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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 29, 2008

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 of incorporation or organization) |  | (I.R.S. Employer 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)

Not Applicable

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





Indicate by check mark (X) whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 (X) whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer   ̈    Accelerated filer  x    Non-Accelerated
filer   ̈    Smaller Reporting Company   ̈

Indicate by check mark (X) whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   ̈    NO  x

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest practicable date.



|                                   |  |                           
|---------------------------------- |  | --------------------------
|CLASS                              |  | OUTSTANDING AT May 2, 2008
|Common stock, par value $.01 share |  | 12,208,137                









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LeCR
OY CORPORATION

FORM 10-Q

INDEX



|          |  |                                                                                                                              |  |         
|--------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | --------
|          |  |                                                                                                                              |  | Page No.
|          |  |                                                                                                                             
|PART I    |  | FINANCIAL INFORMATION                                                                                                        |  | 3       
|          |  |                                                                                                                             
|Item 1.   |  | Financial Statements:                                                                                                        |  | 3       
|          |  |                                                                                                                             
|          |  | Consolidated Balance Sheets (Unaudited) as of March 29, 2008 and June 30, 2007                                               |  | 3       
|          |  |                                                                                                                             
|          |  | Consolidated Statements of Operations (Unaudited) for the Quarter and Three Quarters ended March 29, 2008 and March 31, 2007 |  | 4       
|          |  |                                                                                                                             
|          |  | Consolidated Statements of Cash Flows (Unaudited) for the Three Quarters ended March 29, 2008 and March 31, 2007             |  | 5       
|          |  |                                                                                                                             
|          |  | Notes to Consolidated Financial Statements (Unaudited)                                                                       |  | 7       
|          |  |                                                                                                                             
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                        |  | 24      
|          |  |                                                                                                                             
|Item 3.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                                   |  | 36      
|          |  |                                                                                                                             
|Item 4.   |  | Controls and Procedures                                                                                                      |  | 37      
|          |  |                                                                                                                             
|PART II   |  | OTHER INFORMATION                                                                                                            |  | 38      
|          |  |                                                                                                                             
|Item 1.   |  | Legal Proceedings                                                                                                            |  | 38      
|          |  |                                                                                                                             
|Item 1A.  |  | Risk Factors                                                                                                                 |  | 38      
|          |  |                                                                                                                             
|Item 2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                  |  | 38      
|          |  |                                                                                                                             
|Item 5.   |  | Other Information                                                                                                            |  | 38      
|          |  |                                                                                                                             
|Item 6.   |  | Exhibits                                                                                                                     |  | 39      
|          |  |                                                                                                                             
|Signature |  |                                                                                                                              |  | 40      

LeCroy®, Wavelink, WaveMaster®, WavePro®, WaveJet®, WaveRunner®, WaveScan , WaveSurfer, WaveExpert, MAUI, CATC and Catalyst are our trademarks, among others not referenced
in this document. All other trademarks, servicemarks or tradenames referred to in this Form 10-Q are the property of their respective owners.



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PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

