,559
                                                                  ---------  ---------  ---------  ----------  ---------
  Gross profit........................................               91,346     72,346     56,870      51,739     73,829

Operating expenses:
  Selling, general and administrative(4)(5)...........               57,341     43,997     41,422      40,477     44,738
  Legal settlement....................................                1,000         --         --          --         --
  Research and development(6).........................               28,050     15,760     18,226      22,006     17,682
                                                                  ---------  ---------  ---------  ----------  ---------
    Total operating expenses..........................               86,391     59,757     59,648      62,483     62,420
                                                                  ---------  ---------  ---------  ----------  ---------

Operating income (loss)...............................                4,955     12,589     (2,778)    (10,744)    11,409
  Gain (loss) from sale of marketable securities......                   --         --         --        (122)        --
  Interest income.....................................                  564        716        912         637        527
  Interest expense....................................               (2,742)      (720)      (675)       (211)      (451)
  Other, net..........................................                  238         (7)      (321)       (116)      (547)
                                                                  ---------  ---------  ---------  ----------  ---------
Income (loss) from continuing operations before income taxes
  and the cumulative effect of an accounting change...                3,015     12,578     (2,862)    (10,556)    10,938
(Provision for) benefit from income taxes.............                 (872)    (4,653)     1,059       4,307        897
                                                                  ---------  ---------  ---------  ----------  ---------
Income (loss) from continuing operations
      before the cumulative effect of an accounting change            2,143      7,925     (1,803)     (6,249)    11,835

Gain (loss) from discontinued operations, net of tax..                   --        119        129          --     (1,994)
                                                                  ---------  ---------  ---------  ----------  ---------
Income (loss) before the cumulative effect of an accounting
change................................................                2,143      8,044     (1,674)     (6,249)     9,841
Cumulative effect of an accounting change for
   revenue recognition, net of tax....................                   --         --         --          --      4,417
                                                                  ---------  ---------  ---------  ----------  ---------
Net income (loss).....................................                2,143      8,044     (1,674)     (6,249)     5,424

Charges related to convertible preferred stock........                   --         --      2,069       1,876      1,700
Redemption of convertible preferred stock.............                   --      7,665         --          --         --
Cumulative effect of an accounting change for preferred stock            --         --         --          --      1,848
                                                                  ---------  ---------  ---------  ----------  ---------
Net income (loss) applicable to common stockholders...            $   2,143  $     379  $  (3,743) $   (8,125) $   1,876
                                                                  =========  =========  =========  ==========  =========

Net income (loss) per common share - basic:
    Income (loss) from continuing operations
      before the cumulative effect of an
      accounting change applicable to common stockholders         $    0.18  $    0.02  $   (0.37) $    (0.81) $    1.20
    Gain (loss) from discontinued operations..........                   --       0.01       0.01          --      (0.24)
    Cumulative effect of an accounting change.........                   --         --         --          --      (0.74)
    Net income (loss) applicable to common stockholders                0.18       0.04      (0.36)      (0.81)      0.22

Net income (loss) per common share - diluted:
    Income (loss) from continuing operations
      before the cumulative effect of an
      accounting change applicable to common stockholders         $    0.17  $    0.02  $   (0.37) $   (0.81)  $    1.15
    Gain (loss) from discontinued operations..........                   --       0.01       0.01         --       (0.23)
    Cumulative effect of an accounting change.........                   --         --         --         --       (0.71)
    Net income (loss) applicable to common stockholders                0.17       0.03      (0.36)     (0.81)       0.21

Weighted average number of common shares:
  Basic...............................................               11,774     10,754     10,364     10,052       8,476
  Diluted.............................................               12,258     11,074     10,364     10,052       8,847


<CAPTION>
                                                                                    AS OF JUNE 30,
                                                                -------------------------------------------------------
                                                                   2005       2004        2003       2002       2001
                                                                ---------  ----------  ---------  ---------- ----------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
<S>                                                             <C>        <C>         <C>        <C>        <C>
Cash and cash equivalents and marketable securities, current    $  13,866  $   38,100  $  30,851  $  27,322  $   11,449
Working capital...........................................         44,379      69,916     62,831     63,265      41,610
Total assets..............................................        193,168     129,793    122,152    126,991     122,160
Total debt and capital leases.............................         45,489         196        291        375         456
Redeemable convertible preferred stock....................             --          --     15,335     13,266      11,390
Total stockholders' equity................................        116,818     101,608     80,514     81,505      60,480

</TABLE>

                                       20
<PAGE>

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

(2)  Service and other revenue in each of fiscal 2005, 2004, 2003, 2002 and 2001
     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," as of the
     beginning of fiscal 2001. 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 2005 includes $2.7 million of charges 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. In fiscal 2001, cost of
     revenues includes $0.1 million in severance-related charges.

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

(5)  In fiscal 2005, we recorded a charge for severance and other related costs
     of $1.5 million. 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. In fiscal 2001, we recorded a charge
     for severance of $0.7 million, partially offset by the reversal of an
     unused 1999 restructuring reserve of $0.2 million.

(6)  Research and development in each of fiscal 2005, 2004, 2003, 2002 and 2001
     includes severance-related charges of $0.1 million, zero, $0.7 million,
     $0.2 million and $0.1 million, respectively, and in fiscal 2002, a $4.0
     million technology access fee paid to IBM.

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




                                       21
<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 and the documents incorporated by reference herein.

    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 year 2005 includes 53 weeks. Fiscal years 2004 and 2003 each
include 52 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
five families of oscilloscopes, which address different solutions to the markets
we serve: WaveExpert, a powerful family of sampling oscilloscopes and modules;
WaveMaster, our highest performance product family; WavePro, which is targeted
at the mid- to high-performance sector; WaveRunner, designed for the
mid-performance sector; and WaveSurfer, designed for the low-performance sector
of the market. 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), 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. Our customers include leading
original equipment manufacturers, such as BAE Systems, IBM, Maxtor, Raytheon,
Robert Bosch, Seagate, Samsung and Siemens VDO.

    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 divide 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.



                                       22
<PAGE>

    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
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 Item 7A of this Part II entitled "Quantitative and
Qualitative Disclosure About Market Risk" below.

    Historically, we have, at times, experienced lower levels of demand during
our first fiscal quarter than in other fiscal quarters which, we believe, has
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 profits
represent 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 $4,000 to $106,000, 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 timely 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. For example, in the late 1990s through 2001, our
business expanded along with the prosperity of the technology markets. From
early 2001 to 2003, demand for our products decreased along with the contraction
of the technology industry overall. As a result, our revenues decreased 8% from
the end of fiscal year 2000 through fiscal year 2002. Beginning in fiscal year
2003 our revenues have significantly increased concurrently with the recovery of
the technology industry.

    We believe our ongoing strategy of quickly identifying opportunities and
customer needs in fundamental technology markets and capitalizing on those
opportunities through well-planned, efficient and timely key product
introductions has also contributed to our recent increase in revenues. For
instance, in October 2003, in anticipation of renewed but tentative capital
spending in the technology industry, we introduced our WaveRunner 6000 family of
oscilloscopes, a unique software platform built upon a solid hardware platform
designed to take advantage of demand for mid-tier competitively priced, powerful
oscilloscopes. To date, sales of WaveRunner 6000 oscilloscopes have exceeded our
expectations.

    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 2005 and 2003 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 2005 and 2003, see
the Section entitled "Restructuring and Asset Impairment," below.



                                       23
<PAGE>

    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 CATC to
complement our expanding portfolio of serial data test solutions. The
acquisition of CATC is described more fully below.

CATC ACQUISITION

    On October 29, 2004, we completed our acquisition of 100% of the outstanding
common stock of 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 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, 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, 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, we paid cash to the holders of CATC's
outstanding, vested, in-the-money stock options and employee stock purchase plan
(the "ESPP") 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 will be charged as
compensation expense to operations as earned by employees over their remaining
vesting periods. 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 (the "Credit Agreement"). The Merger
consideration is summarized below:

(IN THOUSANDS)

Cash for shares.................................................$ 120,242
Cash for options and ESPP purchase rights.......................    3,965
Fair value of stock options assumed.............................    5,111
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
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 based
on estimated selling prices less direct costs to sell and a reasonable 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


                                       24
<PAGE>

the net assets acquired was allocated to goodwill. The principal 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 2005, the Company reduced its CATC goodwill
by approximately $2.0 million as a result of the reversal of a valuation
allowance against the CATC deferred tax assets and a reversal of a
pre-acquisition contingency reserve. The 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 ............................................    76,974
Current liabilities assumed .........................    (5,420)
Long-term liabilities assumed .......................      (652)
                                                        -------
Total purchase price ................................  $129,995
                                                       ========

    The following table presents the details of the amortizable intangible
assets acquired in the Merger and their carrying value as of June 30, 2005:

<TABLE>
<CAPTION>

                                                  WEIGHTED                 ACCUMULATED
                                               AVERAGE LIVES     COST      AMORTIZATION      NET
                                               -------------   --------   --------------  ----------
                                                                          (IN THOUSANDS)
<S>                                            <C>             <C>        <C>             <C>
   Amortizable intangible assets:
       Purchased technology..................    2.0 years       $3,080     $    1,178    $    1,901
       Purchased tradename...................    1.0 year            70             47            23
       Purchased purchase orders.............    0.2 years           90             90            --
                                                               --------     ----------    ----------
     Total intangibles purchased.............                  $  3,240     $    1,315    $    1,924
                                                               ========     ==========    ==========
</TABLE>

    Amortization expense for intangible assets acquired in the Merger was $1.3
million for the year ended June 30, 2005. Amortization expense for the
intangible assets acquired in the Merger has been recorded in the Consolidated
Statements of Operations as follows:

                                                   YEAR ENDED
                                                    JUNE 30,
                                                      2005
                                                 --------------
                                                 (IN THOUSANDS)

   Cost of revenues..........................      $   1,268
   General and administrative expense........             47
                                                   ---------
      Total..................................      $   1,315
                                                   =========

    The amortization expense of intangible assets acquired in the Merger for
future years is as follows:
                                                  AMOUNT
                               FISCAL YEAR    (IN THOUSANDS)
                             --------------   --------------
                                  2006            $1,339
                                  2007               585
                                                  ------
                                                  $1,924
                                                  ======
                                       25
<PAGE>

    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 is included in Research and development
expense in the Consolidated Statement of Operations.

RESTRUCTURING AND ASSET IMPAIRMENT

    In response to the continued economic downturn in 2003, we took steps to
change our manufacturing strategy, discontinue older product lines and reduce
our operating expenses in an effort to position our business better for the long
term. In the second quarter of fiscal 2005, in connection with the Merger, we
took steps to change our organization as well as implement a change in our low
to mid-range oscilloscope manufacturing strategy. Additionally, in the fourth
quarter of fiscal 2005 we experienced a decline in test and measurement product
orders and we responded by taking action to better align our overseas
operations, reducing headcount and closing two offices. The resultant charges
taken to accomplish these efforts were:

                                                          FISCAL YEAR
                                                 2005         2004        2003
                                                 ----         ----        ----
                                                        (IN THOUSANDS)
 Charges for:
   Impaired intangible assets.............   $   1,500     $     --    $ 2,280
   Service center closure.................          59           --         --
   Severance and related costs............          18           --        163
                                             ---------     --------    -------
      Cost of revenues....................   $   1,577     $     --    $ 2,443
                                             =========     ========    =======

 Charges for:
   Severance and related costs............   $      77     $     --    $   670
                                             ---------     --------    -------
      Research and development............   $      77     $     --    $   670
                                             =========     ========    =======

 Charges for:
   Severance and related costs............   $   1,328     $     --    $ 2,382
   Facility closure.......................         171           --        286
   Unused restructuring reserve...........         --            --        (78)
                                             ---------     --------    -------
      Selling, general and administrative.   $   1,499     $     --    $ 2,590
                                             =========     ========    =======

    During the fourth quarter of fiscal 2003, we adopted a plan to consolidate
our probe development activities into our Chestnut Ridge, New York facility. In
connection with this plan, we closed our Beaverton, Oregon facility and recorded
lease termination costs of $0.3 million and a charge for severance of $0.6
million ($0.1 million of which was recorded in cost of revenues, $0.6 million
was recorded in selling, general and administrative expense and $0.2 million was
recorded in research and development expense). The implementation of this plan
resulted in headcount reductions of 27 employees or approximately 7% of the
workforce as compared to June 30, 2002. Final payments for severance under this
plan occurred in the fourth quarter of fiscal 2004.

     During the first quarter of fiscal 2003, we adopted a plan to scale down
fixed infrastructure due to the difficult economic environment and to implement
new management operating systems designed to improve processes in sales, order
management, customer relationship management and financial performance
management. In connection with the adoption of this plan, we recorded a charge
for severance and other related expenses in the first quarter of fiscal 2003 of
$2.6 million ($2.1 million was recorded in selling, general and administrative
expense and $0.5 million was recorded in research and development expense). The
plan implemented during fiscal 2003 resulted in improved operating efficiencies
and headcount reductions of 38 employees or approximately 9% of the workforce as
compared to June 30, 2002.

                                       26
<PAGE>

    As of June 30, 2005, all but $48,000 of the accrued amounts for severance
and related costs and plant closure costs related to the first quarter of fiscal
2003 restructuring has been paid. This remaining amount will be paid by the end
of the second quarter of fiscal 2006. The majority of payments was for severance
and was paid as follows: $2.2 million, $0.8 million and $0.2 million in fiscal
2003, 2004 and 2005, respectively. Additionally, on November 8, 2004 we entered
into a Lease Termination Agreement and made a final payment of approximately
$0.1 million releasing us from any future rental obligations under the
Beaverton, Oregon facility lease. This amount had been previously accrued.

    Also during fiscal 2003, we recorded a $2.1 million charge for the
impairment of technology, manufacturing and distribution rights and a $0.2
million charge for a related future royalty payment. The impairment resulted
from our strategic decision to exit certain older product lines and to make
significant changes to our manufacturing strategy to improve further our
operating efficiency. We estimated the fair value of the impaired asset based on
the present value of forecasted future cash inflows using a discount rate
commensurate with our weighted average cost of capital. In addition, we reversed
$0.1 million of unused fiscal 2002 restructuring reserves to selling, general
and administrative expense. No similar charges were incurred in fiscal 2004.

    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, 2005, approximately $0.4
million of severance has been paid and approximately $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 second quarter of fiscal 2007.

    Additionally, during the fourth quarter of 2005, we realigned some 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 includes lease termination costs and
asset write-downs (of which $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, 2005, approximately $0.4 million of
severance has been paid and $0.1 million of facility charges have been paid in
cash or written off and approximately $0.5 million remains in Accrued expenses
and other current liabilities on the Consolidated Balance Sheet.

    Finally, in 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 write-off of a technology asset.

    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 accounting principles generally accepted in the
United States of America. 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, and the disclosure
of contingent assets and liabilities at the date of the consolidated financial
statements and the reported revenues and expenses during the period. 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:


                                       27
<PAGE>

    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 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. 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 Statement of
Financial Accounting Standards 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 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 its protocol analyzer products,
the Company recognizes revenue on the sale of these products in accordance with
SOP 97-2 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 the Company ships 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.