LeCROY CORPORATION

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



|                                                                                                                                                                      |  |               |         |   |              |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------ | - | -------
|In thousands, except par value and share data                                                                                                                         |  | March 29,2008 |         |   | June 30,2007
|ASSETS                                                                                                                                                                |  |               |         |   |              |   |        
|Current assets:                                                                                                                                                       |  |               |         |   |              |   |        
|Cash and cash equivalents                                                                                                                                             |  | $             | 11,593  |   |              | $ | 10,448 
|Accounts receivable, net of reserves of $741 and $882 at March 29, 2008 and June 30, 2007, respectively                                                               |  |               | 30,656  |   |              |   | 31,941 
|Inventories, net                                                                                                                                                      |  |               | 34,192  |   |              |   | 38,645 
|Other current assets                                                                                                                                                  |  |               | 10,469  |   |              |   | 9,608  
|                                                                                                                                                                      |  |               |         |   |              |   |        
|Total current assets                                                                                                                                                  |  |               | 86,910  |   |              |   | 90,642 
|                                                                                                                                                                      |  |              
|Property and equipment, net                                                                                                                                           |  |               | 20,669  |   |              |   | 20,339 
|Goodwill                                                                                                                                                              |  |               | 105,771 |   |              |   | 105,885
|Other non-current assets                                                                                                                                              |  |               | 14,282  |   |              |   | 14,453 
|                                                                                                                                                                      |  |               |         |   |              |   |        
|Total assets                                                                                                                                                          |  | $             | 227,632 |   |              | $ | 231,319
|                                                                                                                                                                      |  |               |         |   |              |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                  |  |               |         |   |              |   |        
|Current liabilities:                                                                                                                                                  |  |               |         |   |              |   |        
|Accounts payable                                                                                                                                                      |  | $             | 16,642  |   |              | $ | 16,905 
|Accrued expenses and other current liabilities                                                                                                                        |  |               | 14,926  |   |              |   | 15,408 
|Note payable- related party                                                                                                                                           |  |               |        |   |              |   | 3,500  
|Current portion of capital leases                                                                                                                                     |  |               | 230     |   |              |   | 119    
|                                                                                                                                                                      |  |               |         |   |              |   |        
|Total current liabilities                                                                                                                                             |  |               | 31,798  |   |              |   | 35,932 
|                                                                                                                                                                      |  |              
|Long-term debt                                                                                                                                                        |  |               |        |   |              |   | 9,410  
|Convertible notes                                                                                                                                                     |  |               | 72,000  |   |              |   | 72,000 
|Deferred revenue and other non-current liabilities                                                                                                                    |  |               | 4,515   |   |              |   | 1,246  
|                                                                                                                                                                      |  |               |         |   |              |   |        
|Total liabilities                                                                                                                                                     |  |               | 108,313 |   |              |   | 118,588
|                                                                                                                                                                      |  |              
|Commitments and contingencies                                                                                                                                         |  |               |         |   |              |   |        
|                                                                                                                                                                      |  |              
|Stockholders equity:                                                                                                                                                 |  |               |         |   |              |   |        
|Preferred stock, $.01 par value (authorized 5,000,000 shares; none issued and outstanding as of March 29, 2008 and June 30, 2007)                                     |  |               |        |   |              |   |       
|Common stock, $.01 par value (authorized 45,000,000 shares; 12,505,623 shares issued at March 29, 2008 and 12,342,809 shares issued and
outstanding at June 30, 2007) |  |               | 125     |   |              |   | 123    
|Additional paid-in capital                                                                                                                                            |  |               | 112,426 |   |              |   | 108,713
|Accumulated other comprehensive income                                                                                                                                |  |               | 3,981   |   |              |   | 1,409  
|Retained earnings                                                                                                                                                     |  |               | 4,913   |   |              |   | 2,486  
|Treasury stock, at cost (262,285 shares and 0 shares at March 29, 2008 and June 30, 2007, respectively)                                                               |  |               | (2,126  | ) |              |   |       
|                                                                                                                                                                      |  |               |         |   |              |   |        
|Total stockholders equity                                                                                                                                            |  |               | 119,319 |   |              |   | 112,731
|                                                                                                                                                                      |  |               |         |   |              |   |        
|Total liabilities and stockholders equity                                                                                                                            |  | $             | 227,632 |   |              | $ | 231,319
|                                                                                                                                                                      |  |               |         |   |              |   |        

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



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|----------------------------------------- |  | ------------- | ------ | - | -------------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------- | -
|                                          |  | Quarter Ended |        |   | Three Quarters Ended |  
|In thousands, except per share data       |  | March 29,2008 |        |   | March 31,2007        |   |        | March 29,2008 |  |   | March 31,2007 |  
|Revenues:                                 |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Test and measurement products             |  | $             | 37,761 |   |                      | $ | 37,298 |               |  | $ | 113,138       |   |  | $ | 108,131 |  
|Service and other                         |  |               | 2,793  |   |                      |   | 2,044  |               |  |   | 6,689         |   |  |   | 6,368   |  
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Total revenues                            |  |               | 40,554 |   |                      |   | 39,342 |               |  |   | 119,827       |   |  |   | 114,499 |  
|                                          |  |               |        |  
|Cost of revenues                          |  |               | 17,811 |   |                      |   | 18,524 |               |  |   | 51,057        |   |  |   | 51,641  |  
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Gross profit                              |  |               | 22,743 |   |                      |   | 20,818 |               |  |   | 68,770        |   |  |   | 62,858  |  
|                                          |  |               |        |  
|Operating expenses (income):              |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Selling, general and administrative       |  |               | 13,121 |   |                      |   | 15,065 |               |  |   | 39,625        |   |  |   | 42,592  |  
|Research and development                  |  |               | 8,113  |   |                      |   | 8,080  |               |  |   | 23,019        |   |  |   | 28,577  |  
|Reimbursement from escrow account         |  |               | (240   | ) |                      |   |       |               |  |   | (240          | ) |  |   |         |  
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Total operating expenses                  |  |               | 20,994 |   |                      |   | 23,145 |               |  |   | 62,404        |   |  |   | 71,169  |  
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Operating income (loss)                   |  |               | 1,749  |   |                      |   | (2,327 | )             |  |   | 6,366         |   |  |   | (8,311  | )
|                                          |  |               |        |  
|Other income (expense):                   |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Interest income                           |  |               | 72     |   |                      |   | 69     |               |  |   | 227           |   |  |   | 167     |  
|Interest expense                          |  |               | (1,020 | ) |                      |   | (1,197 | )             |  |   | (3,359        | ) |  |   | (3,249  | )
|Loss on extinguishment of debt            |  |               |       |   |                      |   | (551   | )             |  |   |              |   |  |   | (997    | )
|Other, net                                |  |               | (83    | ) |                      |   | 2      |               |  |   | (421          | ) |  |   | (93     | )
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Other expense, net                        |  |               | (1,031 | ) |                      |   | (1,677 | )             |  |   | (3,553        | ) |  |   | (4,172  | )
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Income (loss) before income taxes         |  |               | 718    |   |                      |   | (4,004 | )             |  |   | 2,813         |   |  |   | (12,483 | )
|Provision (benefit) for income taxes      |  |               | 65     |   |                      |   | (69    | )             |  |   | 291           |   |  |   | (1,501  | )
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Net income (loss)                         |  | $             | 653    |   |                      | $ | (3,935 | )             |  | $ | 2,522         |   |  | $ | (10,982 | )
|                                          |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Net income (loss) per common share:       |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Basic                                     |  | $             | 0.06   |   |                      | $ | (0.34  | )             |  | $ | 0.21          |   |  | $ | (0.94   | )
|Diluted                                   |  | $             | 0.05   |   |                      | $ | (0.34  | )             |  | $ | 0.21          |   |  | $ | (0.94   | )
|                                          |  |               |        |  
|Weighted average number of common shares: |  |               |        |   |                      |   |        |               |  |   |               |   |  |   |         |  
|Basic                                     |  |               | 11,763 |   |                      |   | 11,499 |               |  |   | 11,759        |   |  |   | 11,736  |  
|Diluted                                   |  |               | 12,032 |   |                      |   | 11,499 |               |  |   | 12,000        |   |  |   | 11,736  |  