    Allowance for Doubtful Accounts. 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. The allowance for doubtful accounts, which includes the allowance for
anticipated returns, was approximately $0.4 million at June 30, 2005 and June
30, 2004. 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 $1.1 million and $2.5 million at June 30, 2005 and 2004, respectively. If
actual market conditions are less favorable than those projected by management,
additional inventory allowances for excess or obsolete inventory may be
required.


                                       28
<PAGE>

    Deferred Tax Assets. We have recorded $14.4 million of net deferred tax
assets as of June 30, 2005 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 $0.4 million as of June 30, 2005 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. The cost of technology,
manufacturing and distribution rights acquired is amortized primarily on the
basis of the higher of units shipped over the contract periods or on a
straight-line basis not to exceed five years. We assess the recoverability of
our long-lived assets and intangible assets with finite lives (including
technology, manufacturing and distribution rights) whenever events or changes in
circumstances indicate that the carrying values may not be recoverable. When
such events or changes in circumstances occur, we assess the recoverability of
long-lived assets by determining whether the carrying values of such assets will
be recovered through undiscounted expected future cash flows. Management
estimates the undiscounted cash flows of these rights on the basis of actual and
forecasted production units as well as the average selling price and standard
costs of the related products after the amortization of the rights to determine
profitability. If required, an impairment charge is recorded as described below.
If the undiscounted cash flows are less than the carrying amounts, an impairment
loss is recorded to the extent that the carrying amounts exceed the fair value.
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. 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 2005 after completion of our annual financial operating
plan and determined that there was no impairment to our recorded goodwill
balance of $78.8 million at June 30, 2005. We use a fair value-based test using
our market capitalization to estimate the Company's fair value. There were no
impairment indicators during the fiscal year ended June 30, 2005.


    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. The expected failure 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, 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 and $1.2 million at June 30, 2005 and 2004, respectively. Management
believes that the warranty reserve is appropriate; however, actual claims
incurred could differ from the original estimates, requiring adjustments to the
reserve.



                                       29
<PAGE>


    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,
                                                                 -----------------------
                                                                 2005     2004      2003
                                                                 ----     ----      ----
<S>                                                             <C>      <C>      <C>
Revenues:
  Test and measurement products (1).........................     94.8%    93.9%    91.1%
  Service and other (1).....................................      5.2      6.1      8.9
                                                                -----    -----    -----
     Total revenues.........................................    100.0    100.0    100.0
Cost of revenues............................................     44.6     42.1     47.3
                                                                -----    -----    -----
     Gross profit...........................................     55.4     57.9     52.7

Operating expenses:
  Selling, general and administrative.......................     34.8     35.2     38.4
  Legal settlement..........................................      0.6        -        -
  Research and development..................................     17.0     12.6     16.9
                                                                -----    -----    -----
     Total operating expenses...............................     52.4     47.8     55.3

Operating income (loss).....................................      3.0     10.1     (2.6)

  Interest income...........................................      0.3      0.6      0.8
  Interest expense..........................................     (1.7)    (0.6)    (0.6)
  Other, net................................................      0.2      0.0     (0.3)
                                                                -----    -----    -----
     Other (expense) income, net............................     (1.2)     0.0     (0.1)
                                                                -----    -----    -----
Income (loss) from continuing operations before
  income taxes..............................................      1.8     10.1     (2.7)
(Provision for) benefit from income taxes...................     (0.5)    (3.8)     1.0
                                                                -----    -----    -----
Income (loss) from continuing operations ...................      1.3      6.3     (1.7)
Gain from discontinued operations, net of tax...............       --      0.1      0.1
                                                                -----    -----    -----
Net income (loss)...........................................      1.3      6.4     (1.6)
Charges related to convertible preferred stock..............       --      6.1      1.9
                                                                -----    -----    -----
Net income (loss) applicable to common stockholders.........      1.3%     0.3%    (3.5)%
                                                                =====    =====    =====
</TABLE>

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

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. 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
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 is
included as product revenue. Service and other revenue in each of fiscal 2005
and 2004 also 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 ("SAB 101"), "Revenue Recognition in Financial
Statements," as of the beginning of fiscal 2001.


                                       30
<PAGE>

    Foreign currency fluctuations contributed approximately $3.9 million to the
increase in total revenues during fiscal 2005 as compared to fiscal 2004. Our
geographic breakdown of revenues by area in total dollars and as a percentage of
total revenues is as follows:

<TABLE>
<CAPTION>
                                 YEAR ENDED JUNE 30,                                    YEAR ENDED JUNE 30,
(IN THOUSANDS)                    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 is 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. We expect the sales of these products to have a more significant
favorable effect on our overall gross margins in future periods.

    Selling, general and administrative ("SG&A") expense, including legal
settlement expense of $1.0 million increased 32.5%, or $14.3 million, from $44.0
million in fiscal 2004 to $58.3 million in fiscal 2005. Approximately 18.8% 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 is $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. In fiscal 2006, we expect selling,
general and administrative expense will increase when compared to fiscal 2005
due to increased variable selling costs on higher forecasted revenues, increased
non-cash compensation expense associated with employee stock compensation under
the newly-implemented rules of SFAS 123R, which require not only expense
recognition of restricted stock compensation, as we are currently doing, but
also, recognition of the fair value of Employee Stock Purchase Plans and the
fair value of fixed award stock options, which previously were only reported on
a pro forma basis, and the full year impact from the Merger on selling, general
and administrative expenses.

    Legal settlement expense for the year ended June 30, 2005 is 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. In fiscal 2006, we intend to continue to invest a substantial


                                       31
<PAGE>

percentage of our revenues into R&D. We periodically expect to introduce new
products that address customer needs for solutions in a variety of market
sectors. We believe that our advanced hardware and software technologies
incorporated into our core products can be adapted to address additional sectors
of the large and diverse Test and Measurement market where we have not
historically focused. For example, early in fiscal 2006, we plan to launch the
industry's first protocol solution for wireless USB, providing us with a
first-mover advantage with this next-generation protocol standard. During the
year we expect to introduce a real-time oscilloscope with bandwidths much higher
than any offering currently available, and a PCI Express Generation 2 Protocol
Solution.

    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 the current
year comprised primarily interest expense of approximately $2.7 million,
compared to approximately $0.7 million last year, which increase is due to the
interest on the $50.0 million Term Loan outstanding under our current Credit
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 have 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.

COMPARISON OF FISCAL YEARS 2004 AND 2003

    Total revenues were $124.9 million in fiscal 2004 compared to $107.9 million
in fiscal 2003, an increase of 15.8%, or $17.0 million. Revenues from Test and
measurement products increased 19.3%, or $19.0 million, in fiscal 2004. This
increase in revenues was primarily due to a 23% increase in total oscilloscope
units shipped due to increased customer demand and to higher average selling
prices, the combined effect of which contributed $16.7 million to the increase,
and a $3.1 million increase in sales of probes and accessories. This increase in
revenues was partially offset by a $2.6 million decrease in sales of
discontinued product lines, distributed products and components.



                                       32
<PAGE>

     Service and other revenues consist primarily of service revenue and license
and maintenance fees. Service and other revenues decreased by 19.8%, or $1.9
million, to $7.7 million in fiscal 2004 from $9.6 million in fiscal 2003. We did
not recognize any software license revenue during fiscal 2004 compared to fiscal
2003 when we recognized a $3.0 million license of our proprietary MAUI
Instrument Operating System technology. In fiscal 2005, based on management's
review and analysis of the then current classification of service kits, we
reclassified $3.9 million and $3.3 million in service kit revenue in fiscal
years ended June 30, 2004 and 2003, respectively, from service revenue to
product revenue. This reclassification has no effect on total revenues or
results of operations and was made for these years in order to conform to fiscal
2005 presentation. Service and other revenue in each of fiscal 2004 and 2003
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 ("SAB 101"), "Revenue Recognition in Financial Statements," as of the
beginning of fiscal 2001.

    Foreign currency fluctuations contributed approximately $4.5 million to the
increase in total revenues during fiscal 2004 as compared to fiscal 2003. Our
geographic breakdown of revenues by area in total dollars and as a percentage of
total revenues is as follows:

<TABLE>
<CAPTION>
                                 YEAR ENDED JUNE 30,                                    YEAR ENDED JUNE 30,
(IN THOUSANDS)                    2004        2003                                       2004       2003
                                --------    --------                                   --------    ------
<S>                            <C>         <C>                                         <C>       <C>
North America(1).............   $   38,926  $   32,394     North America(1)........       31.2%     30.0%
Europe / Middle East.........       37,716      31,171     Europe / Middle East....       30.2      28.9
Japan(1).....................       20,024      17,038     Japan(1)................       16.0      15.8
Asia / Pacific(1)............       28,274      27,256     Asia / Pacific(1).......       22.6      25.3
                                    ------  ----------                                   -----     ------
  Total revenues.............   $  124,940  $  107,859       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 was 57.9% in fiscal 2004 compared to 52.7% in fiscal 2003.
Included in cost of revenues in fiscal 2003 is a $2.1 million charge for the
impairment of technology, manufacturing and distribution rights, a $0.2 million
charge for a future royalty payment and a $0.1 million charge for severance
expense. The impairment and royalty cost resulted from our strategic decision to
exit certain older product lines and to make significant changes to our
manufacturing strategy to improve operating efficiency. Additionally, included
in gross profit in fiscal 2003 was the positive effect of the $3.0 million in
license revenues included in service and other revenues on the Consolidated
Statement of Operations. The increase in gross profit in fiscal 2004 was
primarily due to higher profits and higher average selling prices on our
high-performance WaveMaster and mid-performance WaveRunner oscilloscopes, lower
manufacturing costs resulting from continued improvements in operational
efficiency, positive impact of foreign currency fluctuations on revenues while
cost of revenues are predominately in U.S. dollars, restructuring savings of
$0.4 million and the ongoing benefit of our shift to a direct sales model in
China and Singapore.

    Selling, general and administrative expense increased by 6.3%, or $2.6
million, from $41.4 million in fiscal 2003 to $44.0 million in fiscal 2004.
Selling, general and administrative expense in fiscal 2003 includes $2.4 million
of severance charges and $0.3 million of plant closing costs partially offset by
the reversal of an unused 2002 restructuring reserve of $0.1 million. This
increase was primarily due to increased variable selling costs related to higher
revenues and the impact of foreign currencies, certain legal and compliance
expenses and expenses related to performance bonuses that were suspended in the
first three quarters of fiscal 2003 due to the weakness in the technology sector
of the economy and in LeCroy sales. Selling costs increased by $3.8 million and
general and administrative costs increased by $1.4 million, net of restructuring
savings of approximately $3.5 million, partially offset by the decrease in net
restructuring charges of $2.6 million in fiscal 2004 compared to the same period
in the prior year. As a percentage of total revenues, selling, general and
administrative expense declined to 35.2% in fiscal 2004, compared with 38.4% in
fiscal 2003. This decrease as a percentage of total revenues was primarily due
to our ability to leverage selling infrastructure over the increased revenues in
fiscal 2004.


                                       33
<PAGE>

    Research and development expense decreased by 13.7%, or $2.5 million, from
$18.2 million in fiscal 2003 to $15.8 million in fiscal 2004. The decrease was
primarily due to cost savings realized from the consolidation of our probe
development activities into our Chestnut Ridge, New York facility at the end of
the fourth quarter of fiscal 2003, the full benefit of cost reduction
initiatives taken in fiscal 2003 of approximately $1.7 million, a $0.7 million
charge for severance in fiscal 2003 and the timing of certain project specific
engineering expenses. As a percentage of total revenues, research and
development expense decreased from 16.9% in fiscal 2003 to 12.7% in fiscal 2004,
which reflects our ability to leverage expenses over the higher sales base in
fiscal 2004.

    Other (expense) income, net, which consists primarily of net interest income
and foreign exchange gains or losses, was an expense of $11,000 and $84,000 in
fiscal 2004 and fiscal 2003, respectively. Included in other (expense) income,
net in fiscal 2004, was $0.4 million in transaction costs related to the
repurchase of our redeemable convertible preferred stock and interest expense
due to borrowings under our revolving line of credit, partially offset by
foreign exchange gains of $0.3 million on transactions denominated in other than
our functional currency or that of our subsidiaries. In fiscal 2003, foreign
exchange losses of $0.4 million were partially offset by net interest income of
$0.2 million.

    In fiscal 2004, we recorded a tax provision of $4.7 million, compared to a
tax benefit of $1.1 million in fiscal 2003. The Company's effective tax rate was
37.0% in fiscal 2004 and fiscal 2003.

    In fiscal 2004 and 2003, we recorded $0.1 million gains 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. In addition, the gain on sale of discontinued operations in
fiscal 2003 includes the sale of the residual assets and business of Digitech
Industries, Inc.

    On September 27, 2003, we repurchased all 500,000 issued and outstanding
shares of our redeemable convertible preferred stock from the Holders for $23.0
million. 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.

    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.

    In fiscal 2003, charges related to our redeemable convertible preferred
stock, comprising the dividend on the preferred stock and the accretion for the
value of fully exercisable warrants granted in connection with the private
placement of the preferred stock, were $2.1 million.

LIQUIDITY AND CAPITAL RESOURCES

    Cash and cash equivalents at June 30, 2005 were approximately $13.9 million,
compared to cash, cash equivalents and marketable securities of approximately
$38.1 million at June 30, 2004. In connection with the Merger, we spent $80.4
million, net of $46.5 million of cash acquired, comprising $30.4 million of our
cash and $50.0 million of borrowings under the Credit Agreement.

    Net cash provided by operating activities for the year ended June 30, 2005
was $12.7 million, compared to $20.3 million for the year ended June 30, 2004.
The $7.6 million decrease was attributable primarily to a $4.7 million net use
of cash in operating assets and liabilities resulting from strategic investments
in inventory in fiscal 2005, compared to a net cash inflow of $3.0 million from
operating assets and liabilities in fiscal 2004. Net cash generated from net
income as adjusted for non-cash items in 2005 was approximately the same as
2004. Net income decreased by $5.9 million which effect was offset primarily
by the following changes year over year in non-cash adjustments:


                                       34
<PAGE>

     o    IPR&D charge of $2.2 million resulting from the CATC acquisition;

     o    impairment of intangible asset charge of $1.5 million;

     o    increase in the amortization of equity-based compensation of $3.8
          million;

     o    increase in depreciation and amortization of $1.9 million; all
          partially offset by

     o    a $3.9 million decrease in the cash flow effect of deferred income
          taxes.

    The net investment in working capital of $4.7 million for the year ended
June 30, 2005, was driven mainly by strategic investments in inventory primarily
due to the acquisition of a substantial quantity of parts in anticipation of the
launch of the WaveExpert product line which officially launched in April 2005.

    Net cash (used in) investing activities was ($74.6) million in fiscal 2005
compared to ($16.6) million in fiscal 2004. This increase was primarily due to
the investment of $80.4 million, net of acquired cash, for the acquisition of
CATC, partially offset by the liquidation of $9.5 million of investments to
partially fund such acquisition (See "CATC Acquisition" in this Management's
Discussion and Analysis of Financial Condition and Results of Operations above).