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



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                                           |  |                      |         |   |               |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                           |  | Three Quarters Ended |        
|In thousands                                                                                               |  | March 29,2008        |         |   | March 31,2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                      |  |                      |         |   |               |   |         |  
|Net income (loss)                                                                                          |  | $                    | 2,522   |   |               | $ | (10,982 | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:         |  |                      |         |   |               |   |         |  
|Write-off of acquired in-process research and development                                                  |  |                      |        |   |               |   | 4,000   |  
|Depreciation and amortization                                                                              |  |                      | 5,389   |   |               |   | 6,277   |  
|Share-based compensation                                                                                   |  |                      | 3,714   |   |               |   | 4,428   |  
|Amortization of debt issuance costs                                                                        |  |                      | 539     |   |               |   | 425     |  
|Deferred income taxes                                                                                      |  |                      | (946    | ) |               |   | (707    | )
|Write-off of term loan deferred financing costs                                                            |  |                      |        |   |               |   | 997     |  
|(Gain) loss on disposal of property and equipment, net                                                     |  |                      | (136    | ) |               |   | 14      |  
|Write-off of inventory                                                                                     |  |                      | 770     |   |               |   | 1,804   |  
|Gross profit on non-cash sale                                                                              |  |                      | (44     | ) |               |   |        |  
|Change in operating assets and liabilities, net of assets acquired and liabilities assumed in acquisition: |  |                      |        |   |               |   |        |  
|Accounts receivable                                                                                        |  |                      | 2,569   |   |               |   | (1,036  | )
|Inventories                                                                                                |  |                      | 2,405   |   |               |   | (1,580  | )
|Other current and non-current assets                                                                       |  |                      | 778     |   |               |   | (761    | )
|Accounts payable, accrued expenses and other liabilities                                                   |  |                      | (473    | ) |               |   | (3,041  | )
|                                                                                                           |  |                      |         |   |               |   |         |  
|Net cash provided by (used in) operating activities                                                        |  |                      | 17,087  |   |               |   | (162    | )
|                                                                                                           |  |                      |         |   |               |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                      |  |                      |         |   |               |   |         |  
|Purchase of property and equipment                                                                         |  |                      | (2,299  | ) |               |   | (4,062  | )
|Business acquisition, net of acquired cash                                                                 |  |                      |        |   |               |   | (31,512 | )
|                                                                                                           |  |                      |         |   |               |   |         |  
|Net cash used in investing activities                                                                      |  |                      | (2,299  | ) |               |   | (35,574 | )
|                                                                                                           |  |                      |         |   |               |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                      |  |                      |         |   |               |   |         |  
|Repayment of term loan                                                                                     |  |                      |        |   |               |   | (34,076 | )
|Borrowings under credit agreement                                                                          |  |                      |        |   |               |   | 40,160  |  
|Proceeds from issuance of convertible notes                                                                |  |                      |        |   |               |   | 72,000  |  
|Payments made on capital leases                                                                            |  |                      | (227    | ) |               |   | (208    | )
|Repayment of borrowings under credit agreement                                                             |  |                      | (9,410  | ) |               |   | (34,250 | )
|Payment of note payable to related party for business acquisition                                          |  |                      | (3,500  | ) |               |   |        |  
|Payment of debt issuance costs                                                                             |  |                      |        |   |               |   | (3,684  | )
|Proceeds from employee stock purchase and option plans                                                     |  |                      | 575     |   |               |   | 450     |  
|Purchase of treasury shares                                                                                |  |                      | (2,126  | ) |               |   | (10,508 | )
|                                                                                                           |  |                      |         |   |               |   |         |  
|Net cash (used in) provided by financing activities                                                        |  |                      | (14,688 | ) |               |   | 29,884  |  
|                                                                                                           |  |                      |         |   |               |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                                               |  |                      | 1,045   |   |               |   | (426    | )
|                                                                                                           |  |                      |         |   |               |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                       |  |                      | 1,145   |   |               |   | (6,278  | )
|Cash and cash equivalents at beginning of the period                                                       |  |                      | 10,448  |   |               |   | 16,972  |  
|                                                                                                           |  |                      |         |   |               |   |         |  
|Cash and cash equivalents at end of the period                                                             |  | $                    | 11,593  |   |               | $ | 10,694  |  
|                                                                                                           |  |                      |         |   |               |   |         |  
|Supplemental Cash Flow Disclosure                                                                          |  |                      |         |   |               |   |         |  
|Cash paid during the period for:                                                                           |  |                      |         |   |               |   |         |  
|Interest                                                                                                   |  | $                    | 2,408   |   |               | $ | 1,184   |  
|Income taxes                                                                                               |  |                      | 525     |   |               |   | 827     |  
|Non-cash transactions:                                                                                     |  |                      |         |   |               |   |         |  
|Issuance of note payable to related party for business acquisition                                         |  | $                    |        |   |               | $ | 3,500   |  
|Issuance of LeCroy stock options for business acquisition                                                  |  |                      |        |   |               |   | 450     |  



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|                                                                         |  |                      |  |              
|------------------------------------------------------------------------ |  | -------------------- |  | -------------
|                                                                         |  | Three Quarters Ended
|In thousands                                                             |  | March 29,2008        |  | March 31,2007
|Transaction costs for business acquisition, unpaid at March 31, 2007     |  |                     |  | 99           
|Transaction costs for deferred financing costs, unpaid at March 31, 2007 |  |                     |  | 72           
|Transfer of inventory into property and equipment                        |  | 1,520                |  | 776          
|Vendor supplied capital lease agreement                                  |  | 718                  |  |             
|Receipt of advertising in exchange for test and measurement product      |  | 62                   |  |             

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



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The accompanying interim Consolidated Financial Statements include all the accounts of LeCroy Corporation (the Company or
LeCroy) and its wholly-owned subsidiaries. These Consolidated Financial Statements are unaudited and should be read in conjunction with the audited Consolidated Financial Statements included in the Companys Annual Report on Form
10-K for the fiscal year ended June 30, 2007. The accompanying Consolidated Balance Sheet as of June 30, 2007 has been derived from those audited Consolidated Financial Statements. Inter-company transactions and balances have been
eliminated in consolidation.

The Companys Consolidated Financial Statements have been prepared in accordance with U.S. Generally
Accepted Accounting Principles (US GAAP), 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, reserves for accounts receivable,
allowance for excess and obsolete inventory, valuation of long-lived and intangible assets, goodwill, income taxes, share-based compensation expense and estimation of warranty liabilities. These estimates and assumptions are based on
managements judgment and available information and, consequently, actual results could differ from these estimates.