    Net cash generated by financing activities was approximately $46.9 million
for the year ended June 30, 2005, compared to net cash used of approximately
$6.2 million for the same period last year. This increase in net cash generated
by financing activities was primarily due to $50.0 million of borrowings under
the Credit Agreement used in connection with the Merger net of issuance costs of
$1.4 million and the repayment of borrowings and capital lease obligations of
$5.7 million in the current fiscal year compared to the use of $23.0 million in
the comparable prior year period to repurchase our preferred stock.

    On April 14, 2004, we closed an underwritten public follow-on offering of
500,000 shares of our 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. We granted the underwriters an
option to purchase up to an additional 225,000 shares of common stock included
in the offering to cover over-allotments, if any, within 30 days of the closing.
On April 27, 2004, pursuant to the exercise of this over-allotment option, we
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, we used proceeds from this offering to repay $4.0 million of
indebtedness outstanding under our revolving credit facility.

    We have a $2.0 million capital lease line of credit to fund certain capital
expenditures. As of June 30, 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 Sheet. This line
of credit expires November 2005 and outstanding borrowings thereunder bear
interest at an annual rate of 12.2%.

    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"), which
replaced our existing credit facility with The Bank of New York that was entered
into on October 11, 2000 and subsequently amended. BNY Capital Markets, Inc.
acted as sole lead arranger and sole book runner in connection with syndicating
the credit facility. The terms of the Credit Agreement provide 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 swingline loan
subfacility and a $1.0 million letter of credit subfacility. 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 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, 2005, there were no outstanding borrowings
against the Revolver.

    Borrowings under the Credit Agreement 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.

                                       35
<PAGE>

    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, 2005, 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, 2005, we have repaid $5.6 million of the principal balance of this
loan.

    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 life of the Credit Agreement using the effective interest
method for the Term Loan and the straight-line method for the Revolver.
Transaction fees of approximately $87,000 from the previously amended credit
facility were charged to interest expense for the three months ended December
31, 2004. At June 30, 2005, unamortized fees of $0.4 million were included in
Other current assets, and $0.7 million were included in Other non-current assets
on the Consolidated Balance Sheets.

    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, 2005). No
amounts were outstanding under these facilities as of June 30, 2005. 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, 2005). As of June 30,
2005, there were no amounts outstanding under this facility.

    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.

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 and Term Loan as set forth in the table below
(in thousands):

<TABLE>
<CAPTION>
                                                            PAYMENTS DUE BY PERIOD AS OF JUNE 30, 2005
                                                     ---------------------------------------------------------
                                                                LESS THAN                          MORE THAN 5
                                                       TOTAL     1 YEAR     1-3 YEARS  3-5 YEARS      YEARS
                                                     --------   ---------   ---------  ---------   -----------
                                                                          (IN THOUSANDS)

<S>                                                  <C>        <C>         <C>        <C>         <C>
   Capital lease - equipment...................      $     89   $     89    $     --   $    --     $     --
   Capital lease - technology rights...........         1,025        442         583        --           --
   Realignment charges - severance.............           722        666          56        --           --
   Operating lease obligations.................         5,537      1,922       2,832       683          100
   Commitments to contract suppliers...........           837        837          --        --           --
   Term Loan obligations.......................        44,375      8,125      20,000    16,250           --
                                                     --------   --------      ------   -------     --------
     Total.....................................      $ 52,585   $ 12,081    $ 23,471   $16,933     $    100
                                                     ========   ========    ========   =======     ========
</TABLE>

     Commitments to contract suppliers. We purchase components 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 November 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4" ("SFAS
No. 51"). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing," to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of
ARB 43, Chapter 4, previously stated that ". . . under some circumstances, items
such as idle facility expense, excessive spoilage, double freight, and


                                       36
<PAGE>

rehandling costs may be so abnormal as to require treatment as current period
charges. . . ." SFAS No. 151 requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of "so
abnormal." In addition, SFAS No. 151 requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity
of the production facilities. The provisions of SFAS No. 151 will apply to
inventory costs beginning in fiscal year 2007. We are currently assessing the
impact of the adoption of SFAS No. 151 on our results of operations and
financial condition.

    In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an Amendment of APB Opinion No. 29" ("SFAS No. 153"). The guidance in
Accounting Principles Board ("APB") Opinion No. 29, "Accounting for Nonmonetary
Transactions," is based on the principle that exchanges of nonmonetary assets
should be measured based on the fair value of the assets exchanged. The guidance
in APB Opinion No. 29, however, included certain exceptions to that principle.
SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. The provisions of SFAS No. 153 will be applied prospectively to
nonmonetary asset exchange transactions in fiscal year 2006. We are currently
assessing the impact of the adoption of SFAS No. 153 on our results of
operations and financial condition.


    In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based
Payment" ("SFAS No. 123R"). This new pronouncement requires compensation cost
relating to share-based payment transactions be recognized in financial
statements. That cost will be measured based on the fair value of the equity or
liability instruments issued. SFAS No. 123R covers a wide range of share-based
compensation arrangements including stock options, restricted stock plans,
performance-based awards, stock appreciation rights, and employee stock purchase
plans. SFAS No. 123R replaces SFAS No. 123, "Accounting for Stock-Based
Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued
to Employees." SFAS No. 123, as originally issued in 1995, established as
preferable a fair-value-based method of accounting for share-based payment
transactions with employees. However, SFAS No. 123 permitted entities to
continue to apply the guidance in APB Opinion No. 25, as long as the footnotes
to financial statements disclosed what net income would have been had the
preferable fair-value-based method been used. LeCroy will be required to adopt
the provisions of SFAS No. 123R in the first quarter of fiscal year 2006.
Management is currently evaluating the requirements of SFAS No. 123R. The
adoption of SFAS No. 123R is expected to have a material effect on the
consolidated financial statements of LeCroy. See Note 1, Summary of Significant
Accounting Policies - Stock-Based Compensation to the Consolidated Financial
Statements for the pro forma impact on net income (loss) applicable to common
stockholders and net income (loss) per share applicable to common stockholders
from calculating stock-related compensation cost under the fair value
alternative of SFAS No. 123. However, the calculation of compensation cost for
share-based payment transactions after the effective date of SFAS No. 123R may
be different from the calculation of compensation cost under SFAS No. 123.

    In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections," ("SFAS No. 154") which is effective for the Company for reporting
changes in accounting principles beginning fiscal year 2007. SFAS No. 154
changes the reporting of a change in accounting principle to require
retrospective 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 No. 154
becomes effective.

    In June 2005, the FASB issued FASB Staff Position ("FSP") 143-1, "Accounting
for Electronic Equipment Waste Obligations." This 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. This 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. Management is
currently evaluating the impact of FSP 143-1.



                                       37
<PAGE>

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.
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.

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.



                                       38
<PAGE>


     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;

     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    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 DO NOT CONTINUE TO IMPROVE 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, 2005, we had
recorded $14.4 million of net deferred tax assets related to the future tax
benefit of certain expenses reported for financial statement purposes that have
not yet been deducted on our tax returns. Realization of our net deferred tax
assets is dependent on our ability to generate future taxable income. As of June
30, 2005, we had recorded a valuation allowance of $350,000 to reserve for those
deferred tax assets we believe are not likely 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 net 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.



                                       39
<PAGE>

     WE FACE RISKS FROM FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCY 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
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, 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 or
liabilities 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 as a result of mismatches between local currency
revenues and expenses, the translation of foreign currencies into the U.S.
dollar, our financial reporting currency, or otherwise, 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;


                                       40
<PAGE>

     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
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 most 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.



                                       41
<PAGE>

     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. We are engaged in intellectual property litigation. 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.

     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. 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.


                                       42
<PAGE>

     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 $25.0 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 to 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;

     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 $75.0 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 segment 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.


                                       43
<PAGE>

     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.

     BEGINNING IN JULY 2005, WE WILL BE REQUIRED TO EXPENSE THE FAIR VALUE OF
     STOCK OPTIONS GRANTED UNDER OUR EMPLOYEE STOCK PLANS AND OUR NET INCOME AND
     EARNINGS PER SHARE WILL BE SIGNIFICANTLY REDUCED AS A RESULT.

    In December 2004, the FASB, issued SFAS No. 123 (Revised 2004) entitled
"Share-Based Payment" ("SFAS 123R"), an amendment of FASB Statements No. 123 and
No. 95," requiring companies to expense the fair value of all employee
equity-based awards granted, modified or settled. SFAS 123R will be effective
for us in our 2006 fiscal year commencing July 2005 and accordingly, will
require any options and stock awards issued or vesting on or after that date and
shares issued under our employee stock purchase plan to be recognized as
compensation expense. Currently, we record compensation expense using the
intrinsic value method in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations,
for option grants that have an exercise price below fair value. The adoption of
SFAS 123R is expected to have a material effect on our consolidated financial
statements from the calculation of compensation cost under APB No. 25.
However, the calculation of compensation cost for share-based payment
transactions after the effective date of SFAS 123R may be different from the
calculation of pro forma compensation cost under SFAS 123, but such differences
have not yet been quantified.

     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 $75.0 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. We expect that
existing cash and cash equivalents, cash provided from operations, and
borrowings pursuant to our credit facility will be sufficient to meet ongoing
cash requirements, including debt service requirements. Failure to generate
sufficient cash or 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 AND OUTSTANDING WARRANTS 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. In addition, we also have warrants outstanding to purchase shares
of our common stock. Our stockholders will incur dilution upon exercise of any
outstanding stock options or warrants. 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.




                                       44
<PAGE>

    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.

    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
lead 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
and could materially harm our business. Additionally, it is unclear what
additional laws or regulations may develop, and we cannot predict the ultimate
impact of any future changes.


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 under Item 3, "Legal
Proceedings," of Part I of this Form 10-K.

     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




                                       45
<PAGE>

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.

     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 on 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 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 a product line due to implementation concerns. In August 2000, we
divested our Vigilant Networks, Inc. subsidiary because, while its technology
was potentially viable, the additional capital investment required for its
commercial success was judged to be too high. 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' development 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 timely, customers may defer placing orders in anticipation
of future releases or 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.

     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




                                       46
<PAGE>

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.

     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 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.

    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 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 in
accordance with SFAS No. 133, "Accounting for Derivative Investments and Hedging
Activities" ("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 as a result of mismatches between local currency
revenues and expenses, the translation of foreign currencies into the U.S.
dollar, our financial reporting currency, or otherwise, will not adversely
affect our results of operations. Moreover, fluctuations in exchange rates could
affect the demand for our products.



                                       47
<PAGE>

    During fiscal 2005, 2004 and 2003, foreign currency exchange gains (losses)
on assets or liabilities denominated in other than their functional currencies,
net of gains (losses) on related foreign exchange contracts, were $0.2 million,
$0.3 million, and ($0.4) 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, $0.5 million and $0.1
million in fiscal 2005, 2004 and 2003, respectively. At June 30, 2005 and 2004,
the notional amounts of the Company's open foreign exchange forward contracts,
all with maturities of less than six months, were approximately $9.8 million and
$8.2 million, respectively.

     We performed a sensitivity analysis for the fourth quarter of fiscal 2005
assuming a hypothetical 10% adverse change in foreign currency exchange rates on
our foreign exchange forward contracts and our assets or 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 and cash equivalents as well as our $75.0 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. Please refer to Note 13 - Debt for specifics related to our credit
facility.

    As required by the terms of the Credit Agreement (See Note 13 - Debt), 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 - Debt), 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 Credit
Agreement. 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 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 with respect to the original amortization schedule
as set forth in the Credit Agreement. The net interest expense incurred on the
swap during the year ended June 30, 2005 was approximately $0.1 million. The
notional amount as of June 30, 2005 was approximately $23.1 million. The fair
value of the interest rate swap as of June 30, 2005, is approximately $66,000
and approximates the amount that we would have received from M&T Bank if the
Company had canceled the transaction at June 30, 2005. The fair value is
recorded in Other current assets in the Consolidated Balance Sheet as of June
30, 2005 and Other, net in the Consolidated Statement of Operations for the year
ended June 30, 2005. This interest rate swap does not qualify for hedge
accounting in accordance with SFAS No. 133, "Accounting for Derivative
Investments and Hedging Activities" ("SFAS No. 133").






                                       48
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                               LECROY CORPORATION
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>

<S>                                                                                                             <C>
Report of Independent Registered Public Accounting Firm.....................................................    50

Consolidated Balance Sheets as of June 30, 2005 and 2004....................................................    51

Consolidated Statements of Operations for the years ended June 30, 2005, 2004 and 2003......................    52

Consolidated Statements of Stockholders' Equity for the years ended June 30, 2005, 2004 and 2003............    53

Consolidated Statements of Cash Flows for the years ended June 30, 2005, 2004 and 2003......................    54

Notes to Consolidated Financial Statements..................................................................    55

Financial Statement Schedule -- Valuation and Qualifying Accounts for the years ended June 30, 2005,
2004 and 2003...............................................................................................    83

</TABLE>




                                       49
<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, 2005 and 2004, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended June 30, 2005. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule II. 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, 2005 and 2004, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 2005, 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, 2005, 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 14, 2005 expressed an
unqualified opinion on management's assessment of, and the effective operation
of, internal control over financial reporting. This report includes an
explanatory paragraph that states that management excluded from its assessment
of the effectiveness of LeCroy Corporation and subsidiaries' internal control
over financial reporting as of June 30, 2005, Computer Access Technology
Corporation's internal control over financial reporting associated with total
assets of $4.8 million and total revenues of $17.6 million included in the
consolidated financial statements of LeCroy Corporation and subsidiaries as of
and for the year ended June 30, 2005, and that our audit of internal control
over financial reporting of LeCroy Corporation and subsidiaries also excluded an
evaluation of the internal control over financial reporting of Computer Access
Technology Corporation, an acquired business.

/s/ KPMG LLP

Short Hills, New Jersey
September 14, 2005








                                       50
<PAGE>


                               LECROY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA)
<TABLE>
<CAPTION>
                                                                                                    JUNE 30,
                                                                                               2005          2004
                                                                                           ------------  --------
                                     ASSETS
<S>                                                                                       <C>           <C>
Current assets:
  Cash and cash equivalents...........................................................     $    13,866   $    28,566
  Marketable securities...............................................................              --         9,534
  Accounts receivable, net of reserves of $380 and $436 at
     June 30, 2005 and 2004, respectively.............................................          28,275        24,675
  Inventories, net....................................................................          27,661        21,978
  Other current assets................................................................          12,681        11,921
                                                                                           -----------   -----------
          Total current assets........................................................          82,483        96,674

Property and equipment, net...........................................................          19,078        19,778
Goodwill..............................................................................          78,848         1,874
Other non-current assets..............................................................          12,759        11,467
                                                                                           -----------   -----------
          Total assets................................................................     $   193,168   $   129,793
                                                                                           ===========   ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable....................................................................     $    14,806   $    12,097
  Accrued expenses and other current liabilities......................................          14,642        14,554
  Current portion of long-term debt and capital leases................................           8,656           107
                                                                                           -----------   -----------
          Total current liabilities...................................................          38,104        26,758

Long-term debt........................................................................          36,833            89
Deferred revenue and other non-current liabilities....................................           1,413         1,338
                                                                                           -----------   -----------
          Total liabilities...........................................................          76,350        28,185

Commitments and contingencies

Redeemable convertible preferred stock, $.01 par value (authorized 5,000,000 shares
  of preferred stock; none issued and outstanding at June 30, 2005 and June 30, 2004).              --            --

Stockholders' equity:
  Common stock, $.01 par value (authorized 45,000,000 shares; 12,634,233 and 11,973,830
   shares issued and outstanding at June 30, 2005 and 2004, respectively).............             127           120
  Additional paid-in capital..........................................................         113,229        98,421
  Warrants to purchase common stock...................................................           2,165         2,165
  Accumulated other comprehensive income..............................................             779           434
  Deferred stock compensation.........................................................          (8,602)       (6,509)
  Retained earnings...................................................................           9,120         6,977
                                                                                           -----------   -----------
          Total stockholders' equity..................................................         116,818       101,608
                                                                                           -----------   -----------
          Total liabilities and stockholders' equity..................................     $   193,168   $   129,793
                                                                                           ===========   ===========
</TABLE>


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




                                       51
<PAGE>


                               LECROY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                                       YEARS ENDED JUNE 30,
                                                                                2005          2004           2003
                                                                            ------------  ------------   -----------
                                                                             (53 Weeks)    (52 Weeks)     (52 Weeks)
Revenues:
<S>                                                                        <C>           <C>            <C>
  Test and measurement products.......................................      $   156,440   $   117,290    $    98,281
  Service and other...................................................            8,538         7,650          9,578
                                                                            -----------   -----------    -----------
     Total revenues...................................................          164,978       124,940        107,859

Cost of revenues......................................................           73,632        52,594         50,989
                                                                            -----------   -----------    -----------
     Gross profit.....................................................           91,346        72,346         56,870
                                                                            -----------   -----------    -----------
Operating expenses:
 Selling, general and administrative..................................           57,341        43,997         41,422
 Legal settlement.....................................................            1,000            --             --
 Research and development.............................................           28,050        15,760         18,226
                                                                            -----------   -----------    -----------
     Total operating expenses.........................................           86,391        59,757         59,648
                                                                            -----------   -----------    -----------

Operating income (loss)...............................................            4,955        12,589         (2,778)

Other (expense) income:
 Interest income......................................................              564           716            912
 Interest expense.....................................................           (2,742)         (720)          (675)
 Other, net...........................................................              238            (7)          (321)
                                                                            -----------   ------------   ------------
    Other (expense) income, net.......................................           (1,940)          (11)           (84)
                                                                            -----------   -----------    -----------
Income (loss) from continuing operations before income taxes..........            3,015        12,578         (2,862)
 (Provision for) benefit from income taxes............................             (872)       (4,653)         1,059
                                                                            ------------  ------------   -----------
Income (loss) from continuing operations..............................            2,143         7,925         (1,803)

Discontinued operations:
  Gain on sale, net of provision for income taxes of
    $0, $70 and $75 in 2005, 2004 and 2003, respectively..............               --           119            129
                                                                            ------------   -----------    -----------
Net income (loss).....................................................            2,143         8,044         (1,674)

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

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

Net income (loss) per common share - diluted:
  Income (loss) from continuing operations applicable to
  common stockholders.................................................      $      0.17   $      0.02    $     (0.37)
  Gain from discontinued operations...................................               --          0.01           0.01
  Net income (loss) applicable to common stockholders.................             0.17          0.03          (0.36)

Weighted average number of common shares:
  Basic...............................................................           11,774        10,754         10,364
  Diluted.............................................................           12,258        11,074         10,364
</TABLE>

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




                                       52
<PAGE>


                               LECROY CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                             ACCUMULATED
                                                                               OTHER                       RETAINED
                                    COMMON STOCK       COMMON    ADDITIONAL COMPREHENSIVE    DEFERRED      EARNINGS
                                ------------------     STOCK      PAID-IN      INCOME         STOCK      (ACCUMULATED
                                 SHARES     AMOUNT    WARRANTS    CAPITAL      (LOSS)      COMPENSATION     DEFICIT)       TOTAL
                                --------    ------    --------   ---------  -------------  ------------  ------------    --------
<S>                             <C>         <C>       <C>       <C>        <C>              <C>           <C>           <C>
Balance at June 30, 2002.......  10,323      $ 103     $ 2,165   $ 81,279   $   (3,695)      $      --     $   1,653     $ 81,505

Comprehensive income:
  Net loss.....................      --         --          --         --           --              --        (1,674)      (1,674)
  Foreign currency translation.      --         --          --         --        2,097              --            --        2,097
                                                                                                                         --------
Total comprehensive income.....                                                                                               423
                                                                                                                         --------

Exercise of stock options and
  employee stock purchases.....      90          1          --        618           --              --            --          619
Amortization of employee stock
   compensation................      --         --          --         36           --              --            --           36
Charges related to convertible
  preferred stock..............      --         --          --     (2,069)          --              --            --       (2,069)
                                 ------    -------   ---------   --------    ---------       ---------     ---------     --------
Balance at June 30, 2003.......  10,413        104       2,165     79,864       (1,598)             --           (21)      80,514

Comprehensive income:
  Net income...................      --         --          --         --           --              --         8,044        8,044
  Foreign currency translation.      --         --          --         --        2,052              --            --        2,052
  Unrealized loss on marketable
    securities, (net of tax
    benefit of $12)............      --         --          --         --          (20)             --            --          (20)
                                                                                                                         ---------
Total comprehensive income.....                                                                                            10,076
                                                                                                                         --------

Public sale of common stock, net    725          7          --     11,997           --              --            --       12,004
Exercise of stock options and
   employee stock purchases....     471          5          --      5,374           --              --            --        5,379
Issuance of restricted stock to
  employees....................     365          4          --      6,570           --          (6,574)           --           --
Amortization of employee stock
    compensation...............      --         --          --         23           --              65            --           88
Tax benefit from exercise of
  stock options................      --         --          --      1,212           --              --            --        1,212
Redemption of convertible
  preferred stock..............      --         --          --     (6,619)          --              --        (1,046)      (7,665)
                                 ------    -------   ---------   --------    ---------       ---------     ---------     --------
Balance at June 30, 2004.......  11,974        120       2,165     98,421          434          (6,509)        6,977      101,608

Comprehensive income:
  Net income...................      --         --          --          --          --              --         2,143        2,143
  Foreign currency translation.      --         --          --          --         325              --            --          325
  Reclassification adjustment
   for loss on marketable
   securities included in net
   income, (net of tax
   benefit of $12) ............      --         --          --          --          20              --            --           20
                                                                                                                         --------
Total comprehensive income.....                                                                                             2,488
                                                                                                                         --------

Additional direct costs related
 to public sale of common stock,
 net...........................      --         --          --          (7)          --              --           --           (7)
Exercise of stock options and
  employee stock purchases.....     394          4          --       4,589           --              --           --        4,593
Modification of director stock
 option grants.................      --         --          --          64           --              --           --           64
Issuance of restricted stock to
 employees.....................     182          2          --       2,939           --          (2,941)          --           --
Forfeitures of restricted stock
 for terminated employees......      (2)        --          --         (24)          --              19           --           (5)
Issuance of vested restricted
 stock to employees in lieu of
 cash bonus....................      86          1          --       1,205           --              --           --        1,206
Issuance of LeCroy stock options
  in Merger    ................      --         --          --       3,166           --              --           --        3,166
Assumption of unvested options
  in Merger ....................     --         --          --       1,945           --          (1,945)          --           --
Reversal of deferred stock
 compensation on assumed unvested
 options for terminated employees    --         --          --        (126)          --             126            --          --
Amortization of employee stock
 compensation..................      --         --          --          --           --           2,648            --       2,648
Tax benefit from exercise of
 stock options.................      --         --          --       1,057           --              --            --       1,057
                                 ------     ------    --------    --------     --------       ---------      --------    --------
Balance at June 30, 2005.......  12,634     $  127    $  2,165    $113,229     $    779       $ (8,602)      $  9,120    $116,818
                                 ======     ======    ========    ========     ========       =========      ========    ========
</TABLE>

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




                                       53
<PAGE>


                               LECROY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                        YEARS ENDED JUNE 30,
                                                                               -------------------------------------
                                                                                   2005         2004         2003
                                                                               -----------  -----------  -----------
<S>                                                                            <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)......................................................      $    2,143   $    8,044   $   (1,674)
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
    Write-off of acquired in-process research and development............           2,190           --           --
     Depreciation and amortization.......................................           8,241        6,366        6,716
    Stock-based compensation.............................................           3,913           88           36
    Amortization of debt issuance costs..................................             370           28           --
     Deferred income taxes...............................................            (921)       2,963       (1,674)
     Impairment of intangible assets.....................................           1,500           --        2,030
     Recognition of deferred license revenue.............................          (1,296)      (1,296)      (1,296)
     Loss on disposals of property and equipment, net....................             194          124           52
     Tax benefit from exercise of stock options..........................           1,057        1,212           --
     Gain on sale of discontinued operations.............................              --         (189)        (204)
    Gross profit on non-cash transactions................................              --         (132)          --
  Change in operating asset and liabilities:
     Accounts receivable.................................................          (1,435)      (3,265)       4,082
     Inventories.........................................................          (3,669)       3,421        3,582
     Other current and non-current assets................................             447         (649)         490
     Accounts payable, accrued expenses and other liabilities............             (11)       3,535       (5,457)
                                                                               ----------   ----------   ----------
Net cash provided by operating activities................................          12,723       20,250        6,683
                                                                               ----------   ----------   ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment.....................................          (3,687)      (5,845)      (2,633)
  Business acquisition costs, net of acquired cash.......................         (80,363)           --          --
  Purchase of marketable securities......................................              --       (9,566)          --
  Purchase of intangible assets..........................................            (100)      (1,800)      (1,260)
  Proceeds from the sale of marketable securities........................           9,534            --          --
  Proceeds from the sale of property and equipment.......................              --          584           --
                                                                               ----------   ----------   ----------
Net cash used in investing activities....................................         (74,616)     (16,627)      (3,893)
                                                                               ----------    ---------   ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under line of credit........................................          50,000       10,000           --
  Repayment of borrowings under line of credit and capital leases........          (6,038)     (10,096)         (85)
  Debt issuance costs....................................................          (1,378)          --           --
  Proceeds from issuance of common stock, net of direct costs............              --       12,004           --
  Payment related to issuance of common stock............................              (7)          --           --
  Redemption of convertible preferred stock..............................              --      (23,000)          --
  Payment of seller-financed intangible assets...........................            (250)        (500)          --
  Proceeds from employee stock purchase and option plans.................           4,593        5,379          619
                                                                               ----------   ----------   ----------
Net cash provided by (used in) financing activities......................          46,920       (6,213)         534
                                                                               ----------   -----------  ----------

Effect of exchange rate changes on cash..................................             273          305          205
                                                                               ----------   ----------   ----------
  Net (decrease) increase in cash and cash equivalents...................         (14,700)      (2,285)       3,529
  Cash and cash equivalents, beginning of year...........................          28,566       30,851       27,322
                                                                               ----------   ----------   ----------
  Cash and cash equivalents, end of year.................................      $   13,866   $   28,566   $   30,851
                                                                               ==========   ==========   ==========

Supplemental Cash Flow Disclosure Cash paid during the year for:
     Interest............................................................      $    1,984   $      190   $      104
     Income taxes........................................................           1,215          249          816
  Non-cash transactions:
    Acquisition of seller-financed intangible assets.....................           1,331           --          750
    Issuance of LeCroy stock options for business acquisition............           3,166           --           --
    Acquisition of intangible asset and equipment in exchange for
    oscilloscopes........................................................              --          167           --
    Acquisition of distributor in exchange for amounts due to the Company              --           --          300
</TABLE>

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



                                       54
<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), and others. The Company's products are sold into a broad
range of end markets, including the 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, allowance for doubtful accounts, allowance for excess and
obsolete inventory, deferred tax assets, valuation of long-lived and intangible
assets, goodwill 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 2,
2005, June 26, 2004 and June 28, 2003). Fiscal year 2005 represented a 53-week
period and each of fiscal years 2004 and 2003 represented a 52-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.




                                       55
<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 read-only memory 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.

     Software license revenue. The Company recognizes software license revenue
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").

     Due to the significant software content of its protocol analyzer products,
the Company recognizes revenue on the sale of these products in accordance with
SOP 97-2 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 the Company ships 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.

     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.

     In the third quarter of fiscal 2003, the Company perpetually licensed its
proprietary MAUI Instrument Operating System technology and recognized $3.0
million of license revenue included in Service and other revenue in the
Consolidated Statement of Operations. Maintenance fees (post-contract support or
"PCS") were included in the agreement and are recognized pro rata for each year
of maintenance purchased. The only two elements in this agreement were the
license and the PCS. The Company did not recognize any perpetual software
license revenue during fiscal 2005 or 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 records deferred revenue for extended warranty contracts, software
maintenance agreements and calibrations included within the sales contract
agreement. This deferred revenue is then recognized 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 recognize revenue when
the criteria for revenue recognition have been met for each element.




                                       56
<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 Statement of Financial Accounting Standards
("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 is now being recognized upon shipment to the
distributor, rather than upon the sale of the unit by the distributor to the end
user.

     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 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 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 over 5.5 years, the remaining terms of the license
agreements. The Company recognized pretax license fee revenue of $1.3 million
during fiscal years 2005, 2004 and 2003. Such license fees were included in
Service and other revenue in the Consolidated Statements of Operations. As of
June 30, 2005, the remaining deferred license fees balance was $0.7 million
which is reflected in Accrued expenses and other current liabilities in the
accompanying Consolidated Balance Sheets.

   STOCK - BASED COMPENSATION

    The Company accounts for stock-based compensation plans 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.

    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").
In connection with the Merger, LeCroy assumed CATC's 2000 Stock Option/Stock
Issuance Plan, Special 2000 Stock Option Plan, 2000 Stock Incentive Plan and
1994 Stock Option Plan (collectively, the "CATC Stock 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 Financial Accounting Standards Board ("FASB") Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation,"
("FIN 44") the 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, and the fair value of the new awards were included in the purchase
price. The intrinsic value related to the unvested awards was allocated to
deferred stock compensation and will be recognized as compensation expense over
the remaining future vesting periods. For the year ended June 30, 2005, $0.3
million, net of tax, was charged as compensation expense in the Consolidated
Statements of Operations related to the assumed options.

    Other than the compensation expenses recognized for the CATC Stock Plans as
described in the preceding paragraph, and approximately $64,000 of expense
related to the modification of certain stock option grants to extend the time
period for directors, upon their departure from the Board of Directors, to
exercise their vested stock options, no compensation expense related to stock
option plans is reflected in the Company's Consolidated Statements of
Operations, as all options other than the CATC Stock Plans granted under those
plans had an exercise price equal to the market value of the underlying common



                                       57
<PAGE>

stock on the date of grant. Compensation cost for restricted stock is recorded
based on its market value on the date of grant and is included in the Company's
Consolidated Statements of Operations ratably over the vesting period. Upon the
grant of restricted stock, deferred stock compensation is recorded as an offset
to additional paid-in capital and is amortized on a straight-line basis as
compensation expense over the vesting period.