These unaudited
Consolidated Financial Statements reflect all adjustments, of a normal recurring nature, that are, in the opinion of management, necessary for a fair presentation of the financial position and the results of operations for the interim periods.
Interim period operating results may not be indicative of the operating results for a full year. Certain reclassifications were made to prior period amounts to conform to the current period presentation. Specifically, the three quarters ended
March 29, 2008 reflects a reclassification of a sales return reserve of approximately $1.1 million from Service and other to Test and measurement products for the two quarters ended December 29, 2007 to conform to the current period
presentation. Also, as a result of the fiscal year 2008 company-wide service initiative, certain service products have been reclassified from Test and measurement products to Service and other revenue. The quarter and the three quarters ended
March 31, 2007 reflect a reclassification of approximately $0.3 million and $1.1 million, respectively from Test and measurement products to Service and other revenue, to conform to the current period presentation.

The Companys fiscal periods end on the Saturday closest to the end of the period, which resulted in reporting periods ended on March 29,
2008, March 31, 2007, and June 30, 2007.

On October 29, 2004, the Company completed the acquisition of 100% of the
outstanding common stock of Computer Access Technology Corporation (CATC). CATC is a provider of advanced verification systems for existing and emerging digital communications standards.

On September 29, 2006, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) among the Company, 2006 Franklin
Congress Corporation, a California corporation and a wholly owned subsidiary of the Company (Sub), Catalyst, and Nader Salehomoum, as Equityholder Representative, pursuant to which Sub merged with and into Catalyst (the Catalyst
Merger), with Catalyst continuing as the surviving corporation and as a 100% owned subsidiary of the Company. Catalyst is a manufacturer of data bus analysis and emulation tools for advanced serial data communications.

2. Share-Based Compensation

Total share-based
compensation expense recorded in the Consolidated Statement of Operations for the quarters ended March 29, 2008 and March 31, 2007 is approximately $1.1 million and $1.3 million, respectively, and approximately $3.7 million and $4.4
million for the three quarters ended March 29, 2008 and March 31, 2007, respectively.

Stock Options

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



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The table below presents the assumptions used to calculate the fair value of options granted during the
quarters and three quarters ended March 29, 2008 and March 31, 2007, including the Catalyst assumed options, in the fiscal 2007 periods:



|                                               |  |                             |                |   |                                    |   |                |                             |  |   |                                    |   |  |   |              |  
|---------------------------------------------- |  | --------------------------- | -------------- | - | ---------------------------------- | - | -------------- | --------------------------- |  | - | ---------------------------------- | - |  | - | ------------ | -
|                                               |  | Quarter EndedMarch 29, 2008 |                |   | Three Quarters EndedMarch 29,
2008 |   |                | Quarter EndedMarch 31, 2007 |  |   | Three Quarters EndedMarch 31,
2007 |  
|Expected holding period (years)                |  |                             | 5.0            |   |                                    |   | 5.0            |                             |  |   | 5.0                                |   |  |   | 3.6          |  
|Risk-free interest rate                        |  |                             | 2.67% - 2.78   | % |                                    |   | 2.67% - 4.57   | %                           |  |   | 4.46                               | % |  |   | 4.58% - 4.90 | %
|Dividend yield                                 |  |                             | 0.0            | % |                                    |   | 0.0            | %                           |  |   | 0.0                                | % |  |   | 0.0          | %
|Expected volatility                            |  |                             | 43.51% - 43.63 | % |                                    |   | 43.51% - 48.64 | %                           |  |   | 51.8                               | % |  |   | 32.0% - 54.2 | %
|Weighted average fair value of options granted |  | $                           | 3.66           |   |                                    | $ | 3.70           |                             |  | $ | 4.33                               |   |  | $ | 11.17        |  

Stock option transactions for the quarters and three quarters ended March 29, 2008 under all
plans, including unvested stock options assumed in the Catalyst merger, are as follows:



|                                              |  |                 |   |  |                                |       |                                                  |      |                          |   |      
|--------------------------------------------- |  | --------------- | - |  | ------------------------------ | ----- | ------------------------------------------------ | ---- | ------------------------ | - | -----
|                                              |  | Number ofShares |   |  | Weighted AverageExercise Price |       | WeightedAverageRemainingContractualTerms (Years) |      | AggregateIntrinsic Value
|                                              |  |                 |   |  |                                |       |                                                  |      | ($000)                  
|Outstanding at June 30, 2007                  |  | 2,012,655       |   |  | $                              | 14.49 |                                                  |      |                          |   |      
|Granted                                       |  | 31,500          |   |  | $                              | 7.64  |                                                  |      |                          |   |      
|Exercised                                     |  | (35,874         | ) |  | $                              | 0.76  |                                                  |      |                          |   |      
|Expired                                       |  | (172,498        | ) |  | $                              | 18.73 |                                                  |      |                          |   |      
|Forfeited                                     |  | (33,213         | ) |  | $                              | 15.94 |                                                  |      |                          |   |      
|                                              |  |                 |   |  |                                |       |                                                  |      |                          |   |      
|Outstanding at September 29, 2007             |  | 1,802,570       |   |  | $                              | 14.21 |                                                  | 3.97 |                          | $ | 753  
|Granted                                       |  | 20,700          |   |  | $                              | 8.66  |                                                  |      |                          |   |      
|Exercised                                     |  | (3,748          | ) |  | $                              | 7.23  |                                                  |      |                          |   |      
|Expired                                       |  | (94,853         | ) |  | $                              | 13.88 |                                                  |      |                          |   |      
|Forfeited                                     |  | (43,770         | ) |  | $                              | 6.97  |                                                  |      |                          |   |      
|                                              |  |                 |   |  |                                |       |                                                  |      |                          |   |      
|Outstanding at December 29, 2007              |  | 1,680,899       |   |  | $                              | 14.36 |                                                  | 3.76 |                          | $ | 1,020
|Granted                                       |  | 13,200          |   |  | $                              | 8.78  |                                                  |      |                          |   |      
|Exercised                                     |  | (2,975          | ) |  | $                              | 2.24  |                                                  |      |                          |   |      
|Expired                                       |  | (111,965        | ) |  | $                              | 22.48 |                                                  |      |                          |   |      
|Forfeited                                     |  |                |   |  | $                              |      |                                                  |      |                          |   |      
|                                              |  |                 |   |  |                                |       |                                                  |      |                          |   |      
|Outstanding at March 29, 2008                 |  | 1,579,159       |   |  | $                              | 13.76 |                                                  | 3.70 |                          | $ | 849  
|Vested and expected to vest at March 29, 2008 |  | 1,539,938       |   |  | $                              | 14.13 |                                                  | 3.51 |                          | $ | 839  
|                                              |  |                 |   |  |                                |       |                                                  |      |                          |   |      
|Exercisable at March 29, 2008                 |  | 1,395,827       |   |  | $                              | 14.26 |                                                  | 3.36 |                          | $ | 533  
|                                              |  |                 |   |  |                                |       |                                                  |      |                          |   |      

The total intrinsic value of stock options exercised during the quarter and three quarters ended
March 29, 2008 was approximately $21,000 and $0.3 million, respectively as compared to approximately $0.2 million and $0.4 million for the quarter and three quarters ended March 31, 2007.

As of March 29, 2008, there was approximately $1.4 million of total unrecognized compensation cost (net of estimated forfeitures) related to stock
options granted under the plans. That cost is expected to be recognized on a straight-line basis over a remaining weighted-average period of 1.9 years. No compensation cost related to stock options was capitalized in inventory or any other assets
for the quarters and three quarters ended March 29, 2008 and March 31, 2007.

Stock Options Assumed

In connection with the Catalyst Merger, LeCroy assumed Catalysts Stock Option Plan. Pursuant to SFAS No. 123R, of the 136,826 assumed stock
options granted by the Company in exchange for the stock options held by the employees of Catalyst, the fair value of 36,858 vested options or approximately $450,000 was considered part of the purchase price for Catalyst and the fair value of 99,968
unvested options or approximately $1,196,000, is charged to compensation expense in operations as earned by employees over their remaining requisite service periods. The fair value of assumed options was determined using the Black-Scholes option
pricing model.



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##### Table of Contents

The public announcement of the Catalyst Merger occurred on the same date as the closing, October 2,
2006. Upon completion of the Merger, each outstanding stock option issued by Catalyst was assumed by LeCroy and was converted into an option to purchase that number of shares of LeCroy common stock equal to the number of shares of Catalyst common
stock purchasable pursuant to the Catalyst option immediately prior to the effective time of the merger, multiplied by the exchange ratio, rounded down to the nearest whole number of shares of LeCroy common stock. The exercise price per share was
equal to the exercise price per share of Catalyst common stock divided by the exchange ratio, rounded up to the nearest whole cent. The Companys assumption of the Catalyst issued options was treated as a modification, under SFAS No. 123R,
of the terms of the original Catalyst grant. The same conversion formula was utilized to calculate the number of assumed options as was used in the Merger consideration and, as such, the aggregate fair value of Catalysts awards immediately
prior to the Merger was substantially similar to the aggregate fair value of the LeCroy awards on the date of grant.