    The following table illustrates the effect on net income (loss) and net
income (loss) per common share applicable to common stockholders as if the
Company had applied the fair value recognition provisions for stock-based
employee compensation of SFAS No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123") as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure" (in thousands, except per
share data).

<TABLE>
<CAPTION>
                                                                                         YEARS ENDED JUNE 30,
                                                                               --------------------------------------
                                                                                  2005          2004         2003
                                                                               ----------   ----------    -----------
<S>                                                                            <C>          <C>           <C>
Net income (loss), as reported...........................................      $    2,143   $    8,044    $    (1,674)
Add: stock-based compensation expense included in reported
  net income (loss), net of income taxes.................................           2,547           55             24
Deduct: stock-based compensation expense determined under
  fair value-based method for all awards, net of income taxes............          (4,928)      (2,901)        (3,061)
                                                                               ----------   ----------    -----------
Pro forma net income (loss)..............................................            (238)       5,198         (4,711)

Charges related to convertible preferred stock...........................              --        7,665          2,069
                                                                               -----------   ----------   -----------
Pro forma net loss applicable to common stockholders.....................      $     (238)  $   (2,467)   $    (6,780)
                                                                               ==========   ==========    ===========

Net income (loss) per common share applicable to common stockholders:
  Basic, as reported.....................................................      $    0.18    $    0.04     $     (0.36)
  Diluted, as reported...................................................      $    0.17    $    0.03     $     (0.36)
  Basic, pro forma.......................................................      $   (0.02)   $   (0.23)    $     (0.65)
  Diluted, pro forma.....................................................      $   (0.02)   $   (0.23)    $     (0.65)
</TABLE>

    The fair value of the options granted during fiscal year 2005, 2004 and 2003
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions:
<TABLE>
<CAPTION>
                                                                                        YEARS ENDED JUNE 30,
                                                                                  2005          2004         2003
                                                                               ----------   ------------  -------
<S>                                                                            <C>          <C>           <C>
Expected holding period (years)..........................................          3.9           4.5         4.7
Risk-free interest rate .................................................          3.41%         3.37%       2.84%
Dividend yield...........................................................          0.0%          0.0%        0.0%
Expected volatility......................................................         51.2%         69.0%       71.4%
Fair value of options granted............................................         $8.95         $9.79       $6.16
</TABLE>


    For purposes of pro forma disclosures, the estimated fair value of the
options granted is amortized to expense on a straight-line basis over the option
vesting periods.

   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." Estimated future warranty obligations related to
products are provided by charges to operations in the period that the related
revenue is recognized. These estimates are derived from historical data of
product reliability. 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 operations.



                                       58
<PAGE>


   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 $3.1
million, $2.2 million and $2.1 million for the fiscal years ended June 30, 2005,
2004 and 2003, 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, 2005, 2004 and 2003 was $2.7
million, $2.3 million and $2.4 million, respectively.

   RESEARCH AND DEVELOPMENT

    Research and development costs are expensed as incurred.

   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.

   MARKETABLE SECURITIES

    The Company's investments in debt securities are classified as
available-for-sale and are reported at fair value based on quoted market prices.
Unrealized gains and losses, net of taxes, are reported as accumulated other
comprehensive income (loss), a component of stockholders' equity. Realized gains
and losses on investments are included in Other, net on the Consolidated
Statements of Operations when realized. Management had the ability and intent,
if necessary, to liquidate any of these investments as of June 30, 2004 in order
to meet its liquidity needs within the normal operating cycle. Accordingly, all
investments in debt securities are classified as current assets as of June 30,
2004. As of June 30, 2005, the Company had no investments in marketable
securities.

   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.....................      2-12 years
   Computer software and hardware.........................       2-7 years

   INVENTORIES

    Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

   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




                                       59
<PAGE>

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
consolidated statements of operations. There were no other impairment indicators
for other long-lived assets during the fiscal year ended June 30, 2005.

   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 2005 and determined that there was no impairment to its recorded
goodwill balance of $78.8 million at June 30, 2005. There were no impairment
indicators during the fiscal year ended June 30, 2005.

   CONCENTRATION OF CREDIT RISK

    The Company develops, manufactures, sells and licenses high-performance
oscilloscopes, serial data analyzers and global communication protocol test
solutions. The Company's products are sold into a broad range of end markets,
including the computer and semiconductor, data storage devices, automotive and
industrial, and military and aerospace markets. Sales are to all regions of the
United States as well as to 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 2005, 2004 and 2003.

    Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of foreign exchange forward
contracts, interest rate swaps and short-term deposits in the United States and
Europe with major banks with investment levels and debt ratings set to limit
exposure with any one institution.

   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.

   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,
which is 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.





                                       60
<PAGE>

   FINANCIAL INSTRUMENTS

     Cash and cash equivalents, marketable securities, 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 is included within Current portion of
long-term debt and capital leases and Long term debt totaling $44.4 million.
Borrowings under the Term Loan have variable rates and the carrying amount of
the Term Loan is considered by management to be a reasonable estimate of its
fair value.

     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 M&T Bank effective January 31, 2005 and continuing through January 31,
2008, corresponding with the repayment terms of the $75.0 million 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 No. 133, "Accounting for Derivative Investments and Hedging Activities," as
amended ("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. As of June 30, 2005 and 2004, the fair value of the
foreign exchange forward contracts is approximately $0.1 million and $49,000,
respectively.

    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, 2005 and June 30, 2004,
the notional amounts of the Company's open foreign exchange forward contracts,
all with maturities of less than six months, were approximately $9.8 million and
$8.2 million, respectively.

    The notional amount of the interest rate swap as of June 30, 2005 was
approximately $23.1 million, and the fair value of the interest rate swap as of
June 30, 2005, is $66,000 and approximates the amount that the Company would
have received from M&T Bank if the Company had canceled the transaction at June
30, 2005.

   DERIVATIVE INSTRUMENTS

    The Company accounts for derivatives and hedging activities in accordance
with 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, 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.

   COMPREHENSIVE INCOME

    Comprehensive income comprises net income (loss), 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 November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4" ("SFAS 51"). SFAS 151 amends the guidance in
ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted





                                       61
<PAGE>

material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that
". . . under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges. . . ." SFAS 151 requires that those items
be recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal." In addition, SFAS 151 requires that allocation of
fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of SFAS 151 will apply to
inventory costs beginning in fiscal year 2007. The Company is currently
assessing the impact of the adoption of SFAS 151 on its results of operations
and financial condition.

    In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an Amendment of APB Opinion No. 29" ("SFAS 153"). The guidance in APB
Opinion No. 29, "Accounting for Nonmonetary Transactions," ("APB 29") is based
on the principle that exchanges of nonmonetary assets should be measured based
on the fair value of the assets exchanged. The guidance in APB 29, however,
included certain exceptions to that principle. SFAS 153 amends APB 29 to
eliminate the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The provisions of SFAS 153 will be
applied prospectively to nonmonetary asset exchange transactions in fiscal year
2006. The Company is currently assessing the impact of the adoption of SFAS 153
on its results of operations and financial condition.

    In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based
Payment" ("SFAS 123R"). This new pronouncement requires compensation cost
relating to share-based payment transactions to be recognized in financial
statements. That cost will be measured based on the fair value of the equity or
liability instruments issued. SFAS 123R covers a wide range of share-based
compensation arrangements including stock options, restricted stock plans,
performance-based awards, stock appreciation rights and employee stock purchase
plans. SFAS 123R replaces SFAS 123 and supersedes APB 25. SFAS 123, as
originally issued in 1995, established as preferable a fair-value-based method
of accounting for share-based payment transactions with employees. However, SFAS
123 permitted entities to continue to apply the guidance in APB 25, as long as
the footnotes to financial statements disclosed what net income would have been
had the preferable fair-value-based method been used. LeCroy will be required to
adopt the provisions of SFAS 123R in the first quarter of fiscal 2006.
Management is currently evaluating the requirements of SFAS 123R. The adoption
of SFAS 123R is expected to have a material effect on the consolidated financial
statements of LeCroy. See Stock Based Compensation paragraph within this note
for the pro forma impact on net income (loss) and net income (loss) per common
share from calculating stock-related compensation cost under the fair value
alternative of SFAS 123. However, the calculation of compensation cost for
share-based payment transactions after the effective date of SFAS 123R may be
different from the calculation of pro forma compensation cost under SFAS 123,
but such differences have not yet been quantified.

    In May 2005, the 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 for correction of errors beginning fiscal year
2007. SFAS 154 changes the reporting of a change in accounting principle to
require retrospective 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.

     In June 2005, the FASB issued FASB Staff Position ("FSP") 143-1,
"Accounting for Electronic Equipment Waste Obligations." This 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. This 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. Management is currently evaluating the impact of FSP 143-1.

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





                                       62
<PAGE>

CATC, with CATC surviving as a wholly-owned subsidiary of LeCroy. 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 profits 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, in accordance
with 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 "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 will be charged as compensation expense to operations on
a straight-line basis as earned by employees over their remaining vesting
periods. 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 (the "Credit Agreement"). (See Note 13 -
Debt). The Merger consideration is summarized below (in thousands):



   Cash for shares..........................................$  120,242
   Cash for options and ESPP purchase rights................     3,965
   Fair value of stock options assumed......................     5,111
   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
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 based
on estimated selling prices less direct costs to sell and a reasonable 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 was 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 2005, the Company reduced its CATC goodwill
by $2 million as a result of reversing the valuation allowance against the CATC
deferred tax assets and a reversal of a pre-acquisition contingency reserve. The
purchase price allocation is summarized below (in thousands):





                                       63
<PAGE>

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                                                   76,974
Current liabilities assumed                                (5,420)
Long-term liabilities assumed                                (652)
                                                       ----------
Total purchase price                                   $  129,995
                                                       ==========

    The following table presents the details of the amortizable intangible
assets acquired in the Merger and their carrying value as of June 30, 2005:

<TABLE>
<CAPTION>

                                        WEIGHTED           ACCUMULATED
                                     AVERAGE LIVES  COST  AMORTIZATION    NET
                                    --------------  ----  ------------  ------
<S>                                    <C>         <C>       <C>        <C>
   Amortizable intangible assets:
       Purchased technology........    2.0 years   $3,080    $1,178     $1,901
       Purchased tradename.........    1.0 year        70        47         23
       Purchased purchase orders...    0.2 years       90        90         --
                                                   ------    ------     ------
     Total intangibles purchased...                $3,240    $1,315     $1,924
                                                   ======    ======     ======
</TABLE>

    Amortization expense for intangible assets acquired in the Merger was $1.3
million for the year ended June 30, 2005. Amortization expense for the
intangible assets acquired in the Merger has been recorded in the Consolidated
Statements of Operations as follows:

                                                   YEAR ENDED
                                                     JUNE 30,
                                                      2005
                                                 --------------
                                                 (IN THOUSANDS)
   Cost of revenues..........................      $   1,268
   General and administrative expense........             47
                                                   ---------
      Total..................................      $   1,315
                                                   =========

    The amortization expense of intangible assets acquired in the Merger for
future years is expected to be as follows:

                                       AMOUNT
                                        (IN
                    FISCAL YEAR      THOUSANDS)
                    -----------      ----------
                       2006           $1,339
                       2007              585
                                      ------
                                      $1,924
                                      ======

    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 is included in Research and development
expense in the Consolidated Statements of Operations.

    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.





                                       64
<PAGE>

<TABLE>
<CAPTION>

                                                                     YEAR ENDED JUNE 30,
                                                                       2005       2004
                                                                     --------   --------
                                                                    (IN THOUSANDS, EXCEPT
                                                                       PER SHARE DATA)
<S>                                                                 <C>        <C>
Revenues........................................................     $170,002   $142,613
Income (loss) from continuing operations before non-recurring
  charges directly attributable to the Merger applicable to
  common stockholders...........................................     $  1,189    ($3,058)
Income (loss) from continuing operations applicable to common
  shareholders per share before non-recurring charges directly
  attributable to the Merger - basic............................     $   0.10     ($0.28)
Income (loss) from continuing operations applicable to common
  shareholders per share before non-recurring charges directly
  attributable to the Merger - diluted..........................     $   0.10     ($0.28)

</TABLE>

    The write-off of IPR&D 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.

    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 response to the continued economic downturn in 2003, the Company took
steps to change its manufacturing strategy, discontinue older product lines and
reduce its operating expenses in an effort to position the Company's business
better for the long term. In the second quarter of fiscal 2005, in connection
with the Merger, the Company took steps to change its organization as well as
implement a change in its low to mid-range oscilloscope manufacturing strategy.
Additionally, in the fourth quarter of fiscal 2005 the Company experienced a
decline in test and measurement product orders and responded by taking action to
better align its overseas operations, reducing headcount and closing two
offices. The resultant charges taken to accomplish these efforts were:

                                                    FISCAL YEAR ENDED
                                            ---------------------------------
                                               2005         2004        2003
                                            ---------     -------     -------
                                                       (IN THOUSANDS)
Charges for:
  Impaired intangible assets.............   $   1,500     $     --     $ 2,280
  Service center closure.................          59           --          --
  Severance and related costs............          18           --         163
                                            ---------     --------     -------
     Cost of revenues....................   $   1,577     $     --     $ 2,443
                                            =========    =========     =======

Charges for:
  Severance and related costs............   $      77     $     --     $   670
                                            ---------     --------     -------
     Research and development............   $      77     $     --     $   670
                                            =========     ========     =======

Charges for:
  Severance and related costs............   $   1,328     $     --     $ 2,382
  Plant closure..........................         171           --         286
  Unused restructuring reserve...........         --            --         (78)
                                            ---------     --------     -------
     Selling, general and administrative.   $   1,499     $     --     $ 2,590
                                            =========     ========     =======





                                       65

<PAGE>

    During the fourth quarter of fiscal 2003, the Company adopted a plan to
consolidate its probe development activities into its Chestnut Ridge, New York
facility. In connection with this plan, the Company closed its Beaverton, Oregon
facility and recorded lease termination costs of $0.3 million and a charge for
severance of $0.6 million ($0.1 million of which was recorded in cost of
revenues, $0.6 million was recorded in selling, general and administrative
expense and $0.2 million was recorded in research and development expense). The
implementation of this plan resulted in headcount reductions of 27 employees or
approximately 7% of the workforce as compared to June 30, 2002. Final payments
for severance under this plan occurred in the fourth quarter of fiscal 2004.

    During the first quarter of fiscal 2003, the Company adopted a plan to scale
down fixed infrastructure due to the difficult economic environment and to
implement new management operating systems designed to improve processes in
sales, order management, customer relationship management and financial
performance management. In connection with the adoption of this plan, the
Company recorded a charge for severance and other related expenses in the first
quarter of fiscal 2003 of $2.6 million ($2.1 million of which was recorded in
selling, general and administrative expense and $0.5 million which was recorded
in research and development expense). The plan implemented during fiscal 2003
resulted in improved operating efficiencies and headcount reductions of 38
employees or approximately 9% of the workforce as compared to June 30, 2002.