Non-Vested Stock

The following table summarizes transactions related to non-vested stock for the quarters and three quarters ended March 29, 2008:



|                                       |  |                 |   |  |                                      |      
|-------------------------------------- |  | --------------- | - |  | ------------------------------------ | -----
|                                       |  | Number ofShares |   |  | Weighted AverageGrant DateFair Value
|Non-vested stock at June 30, 2007      |  | 647,141         |   |  | $                                    | 14.61
|Granted                                |  | 34,241          |   |  | $                                    | 7.48 
|Vested                                 |  | (49,163         | ) |  | $                                    | 12.88
|Forfeited                              |  | (31,222         | ) |  | $                                    | 12.29
|                                       |  |                 |   |  |                                      |      
|Non-vested stock at September 29, 2007 |  | 600,997         |   |  | $                                    | 14.46
|Granted                                |  | 75,233          |   |  | $                                    | 8.98 
|Vested                                 |  | (85,590         | ) |  | $                                    | 10.72
|Forfeited                              |  | (20,149         | ) |  | $                                    | 12.46
|                                       |  |                 |   |  |                                      |      
|Non-vested stock at December 29, 2007  |  | 570,491         |   |  | $                                    | 14.37
|Granted                                |  | 20,000          |   |  | $                                    | 8.63 
|Vested                                 |  | (15,306         | ) |  | $                                    | 15.06
|Forfeited                              |  | (9,641          | ) |  | $                                    | 11.02
|                                       |  |                 |   |  |                                      |      
|Non-vested stock at March 29, 2008     |  | 565,544         |   |  | $                                    | 14.21
|                                       |  |                 |   |  |                                      |      

Non-vested stock is included in the issued and outstanding share numbers presented on the
Consolidated Balance Sheets. Non-vested stock is not included in the weighted average share calculation for basic earnings per share. However, the dilutive effect of the non-vested stock is included in the weighted average share calculation for
diluted earnings per share.

As of March 29, 2008, there was approximately $3.9 million of total unrecognized compensation cost (net
of estimated forfeitures) related to non-vested stock granted under the plans. That cost is expected to be recognized on a straight-line basis over a remaining weighted-average period of 2.2 years.

Employee Stock Purchase Plan

The
Company has an Employee Stock Purchase Plan (ESPP) with a look-back option that allows employees to purchase shares of common stock at 85% of the market value at the lower of either the date of enrollment or the date of purchase. Payment
for the ESPP is a fixed amount, set at the beginning of the period, made through payroll withholding over the enrollment period of six months. The number of shares the participant can acquire is variable based on the fixed amount withheld and the
applicable fair value. SFAS No. 123R requires an ESPP with a purchase price discount of greater than 5% and a look-back option to be compensatory. The Company accounts for the ESPP in accordance with FASB Technical Bulletin No. 97-1,
Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a Look-Back Option. The fair value of the put and call features of the estimated shares to be purchased are estimated at the beginning
of the purchase period using a Black-Scholes option pricing model. Expected volatilities are calculated based on the historical six-month volatility of the Companys stock. The expected holding period is equal to the six-month enrollment
period. The risk-free interest rate is based on the interest rate of a six-month U.S. Treasury note in effect on the first day of the enrollment period. The fair value of the shares is liability classified until the end of the six-month period at
which time the amount is then equity classified. As of March 29, 2008 and June 30, 2007, there was approximately $0.1 million and $41,000, respectively of liability classified share-based compensation expense for the ESPP included in
Accrued expenses and other current liabilities on the Consolidated Balance Sheets.



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##### Table of Contents

Stock Appreciation Rights

On August 20, 2007, the Board of Directors adopted and approved the 2007 Stock Appreciation Plan (the SAR Plan). Under the SAR Plan, the
Compensation Committee of the Board of Directors may award stock appreciation rights to eligible employees. Each stock appreciation right (SAR) awarded represents the right to receive an amount of cash equal to the excess of the fair
market value of a share of the Companys common stock on the date that a participant exercises such right over the fair market value of a share of the Company common stock on the date that such SAR was awarded. Awards of SARs will vest in
four successive annual installments of 25% of the SARs subject to such award on the anniversary of the date of the grant of such award. The employee will have four years from the date of vesting of an installment in which to exercise such
installment. The SAR Plan will terminate on August 20, 2017.