    As of June 30, 2005, all but $48,000 of the accrued amounts for severance
and related costs and plant closure costs related to the first quarter of fiscal
2003 restructuring has been paid. This remaining amount will be paid by the end
of the second quarter of fiscal 2006. The majority of the payments was for
severance and was paid as follows: $2.2 million, $0.8 million and $0.2 million
in fiscal 2003, 2004 and 2005, respectively. Additionally, on November 8, 2004
the Company entered into a Lease Termination Agreement and made a final payment
of approximately $0.1 million releasing the Company of any future rental
obligations under the Beaverton, Oregon facility lease. This amount had been
previously accrued.

    Also during fiscal 2003, the Company recorded a $2.1 million charge for the
impairment of technology, manufacturing and distribution rights and a $0.2
million charge for a related future royalty payment. The impairment resulted
from the Company's strategic decision to exit certain older product lines and to
make significant changes to its manufacturing strategy to improve further the
Company's operating efficiency. The Company estimated the fair value of the
impaired asset based on the present value of forecasted future cash inflows
using a discount rate commensurate with its weighted average cost of capital. In
addition, the Company credited $0.1 million of unused fiscal 2002 restructuring
reserves to selling, general and administrative expense.

    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 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, 2005,
approximately $0.4 million of severance has been paid and approximately $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 second quarter of fiscal 2007.

     Additionally, during the fourth quarter of 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 plant closure expenses which includes lease termination costs
and asset write-downs. As of June 30, 2005, approximately $0.4 million of
severance has been paid and $0.1 million of facility charges have been paid in
cash or written off and approximately $0.5 million remains in Accrued expenses
and other current liabilities on the Consolidated Balance Sheet.

    Finally, in 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 write-off of an intangible
asset.





                                       66
<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 connection with the sale, the Company issued warrants to purchase 200,000
shares of LeCroy Common Stock at $10.05 per share to the buyer. Using the
Black-Scholes option pricing model, these warrants, which are no longer
outstanding, were valued at approximately $1.3 million. After deducting the
value of these warrants, along with fees and certain retained liabilities, the
Company recorded a loss of ($0.6) million, net of a $0.3 million income tax
benefit, on the sale and discontinuance of the Vigilant Networks business
segment. This includes a $1.4 million adjustment to the loss recorded in the
fourth quarter of fiscal 2001 due to changes in estimates.

    In fiscal 2004 and 2003, the Company recorded $0.1 million of gains 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. In addition, the gain on sale of discontinued operations in
fiscal 2003 includes the sale of the residual assets and business of Digitech.
As of June 30, 2005, the Company has accrued discontinued operations reserves of
$0.2 million due to environmental matters at Digitech's previously leased
facilities (See Note 21- Commitments and Contingencies).

5.  ACCOUNTS RECEIVABLE, NET

    The Company has agreements with two of its customers, who are also vendors,
that provide the Company with the legal right to offset outstanding accounts
receivable balances against outstanding accounts payable balances. At June 30,
2005 and 2004, the Company netted approximately $2.3 million and $0.6 million,
respectively, of accounts receivable against accounts payable on the
Consolidated Balance Sheets related to these agreements.

    The allowance for doubtful accounts was approximately $0.4 million as of
June 30, 2005 and June 30, 2004, and is entirely related to trade accounts
receivables.

6.       INVENTORIES

    Inventories, including demonstration units in finished goods, are stated at
the lower of cost (first-in, first-out method) or market. Inventories consist of
the following (in thousands):
                                                       JUNE 30,
                                               ----------------------
                                                  2005        2004
                                               ----------  ----------
   Raw materials.........................      $    9,857  $    6,617
   Work in process.......................           3,425       4,544
   Finished goods........................          14,379      10,817
                                               ----------  ----------
                                               $   27,661  $   21,978
                                               ==========  ==========

    The value of demonstration units included in finished goods was $10.8
million and $8.0 million at June 30, 2005 and 2004, 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 $1.1 million and $2.5 million at June 30, 2005 and 2004,
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, 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.





                                       67
<PAGE>

7.  OTHER CURRENT ASSETS

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

                                                      June 30,
                                               ----------------------
                                                  2005        2004
                                               ----------  ----------
   Deferred tax assets, net..............      $    9,000  $    7,400
   Other receivables.....................             456         511
   Prepaid probes and accessories........             195         818
   Value-added tax.......................             565         595
   Other.................................           2,465       2,597
                                               ----------  ----------
                                               $   12,681  $   11,921
                                               ==========  ==========


8.  PROPERTY AND EQUIPMENT, NET

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

                                                       JUNE 30,
                                              -------------------------
                                                  2005           2004
                                              ------------  -----------
   Land, building and improvements.......     $    15,494   $    14,640
   Furniture, machinery and equipment....          28,638        25,073
   Computer software and hardware........          15,712        17,637
                                              -----------   -----------
                                                   59,844        57,350
   Less: Accumulated depreciation and
       amortization......................         (40,766)      (37,572)
                                              -----------   -----------
                                              $    19,078   $    19,778
                                              ===========   ===========

    Depreciation and amortization expense for the fiscal years ended June 30,
2005, 2004 and 2003 was $5.1 million, $5.0 million and $4.7 million,
respectively.

9.  GOODWILL AND OTHER NON-CURRENT ASSETS

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

                                                    JUNE 30,
                                             -----------------------
                                                 2005         2004
                                             ----------   ----------
   Goodwill..............................    $   78,848   $    1,874
                                             ==========   ==========

   Intangibles, net......................    $    5,783   $    5,802
   Deferred tax assets, net..............         5,446        4,771
   Other.................................         1,530          894
                                             ----------   ----------
                                             $   12,759   $   11,467
                                             ==========   ==========

    Under SFAS No. 142 "Goodwill and Other Intangible Assets," ("SFAS 142")
goodwill is not amortized but reviewed for impairment annually or more
frequently if certain indicators arise. The fiscal 2005 increase in Goodwill is
attributable to the CATC acquisition (See Note 2 - CATC Acquisition). In
addition, the Company completed the annual impairment test required under SFAS
142 during the fourth quarter of fiscal 2005 and determined that there was no
impairment to the recorded goodwill balances. No impairment indicators arose
during the year ended June 30, 2005.

    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:

<TABLE>
<CAPTION>

                                                                            JUNE 30,
                                                        WEIGHTED    -----------------------
                                                      AVERAGE LIVES    2005         2004
                                                      ------------- ----------   ----------
Amortizable intangible assets (in thousands):         (AS OF JUNE
                                                       30, 2005)
<S>                                                    <C>          <C>          <C>
  Technology, manufacturing and distribution rights... 3.8 years    $   11,737   $    8,897
  Patents and other intangible assets................. 3.4 years         1,073          661
  Effect of currency translation on intangible assets.                       -          148
  Accumulated amortization............................                  (7,027)      (3,904)
                                                                    ----------   ----------
Net carrying amount...................................              $    5,783   $    5,802
                                                                    ==========   ==========
</TABLE>





                                       68
<PAGE>

     During the year ended June 30, 2005, the Company entered into capital lease
agreements for approximately $1.0 million for the use of electronic design
automation software and a license for approximately $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 have an
amortization 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, 2005, is $0.9 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 $3.1
million, $1.4 million and $2.0 million for fiscal 2005, 2004 and 2003,
respectively. The cost of technology, manufacturing and distribution rights
acquired is amortized primarily on the basis of the higher of units shipped over
the contract periods through June 2008 or on a straight-line basis. Management
estimates intangible assets amortization expense on a straight-line basis in
fiscal 2006 through 2009 will approximate $2.6 million, $1.8 million, $1.0
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,
                                                         ----------------------
                                                            2005        2004
                                                         ----------  ----------
    Compensation and benefits..........................  $    5,279  $    5,022
    Income taxes.......................................       3,046       2,938
    Deferred license fee revenue, current portion......         665       1,296
    Warranty...........................................         971       1,247
    Deferred revenue, current portion..................       1,049       1,606
    Retained liabilities from discontinued operations..         160         160
    Other current liabilities..........................       3,472       2,285
                                                         ----------  ----------
                                                         $   14,642  $   14,554
                                                         ==========  ==========

11.  WARRANTIES AND GUARANTEES

    The Company provides a warranty on its products, typically extending three
years after delivery. Estimated future warranty obligations related to products
are provided by charges to operations in the period that the related revenue is
recognized. These estimates are derived from historical data of product
reliability. The expected failure rate is arrived at in terms of units, which
are then converted into labor hours to which an average 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
operations.

    The following table is a reconciliation of the changes in the Company's
aggregate product warranty liability during the years ended June 30, 2005, 2004
and 2003 (in thousands):

                                                              JUNE 30,
                                                     2005       2004     2003
                                                  ----------  --------  ------
Balance at beginning of year......................   $1,247    $1,235   $1,247
  Warranty accrual acquired in CATC acquisition ..      105         -        -
  Accruals for warranties issued during the year..    1,319     1,366    1,160
  Warranty costs incurred during the year.........   (1,700)   (1,354)  (1,172)
                                                     ------    ------   -------
Balance at end of year............................     $971    $1,247   $1,235
                                                     ======    ======   ======





                                       69
<PAGE>

    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 recent new 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,
2005, 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 when a loss becomes
probable and estimable. To date, there have been no claims under such
indemnification provisions.

12.  INCOME TAXES

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

                                                       YEARS ENDED
                                         ------------------------------------
                                                       JUNE 30,
                                            2005         2004          2003
                                         ----------  ----------    ----------
    Domestic............................ $      142  $   10,546    $   (2,750)
    Foreign.............................      2,873       2,032          (112)
                                         ----------  ----------    ----------
                                         $    3,015  $   12,578    $   (2,862)
                                         ==========  ==========    ==========

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

                                                      YEARS ENDED
                                         ------------------------------------
                                                      JUNE 30,
                                            2005        2004          2003
                                         ----------  ----------    ---------
    Current:
      U.S. federal...................... $    (105)  $     (36)    $      --
      U.S. state and local..............      (161)       (133)          (93)
      Foreign...........................      (945)       (421)         (596)
    Deferred:
      U.S. federal......................        89      (3,554)        1,613
      U.S. state and local..............         9        (313)          135
      Foreign...........................       241        (196)           --
                                         ---------   ---------     ---------
                                         $    (872)  $  (4,653)    $   1,059
                                         =========   =========     =========

    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):

<TABLE>
<CAPTION>
                                                                         YEARS ENDED
                                                            -----------------------------------
                                                                         JUNE 30,
                                                               2005        2004          2003
                                                            ----------  ----------    ---------
<S>                                                         <C>         <C>           <C>
(Provision) benefit at U.S. federal statutory rate......... $  (1,055)  $  (4,402)    $   1,002
(Increase) reduction to statutory tax from:
  Difference between U.S. and foreign rates................       302         317          (336)
  Non-deductible purchased in-process research technology..      (767)         --            --
  Adjustment of net deferred tax assets....................    (4,181)         40           524
  State income taxes, net of federal benefit...............      (114)       (389)          (61)
  (Increase) decrease in valuation allowance...............     4,954        (218)         (145)
  Other, net...............................................       (11)         (1)           75
                                                            ----------  ---------     ---------
Income tax (provision) benefit............................. $    (872)  $  (4,653)    $   1,059
                                                            =========   =========     =========
</TABLE>

    Significant components of the Company's net deferred tax assets as of June
30, 2005 and 2004 were as follows (in thousands):





                                       70
<PAGE>

                                                               JUNE 30,
                                                       -----------------------
Deferred tax assets:                                       2005         2004
                                                       -----------    --------
   U.S. net operating loss carryforwards.............  $    4,763   $    6,478
   Acquired U.S. net operating loss carryforwards....       2,026           --
   Foreign net operating loss carryforwards..........         176          352
   Tax credit carryforwards..........................       2,073        6,239
   Inventory reserves................................         311          796
   Deferred revenue..................................         547        1,045
   Stock-based compensation..........................         885           24
   Accrued compensation/benefits.....................         616          214
   Deferred research expenses........................       5,204        3,004
   Other reserves....................................       1,949        1,953
                                                       ----------   ----------
     Deferred tax assets before valuation allowance..      18,550       20,105
   Valuation allowance...............................        (350)      (5,304)
                                                       ----------   ----------
      Deferred tax assets after valuation allowance..      18,200       14,801
                                                       ----------   ----------

Deferred tax liabilities:
   Unrepatriated funds ..............................      (1,622)      (1,622)
   Depreciation and amortization.....................      (1,590)        (885)
   Other.............................................        (542)        (123)
                                                       ----------   ----------
   Deferred tax liabilities..........................      (3,754)      (2,630)
                                                       ----------   ----------
       Net deferred tax assets.......................  $   14,446   $   12,171
                                                       ==========   ==========

    At June 30, 2005 and 2004, $9.0 million and $7.4 million, respectively, of
the Company's net deferred tax assets were included on the Consolidated Balance
Sheets in Other current assets, with the remaining $5.4 million and $4.8
million, respectively, included in Other non-current assets.

    The Company is required to recognize all or a portion of its net 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 net deferred tax assets
will be realized. Management assesses the realizability of the net 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, including the fact that the losses generated from the Company's
discontinued operations, as well as certain non-recurring restructuring charges,
principally resulted in the Company's cumulative net operating loss for
financial reporting purposes. Management believes that the actions taken to
improve the Company's operating performance, including the acquisition of CATC,
will result in future projected operating profits. Moreover, certain tax
strategies are available, which include the ability to capitalize research and
development expenditures, that could be implemented, if necessary, to supplement
income from operations to fully realize the net recorded tax benefits before
their expiration. Other factors considered include the Company's current
utilization of net operating loss carryforwards as well as management's
projection that, as a result of the past cost-cutting initiatives and new
product offerings, the Company fully expects to utilize the net operating loss
carryforwards in the next couple of years, well before the initial expiration
period in fiscal 2020.

      As a result of CATC's operating profits since acquisition and it's
projected operating results, during the fourth quarter of fiscal 2005 the
Company reversed the valuation allowance of $2.4 million resulting from the
Company's acquisition of CATC. This reversal resulted in a decrease in goodwill.
A valuation allowance has been established 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 these
deductible differences, net of the valuation allowance. 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. 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.





                                       71
<PAGE>


    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. 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.

    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 $4.0
million and $25.6 million at June 30, 2005 and 2004, 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, 2005, the Company has U.S. net operating loss carryforwards of
approximately $13.9 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 2020 through 2023. Foreign tax net
operating losses of approximately $0.6 million at June 30, 2005 are available to
offset future taxable income of certain foreign subsidiaries. These foreign
losses do not have an expiration period. The Company has approximately $0.6
million of foreign tax credits, $1.7 million of state tax credits, $1.2 million
of acquired state tax credits, $3.7 million of federal general business credits,
$0.9 million of acquired federal general business credits, and $0.3 million of
alternative minimum tax credits available to offset future payments of income
taxes. The foreign, state and federal general tax credits expire at various
dates between 2006 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 that was entered into on October 11, 2000 and subsequently amended. BNY
Capital Markets, Inc. acted as sole lead arranger and sole book runner in
connection with syndicating the credit facility. 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 have been 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, 2005, the
Company has not borrowed against the Revolver.




                                       72
<PAGE>

    Borrowings under the Credit Agreement 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.

    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, 2005, 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, 2005, the Company has repaid $5.6 million of the principal balance
of this loan. The remaining outstanding balance to be repaid annually is
approximately $8.1 million, $9.4 million, $10.6 million, $11.9 million and $4.4
million for the years ended June 2006, 2007, 2008, 2009 and 2010, respectively.

    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 life of the Credit Agreement using the effective
interest method for the Term Loan and the straight-line method for the Revolver.
Transaction fees of approximately $87,000 from the previously amended credit
facility were charged to interest expense in the second fiscal quarter of 2005.
At June 30, 2005, unamortized fees of $0.4 million were included in Other
current assets, and $0.7 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 and $1.4 million as
of June 30, 2005 and 2004, respectively). No amounts were outstanding under
these facilities as of June 30, 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, 2005). As of June 30, 2005, there
were no amounts outstanding under this facility.

     The Company has a five year $2.0 million capital lease line of credit
expiring in November 2005, that bears interest at 12.2%, to fund certain capital
expenditures. At June 30, 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 in the Consolidated Balance Sheet.

     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, 2005, the Company's outstanding
balance under these agreements was $1.0 million of which $0.4 million was
included within Current portion of long-term debt and capital leases and $0.6
million was included within Long term debt in the Consolidated Balance Sheet.
Under these capital lease obligations the annual payments, including interest,
for fiscal year 2006, 2007 and 2008 are $0.5 million, $0.5 million and $0.1
million, respectively.

14.  STOCK COMPENSATION PLANS

   STOCK OPTION PLANS

    The Company maintains four stock option plans, the Amended and Restated 1993
Stock Incentive Plan ("1993 Plan"), the 1998 Non-Employee Director Stock Option
Plan ("1998 Plan"), the 2003 Stock Incentive Plan ("2003 Plan"), and the 2004
Employment Inducement Stock Plan ("2004 Plan").

    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 initial 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).




                                       73
<PAGE>

    In connection with the Merger, LeCroy assumed CATC's 2000 Stock Option/Stock
Issuance Plan, Special 2000 Stock Option Plan, 2000 Stock Incentive Plan and
1994 Stock Option Plan (collectively, the "CATC Stock 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 FIN 44, the 648,284 unvested stock options, as well as
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 fair value of the new awards were included in the
purchase price, less the intrinsic value of unvested options, which will be
charged as compensation expense to operations as earned by employees over their
remaining vesting periods.

    On October 29, 2003, the Company's shareholders approved the 2003 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 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 shall not
exceed 910,167 shares. 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. The 2003 Plan expires on October 29, 2013.

    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. No more than 2,608,696 shares of Common Stock
were allowed to be issued pursuant to the exercise of incentive stock options
granted under the 1993 Plan. This limitation did not apply to non-qualified
stock options or restricted stock awards that were granted under the 1993 Plan.
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.

    Compensation expense for restricted stock awards is recognized based on the
intrinsic value method defined by APB 25. Compensation expense is recognized
ratably over the associated service period, the period in which restrictions are
removed. In fiscal 2005, 111,900 shares of restricted stock were granted under
the 2003 Plan, with various vesting conditions ranging from three to five years,
all of which are unvested as of June 30, 2005. During fiscal 2005, 1,800 of
these shares were forfeited as a result of employee terminations and the
corresponding compensation expense and remaining deferred compensation amounts
were reversed. In fiscal 2004, 365,000 shares of restricted stock were granted
under the 2003 Plan with long-term cliff vesting conditions to certain key
employees, all of which are unvested as of June 30, 2005.

    In June 2005, 86,130 shares of restricted stock were issued to certain key
employees and officers in lieu of cash bonuses. These shares had their
restrictions lifted immediately, causing them to become fully vested on the date
of grant. As a result, the Company recognized $1.2 million in compensation
expense immediately upon grant.

    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, 2005, stock options to purchase 901 shares of Common Stock issued
pursuant to the 1995 Plan are outstanding and fully vested. Pursuant to the 1998
Plan, each non-employee director receives a stock option grant of 15,000 shares
exercisable at the market price on the date the plan was adopted or upon initial
election to the Board of Directors. These options vest ratably over a 36-month
period. Additionally, each non-employee director receives an annual stock option
grant of 7,000 shares (5,000 shares prior to an amendment dated October 25,
2000) exercisable at the market price on the date of grant. These options vest
immediately. A total of 500,000 shares of Common Stock can be issued during the
term of the 1998 Plan.




                                       74
<PAGE>

    Stock option transactions for fiscal years 2005, 2004 and 2003 under all
plans are as follows:
<TABLE>
<CAPTION>

                                      NUMBER OF     EXERCISE PRICE PER   WEIGHTED AVERAGE
                                       SHARES             SHARE           EXERCISE PRICE
                                    -----------     ------------------   ----------------
<S>                                 <C>            <C>                  <C>
   Outstanding at June 30, 2002...    2,677,091       $6.33 -$37.00         $17.15
   Granted........................      440,250        9.10 - 11.70          10.51
   Exercised......................      (17,057)       6.33 -  6.33           6.33
   Cancelled......................     (311,340)       9.20 - 32.25          18.49
                                    -----------
   Outstanding at June 30, 2003...    2,788,944        6.33 - 37.00          16.02

   Granted........................      104,000       16.45 - 19.89          17.23
   Exercised......................     (439,785)       6.33 - 20.50          11.00
   Cancelled......................     (113,512)      10.15 - 23.69          18.22
                                    -----------
   Outstanding at June 30, 2004...    2,339,647        6.33 - 37.00          16.91

   Granted........................      977,736        0.99 - 35.59          12.31
   Exercised......................     (337,889)       0.99 - 19.25          11.56
   Cancelled......................     (195,206)       7.16 - 26.13          17.00
                                    -----------
   Outstanding at June 30, 2005...    2,784,288      $0.99 - $37.00         $16.05
                                    ===========
</TABLE>


    The options granted, exercised and cancelled during fiscal 2005 shown in the
table above include the CATC assumed options granted by the Company and contain
exercise prices ranging from $0.99 to $35.59 per share.

    The following table summarizes information about stock options outstanding
at June 30, 2005:

<TABLE>
<CAPTION>
                                                         OPTIONS OUTSTANDING AT                OPTIONS EXERCISABLE AT
                                                              JUNE 30, 2005                        JUNE 30, 2005
                                               --------------------------------------------    -----------------------
                                                                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>
   $ 0.99 - $12.00..........................       534,440      $  8.49           6.72            245,617    $  7.49
   $12.01 - $18.00..........................     1,345,915        15.14           6.25            808,833      15.28
   $18.01 - $24.00..........................       841,622        21.34           4.17            743,938      21.44
   $24.01 - $37.00..........................        62,311        29.16           3.01             62,311      29.16
                                                ----------                                     ----------
     Total..................................     2,784,288      $ 16.05           5.64          1,860,699    $ 17.18
                                                ==========                                     ==========
</TABLE>

    Of the total stock options outstanding, 1,860,699, 1,771,859 and 1,921,861
were exercisable at June 30, 2005, 2004 and 2003, respectively. Stock options
and restricted stock awards available for grant under all plans were 1,304,111,
723,587 and 266,000 at June 30, 2005, 2004 and 2003, respectively.

   EMPLOYEE STOCK PURCHASE PLAN

    In July 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the
"ESPP") and reserved for issuance an aggregate of 434,783 shares of Common
Stock. 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.


                                       75
<PAGE>

    On October 29, 2003, the Company's shareholders approved the extension of
the expiration of the ESPP from June 7, 2005 to November 30, 2006 and increased
the number of shares available for issuance under the ESPP from 434,783 to
684,783. Through June 30, 2005, 492,513 shares have been issued under the ESPP
including 56,214, 49,141 and 45,820 for the years ended June 30, 2005, 2004 and
2003, respectively; and 192,270 shares are available for future issuance.

15.  COMMON 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.

     At June 30, 2005 the Company has outstanding warrants to purchase 278,571
shares of common stock, 250,000 warrants expire June 30, 2006, at a purchase
price of $20.00 per share and 28,571 warrants expire August 15, 2006, at a
purchase price of $17.50 per share. No warrants were exercised during fiscal
years ended June 30, 2005, 2004 or 2003.

16.  EARNINGS PER COMMON SHARE

    The following is a presentation of the numerators and the denominators of
the basic and diluted net income (loss) per share computations for the years
ended June 30, 2005, 2004 and 2003:


<TABLE>
<CAPTION>
                                                                         YEARS ENDED JUNE 30,
                                                                ------------------------------------
                                                                   2005          2004         2003
                                                                ----------   ------------  ---------
                                                                             IN THOUSANDS
<S>                                                             <C>          <C>           <C>
Numerator:
     Income (loss) from continuing operations..............     $   2,143    $   7,925     $  (1,803)
     Charges related to convertible preferred stock........            --           --         2,069
     Redemption of convertible preferred stock.............            --        7,665            --
                                                                ----------   ---------     ---------
     Net income (loss) from continuing operations
            applicable to common stockholders..............     $   2,143    $     260     $  (3,872)
                                                                =========    =========     =========

Denominator:
     Weighted average shares outstanding:
            Basic .........................................        11,774       10,754       10,364
            Employee stock options and other...............           484          320           --
                                                                ---------    ---------     --------
            Diluted........................................        12,258       11,074       10,364
                                                                =========    =========     ========
</TABLE>

    As defined in SFAS No. 128, "Earnings per Share," the computation of diluted
net income (loss) per common share available to common stockholders for the
years ended June 30, 2005, 2004 and 2003 does not include approximately 1.6
million, 1.1 million and 3.6 million, respectively, of certain potential common
stock, as the effect of including such would have been antidilutive to earnings
per share. Potential common stock comprises restricted shares, employee and
non-employee director stock options and warrants to purchase common stock and,
in fiscal 2003, convertible redeemable preferred stock.

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. Initially, the rights will



                                       76
<PAGE>

trade together with the Common Stock and will not be 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 amount 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
(loss) 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.

19.  EMPLOYEE BENEFIT PLANS

    The Company has two employee 401(k) savings plans. One is a trusted,
employee 401(k) savings plan for eligible U.S. employees (other than CATC
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. For each of the fiscal years 2005,
2004, and 2003, the Company has expensed $0.4 million in matching contributions
to this plan.

    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 covers all full-time
CATC employees. The CATC 401(k) Plan permits, but does not require, that the
Company provide matching contributions to the CATC 401(k) Plan on behalf of all
participants. For the fiscal year ended June 30, 2005, the Company expensed $0.2
million in contributions made to the CATC 401(k) Plan.

     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
2005, 2004, and 2003, the Company has expensed $0.5 million, $0.4 million, and
$0.3 million, respectively, in matching contributions to this plan.




                                       77
<PAGE>

20.  SEGMENT AND GEOGRAPHIC INFORMATION

    The Company operates in the test and measurement market, in which it
develops, manufactures, sells and licenses high-performance oscilloscopes,
serial data analyzers and global communication protocol test solutions. These
products are used by design engineers and researchers to measure and analyze
complex electronic signals in order to develop high performance systems, to
validate electronic designs and to improve time to market.

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

                                        2005         2004          2003
                                    -----------  -----------   ----------
    North America..............     $   52,500   $   38,926    $   32,394
    Europe / Middle East.......         49,650       37,716        31,171
    Japan......................         26,209       20,024        17,038
    Asia / Pacific.............         36,619       28,274        27,256
                                    ----------   ----------    ----------
      Total revenues...........     $  164,978   $  124,940    $  107,859
                                    ==========   ==========    ==========

    Total assets by geographic area are as follows:

                                               JUNE 30,     JUNE 30,
                                                 2005        2004
                                             -----------  -----------
    North America........................    $   170,685  $    90,213
    Europe / Middle East.................         11,241       29,324
    Japan................................          6,328        6,862
    Asia / Pacific.......................          4,914        3,394
                                             -----------  -----------
                                             $   193,168  $   129,793
                                             ===========  ===========

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

                                               JUNE 30,      JUNE 30,
                                                 2005         2004
                                             -----------  -----------
    North America........................    $   103,921  $    25,899
    Europe / Middle East.................            525        1,379
    Japan................................            456          632
    Asia / Pacific.......................            419          438
                                             -----------  -----------
                                             $   105,321  $    28,348
                                             ===========  ===========

    (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.

    Revenue attributable to individual countries based on customer ship-to
addresses that account for 10% or more of total revenues in fiscal 2005 include
the United States ($47.0 million), Japan ($26.2 million) and Germany ($19.4
million); in fiscal 2004 include the United States ($37.3 million), Japan ($20.0
million) and Germany ($15.9 million); and in fiscal 2003 include the United
States ($31.7 million), Japan ($17.0 million) and Germany ($11.0 million).

21.  COMMITMENTS AND CONTINGENCIES

   OPERATING LEASES

     Operating leases covering plant, certain office facilities and equipment
expire at various dates through 2011. Future minimum annual lease payments
required during the years ending June 30, 2006, 2007, 2008, 2009, 2010 and
thereafter, under noncancelable operating leases having an original term of more
than one year, are $1.9 million, $1.6 million, $1.2 million, $0.5 million and
$0.3 million respectively. Aggregate rental expense on noncancelable operating
leases for the years ended June 30, 2005, 2004 and 2003 approximated $2.0
million, $2.1 million and $2.0 million, respectively.



                                       78
<PAGE>

   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 segment and the residual assets of
Digitech, which amount is recorded in Accrued expenses and other current
liabilities on the June 30, 2005 and 2004 Consolidated Balance Sheets.

   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 infringed any of these
patents, and contended that the patents were invalid. The Company filed a
counterclaim on August 5, 2003, claiming infringement by Tektronix on 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 Noninfringement
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 Noninfringement 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.

    On January 15, 2003, LeCroy was sued by Sicom Systems ("Sicom") in the
United States District Court for the District of Delaware for patent
infringement of a U.S. patent relating to the graphical display of test limits.
LeCroy answered the complaint denying infringement and asserted a counterclaim
alleging the invalidity of the patent and that Sicom had abused the judicial
process by bringing a baseless patent infringement claim. On July 16, 2003,
LeCroy filed a Motion to Dismiss Sicom's case, contending that Sicom did not
have standing to bring the litigation. On November 20, 2003, the Court granted
LeCroy's Motion to Dismiss. On December 18, 2003, Sicom filed a Notice of Appeal
to the United States Court of Appeals for the Federal Circuit. On December 30,
2003, Sicom filed a new patent infringement lawsuit against LeCroy in the United
States District Court for the District of Delaware. Tektronix and Agilent
Technologies are also co-defendants in this litigation. The complaint in this
case is essentially the same as the complaint filed by Sicom on January 15,
2003, except that Sicom now states that it entered into an amendment to its
license agreement with the Canadian government on December 19, 2003, and that
Sicom now has the exclusive right to bring suit for infringement of the patent
in the United States. On January 5, 2004, Sicom filed a Notice and Order of
Dismissal of Appeal of its appeal to the Court of Appeals for the Federal
Circuit and the Order was entered on the following day. In LeCroy's responsive
pleading, LeCroy denied that it has infringed, or is infringing, the patent, and
contends that the patent is invalid. The defendants in this case, including
LeCroy, filed a Motion to Dismiss for lack of standing contending that Sicom's
amended license agreement with Canada does not cure the standing defects that
caused the Court to dismiss the original lawsuit. The court granted the
Defendants' Motion on October 5, 2004, dismissing the case with prejudice. On
October 28, 2004, Sicom filed a Notice of Appeal to the United States Court of
Appeals for the Federal Circuit from the September 30, 2004 order granting the
Company's motion to dismiss and the related memorandum opinion dated October 5,
2004. The appeal is ongoing and the outcome cannot be predicted. LeCroy intends
to defend itself vigorously in this litigation.



                                       79
<PAGE>

    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 other matters
pending that the Company expects to be material to its business, results of
operations, financial condition or cash flows.

22.  RELATED PARTY TRANSACTION

    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 accrues interest at 9.5% compounded annually with interest
payable at the maturity of the loan. If Mr. Reslewic remains an employee of
LeCroy for the entire five-year term of the loan or is terminated without cause
prior to the maturity date of the loan, the Company will forgive the loan
principal and all accrued interest. The loan is being amortized on a
straight-line basis and the compensation expense is recorded within Selling,
general and administrative expenses. The outstanding balance under this loan at
June 30, 2005 and 2004 was approximately $17,000 and $0.1 million, respectively.



23. DERIVATIVE INSTRUMENTS

    The Company has the following derivative instruments:

    Interest Rate Swap

    As required by the terms of the Credit Agreement (See Note 13 - Debt), on
January 27, 2005 the Company 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. 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 Credit
Agreement. 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 earnings. 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
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 with respect to the original amortization schedule
as set forth in the Credit Agreement. The net interest expense incurred on the
swap during the year ended June 30, 2005 was approximately $0.1 million. The
notional amount as of June 30, 2005 was approximately $23.1 million. The fair
value of the interest rate swap as of June 30, 2005, is $66,000 and approximates
the amount that the Company would have received from M&T Bank if the Company had
canceled the transaction at June 30, 2005. The fair value is recorded in Other
current assets in the Consolidated Balance Sheets as of June 30, 2005 and Other,
net in the Consolidated Statements of Operations for the year ended June 30,
2005.

Forward foreign exchange contracts

    The Company may enter 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 for all significant planned purchases of fixed
assets or commodities that are 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 operations.



                                       80
<PAGE>

     During fiscal 2005, 2004 and 2003, foreign currency exchange gains (losses)
on assets or liabilities denominated in other than their functional currencies,
net of gains (losses) on related foreign exchange contracts, were $0.2 million,
$0.3 million, and ($0.4) 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, $0.5 million and $0.1
million in fiscal 2005, 2004 and 2003, respectively. At June 30, 2005 and June
30, 2004, the notional amounts of the Company's open foreign exchange forward
contracts, all with maturities of less than six months, were approximately $9.8
million and $8.2 million, respectively.

24.  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
2005 and 2004 (all quarters represent 13-week periods, except for the quarter
ended September 30, 2004 which was a 14-week period) are as follows:

<TABLE>
<CAPTION>
                                                                        QUARTERS ENDED
                                      ------------------------------------------------------------------------------------------
                                                      FISCAL YEAR 2005                               FISCAL YEAR 2004
                                      ----------------------------------------------   -----------------------------------------
                                       JUNE 30,    MAR. 31,    DEC. 31,    SEPT. 30,   JUNE. 30,  MAR. 31,   DEC. 31,  SEPT. 30,
                                         2005        2005        2004        2004         2004      2004      2003        2003
                                      ---------    --------    --------    --------    --------   --------   --------   --------
                                      (13 WEEKS)   (13 WEEKS)  (13 WEEKS)  (14 WEEKS)  (13 WEEKS) (13 WEEKS) (13 WEEKS) (13 WEEKS)
                                                               (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<S>                                   <C>         <C>         <C>         <C>         <C>        <C>        <C>        <C>
Revenues(1)
  Test and measurement products(2) .   $ 41,875    $ 40,879    $ 40,380    $ 33,305    $ 32,948   $ 30,883   $ 27,961   $ 25,498
  Service and other(2) .............      1,919       2,011       2,408       2,200       1,972      1,947      1,810      1,921
                                       --------    --------    --------    --------    --------   --------   --------   --------
    Total revenues .................     43,794      42,890      42,788      35,505      34,920     32,830     29,771     27,419

Cost of revenue(3) .................     19,730      16,947      22,182      14,773      14,420     13,684     12,691     11,799
                                       --------    --------    --------    --------    --------   --------   --------   --------
    Gross profit ...................     24,064      25,943      20,606      20,732      20,500     19,146     17,080     15,620

Selling, general and
  administrative expenses(4) .......     15,908      14,126      15,044      12,310      12,312     11,429     10,335      9,921
Legal settlement ...................         --       1,000          --          --          --         --         --         --
Research and development
  expenses(5) ......................      7,440       7,027       8,800       4,736       4,175      4,120      3,781      3,684
                                       --------    --------    --------    --------    --------   --------   --------   --------
    Operating income (loss) ........        716       3,790      (3,238)      3,686       4,013      3,597      2,964      2,015

Other, net .........................       (980)       (898)        (29)        (32)         84        147         80       (322)
                                       --------    --------    --------    --------    --------   --------   --------   --------
    Income (loss) from continuing
      operations before income taxes       (264)      2,892      (3,267)      3,654       4,097      3,744      3,044      1,693
(Provision for) benefit from
    income taxes ...................        (91)         10         398       1,352       1,516      1,385      1,126        626
                                       --------    --------    --------    --------    --------   --------   --------   --------
  Income (loss) from continuing
    operations .....................       (173)      2,882      (2,869)      2,302       2,581      2,359      1,918      1,067
Gain on sale from discontinued
  operations, net of tax ...........         --          --          --          --         119         --         --         --
                                       --------    --------    --------    --------    --------   --------   --------   --------
    Net (loss) income ..............       (173)      2,882      (2,869)      2,302       2,700      2,359      1,918      1,067

Charges related to convertible
  preferred stock ..................         --          --          --          --          --         --         --      7,665
                                       --------    --------    --------    --------    --------   --------   --------   --------
Net income (loss) applicable to
  Common stockholders ..............   $   (173)   $  2,882    $ (2,869)   $  2,302    $  2,700   $  2,359   $  1,918   $ (6,598)
                                       ========    ========    ========    ========    ========   ========   ========   ========

Net income (loss) per common share-
  Basic:
  Income (loss) from continuing
    operations applicable to
    common stockholders ............   $  (0.01)   $   0.24    $  (0.25)   $   0.20    $   0.23   $   0.22   $   0.18   $  (0.63)
  Gain from discontinued operations          --          --          --          --        0.01         --         --         --
                                       --------    --------    --------    --------    --------   --------   --------   --------
  Net income (loss) applicable to
    common stockholders ............   $  (0.01)   $   0.24    $  (0.25)   $   0.20    $   0.24   $   0.22   $   0.18   $  (0.63)
                                       ========    ========    ========    ========    ========   ========   ========   ========
Net income (loss) per common share-
  Diluted:
  Income (loss) from continuing
    operations applicable to
    common stockholders ............   $  (0.01)   $   0.23    $  (0.25)   $   0.19   $   0.22    $   0.21    $   0.18   $  (0.63)
  Gain from discontinued
    operations .....................         --          --          --          --        0.01         --         --         --
                                       --------    --------    --------    --------    --------   --------   --------   --------
  Net income (loss) applicable to
    common stockholders ............   $  (0.01)   $   0.23    $  (0.25)   $   0.19    $   0.23   $   0.21   $   0.18   $  (0.63)
                                       ========    ========    ========    ========    ========   ========   ========   ========
Weighted average number of shares:
  Basic ............................     11,995      11,847      11,655      11,612      11,387     10,721     10,498     10,414
  Diluted ..........................     11,995      12,672      11,655      12,177      11,807     11,271     10,690     10,414

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




                                       81
<PAGE>


(1)  Included in service and other revenue for each of the four quarters in
     fiscal 2005 and 2004, is $0.3 million related to the recognition of
     deferred revenue associated with the adoption of SAB 101. The quarter ended
     June 30, 2005, includes 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 product revenue to
     service revenue to conform to the 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, 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 $0.6 million and $0.6 million for the quarters ended 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 quarter ended June 30,
     2005 are severance charges of $0.1 million.






                                       82
<PAGE>


                                                                     SCHEDULE II

                               LECROY CORPORATION
                        VALUATION AND QUALIFYING ACCOUNTS

                    YEARS ENDED JUNE 30, 2005, 2004 AND 2003
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                 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, 2003
  Allowance for doubtful accounts...........     $   422     $    177       $  (205)(1)    $  394
Year ended June 30, 2004
  Allowance for doubtful accounts...........         394           56           (14)(1)       436
Year ended June 30, 2005
  Allowance for doubtful accounts...........         436           93          (149)(1)       380

Against inventories --
Year ended June 30, 2003
  Allowance for excess and obsolete.........       1,503          924          (320)(2)     2,107
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

Against deferred tax assets --
Year ended June 30, 2003
  Valuation allowance.......................       4,940          146            --         5,086
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

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

(1) Uncollectible accounts receivable written-off.

(2) Merchandise 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.

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.



                                       83
<PAGE>

    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, 2005 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, 2005, as well as the
effectiveness of internal control over financial reporting as of June 30, 2005
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 and Chief Financial Officers, 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 are effective as of June 30, 2005. 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,
2005, as well as the effectiveness of internal control over financial reporting
as of June 30, 2005 and has issued their report thereon. That report appears
below.

     On October 29, 2004, we acquired Computer Access Technology Corporation. We
excluded from our assessment of the effectiveness of internal control over
financial reporting as of June 30, 2005, Computer Access Technology
Corporation's internal control over financial reporting associated with total
assets of $4.8 million and total revenues of $17.6 million included in our
consolidated financial statements as of and for the year ended June 30, 2005.






                                       84
<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, 2005, 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,
2005, 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, 2005, based on the
criteria established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).

LeCroy Corporation acquired Computer Access Technology Corporation during the
year ended June 30, 2005, and management excluded from its assessment of the
effectiveness of LeCroy Corporation and subsidiaries' internal control over
financial reporting as of June 30, 2005, Computer Access Technology
Corporation's internal control over financial reporting associated with total
assets of $4.8 million and total revenues of $17.6 million included in the
consolidated financial statements of LeCroy Corporation and subsidiaries as of
and for the year ended June 30, 2005. Our audit of internal control over
financial reporting of LeCroy Corporation and subsidiaries also excluded an
evaluation of the internal control over financial reporting of Computer Access
Technology Corporation.

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, 2005 and 2004, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended June 30, 2005, and
our report dated September 14, 2005, expressed an unqualified opinion on those
consolidated financial statements.

/s/ KPMG LLP

Short Hills, New Jersey
September 14, 2005



                                       85
<PAGE>



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information with respect to our directors and 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" of the
Definitive Proxy Statement relating to our 2005 Annual Meeting of Stockholders,
which is scheduled to be held October 26, 2005; said information is incorporated
herein by reference. The discussion of our executive officers is included in
Item 1, Part I 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 Definitive
Proxy Statement for our 2005 Annual Meeting of Stockholders, which is scheduled
to be held on October 26, 2005; said information is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     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 Definitive Proxy Statement for
our 2005 Annual Meeting of Stockholders, which is scheduled to be held on
October 26, 2005; said information 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
Definitive Proxy Statement for our 2005 Annual Meeting of Stockholders, which is
scheduled to be held on October 26, 2005; said information 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 Definitive Proxy Statement for our 2005 Annual Meeting of
Stockholders, which is scheduled to be held on October 26, 2005; said
information 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 Definitive Proxy Statement for our 2005 Annual Meeting of Stockholders,
which is scheduled to be held on October 26, 2005; said information is
incorporated herein by reference.





                                       86
<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.

               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 filed on 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 as of 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.

         4.2      Warrant to purchase 250,000 shares of the Registrant's Common
                  Stock, dated June 30, 1999, issued by the Registrant to
                  certain investors named therein, filed as Exhibit 2.2 to Form
                  S-3 Registration Statement No. 333-88239, 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
                  Registrant's Definitive Proxy Statement filed on September 18,
                  1998.

         10.7     Amendment to 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 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 2003 Stock Incentive Plan, incorporated by
                  reference to Appendix A to the Registrant's Definitive Proxy
                  Statement filed on September 26, 2003.*

                                       87
<PAGE>

         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.*

         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 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 Lutz. P. Henckels, filed as Exhibit 10.12 to
                  Form S-1 Registration Statement No. 33-95620, incorporated
                  herein by reference.*

         10.23    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.*

                                       88
<PAGE>

         10.24    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.*

         10.25    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.*

         10.26    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.*

         10.27    Amended and Restated Employment Agreement, dated January 18,
                  2002, between the Registrant and Lutz P. Henckels, filed as
                  Exhibit 10.39 to Form 10-Q for the quarterly period ended
                  December 31, 2001, incorporated herein by reference.*

         10.28    Amendment No. 1 to Amended and Restated Employment Agreement,
                  dated November 25, 2003, between the Registrant and Lutz P.
                  Henckels, filed as Exhibit 99.1 to Form 8-K filed on December
                  1, 2003, incorporated herein by reference.*

         10.29    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.*

         10.30    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.*

         10.31    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.*

         10.32    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.*

         10.33    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.*

         10.34    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.*

         10.35    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.*

         10.36    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.*

         10.37    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.*

         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.

         16.1     Letter from Ernst & Young LLP to the Securities and Exchange
                  Commission dated December 4, 2002, filed as Exhibit 16.1 to
                  Form 8-K filed on December 6, 2002, incorporated herein by
                  reference.
                                       89
<PAGE>

         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.



                                       90
<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

September 15, 2005            By /s/ Scott D. Kantor
                                 -------------------
                              Scott D. Kantor
                              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 15, 2005
-------------------------------
     Charles A. Dickinson


  /s/ THOMAS H. RESLEWIC              President, Chief Executive Officer             September 15, 2005
-------------------------------                 and Director
     Thomas H. Reslewic                  (Principal Executive Officer)


  /s/ SCOTT D. KANTOR                    Vice President Finance, Chief               September 15, 2005
-------------------------------          Financial Officer, Secretary
     Scott D. Kantor                             and Treasurer
                                        (Principal Accounting Officer)


  /s/ ROBERT E. ANDERSON                           Director                          September 15, 2005
-------------------------------
     Robert E. Anderson


  /s/ WALTER O. LECROY, JR.                        Director                          September 15, 2005
-------------------------------
     Walter O. LeCroy, Jr.


  /s/ NORMAN R. ROBERTSON                          Director                          September 15, 2005
-------------------------------
     Norman R. Robertson


  /s/                                              Director                          September 15, 2005
-------------------------------
     William G. Scheerer


  /s/ ALLYN C. WOODWARD, JR.                       Director                          September 15, 2005
----------------------------
     Allyn C. Woodward, Jr.

</TABLE>


                                       91