On August 20, 2007, the Company granted 712,000 SARs. The exercise
price of the SARs was set at $7.60 per share, which equaled the closing price of the Companys common stock on the grant date. The fair value at grant date was $3.61, using the Black-Scholes option pricing model. Expected volatilities are
calculated based on the historical volatility of the Companys stock. Management monitors award exercise and employee termination patterns to estimate forfeiture rates. The expected holding period of SARs represents the period of time that SARs
granted are expected to be outstanding. The risk-free interest rate is based on the interest rate of a 5-year U.S. Treasury note in effect on the date of the grant or other such period that is closest to the expected term of the SARs.

The Company records compensation expense ratably over the service period and adjusts for changes in the fair value of SARs at each reporting period.
Based on the fair value of $3.66 per SAR on March 29, 2008, there was approximately $2.1 million of unrecognized compensation cost (net of estimated forfeitures) related to SARs, which is expected to be recognized over a weighted average period
of approximately 3.4 years. The fair value of the SARs is liability classified because the awards are payable in cash. As of March 29, 2008, there was approximately $0.4 million of liability classified share-based compensation expense for the
SARs included in Accrued expenses and other current liabilities on the Consolidated Balance Sheet.

3. Revenue Recognition

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

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

Test and measurement products revenue

The Company generates Test and measurement product revenue from the sales of oscilloscopes and application solutions, protocol analyzers, probes and
accessories. Provisions for warranty costs are recorded at the time products are shipped.

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

In fiscal 2006, in an effort to provide end-user customers an alternative to purchasing the Companys higher end products under its standard terms
and conditions, the Company began offering customers an opportunity to enter into sales-type or direct financing leases for these products. The Company is accounting for these leases in accordance with SFAS Statement No. 13, Accounting
for



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##### Table of Contents

Leases. Lease and rental revenues are reported within Test and measurement product revenue and were approximately $0.3 million and $0.5 million for the
quarter and three quarters ended March 29, 2008, as compared to approximately $0.6 million and $1.4 million for the quarter and three quarters ended March 31, 2007.

Due to the significant software content of its protocol analyzer products, the Company recognizes revenue on the sale of these products, in accordance
with American Institute of Certified Public Accountants Statement of Position 97-2, Software Revenue Recognition (SOP 97-2), as amended by Statement of Position 98-9, Modifications of SOP 97-2 with
Respect to Certain Transactions (SOP 98-9), upon shipment, provided there is persuasive evidence of an arrangement, the product has been delivered, the price is fixed or determinable and collectibility is probable. Software
maintenance support revenue is deferred based on its vendor specific objective evidence of fair value (VSOE) and recognized ratably over the maintenance support periods. In limited circumstances where VSOE does not exist for software
maintenance support, the Company recognizes revenues and accrues costs, if applicable, under the appropriate provisions of SOP 97-2 determined by the facts and circumstances of each transaction. 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.

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 calibration
services and then recognizes such revenue on a straight-line basis over the related service period. When arrangements include multiple elements, the Company uses relative fair values in accordance with Emerging Issues Task Force (EITF)
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, to allocate revenue to the elements and recognizes revenue when the criteria for revenue recognition have been met for each element.

Deferred license revenue

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

4.
Business Realignment, Restructuring Initiatives, and Related Asset Impairments

Business Realignment and Related Asset Impairment Costs

The Company records realignment charges related to workforce reductions in accordance with SFAS No. 112, Employers
Accounting for Postemployment Benefits (SFAS 112), and SFAS No. 88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits (SFAS 88).
Pursuant to SFAS 112, costs related to employee severance are recorded when probable and estimable in accordance with our ongoing severance policy. SFAS 88, paragraph 15, provides that contractual termination benefits are recorded when it is
probable and estimable. Charges for the impairment of long-lived assets are recognized in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes a single accounting model for the
impairment of long-lived assets.

Restructuring Charges

The Company records restructuring costs in accordance with SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146) which requires that a liability for charges
associated with an exit or disposal activity be measured and recognized initially at fair value only when the liability is incurred. Related to restructuring (exit) activities, we may also have involuntary terminations that are accounted for under
SFAS 112 or SFAS 88 as applicable, or under SFAS 146 if the severance and related costs are considered to be a one-time benefit arrangement outside of our ongoing severance policy.



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Fiscal 2008 Business Realignment

In the third quarter of fiscal 2008, as a result of streamlining operational management processes and staffing requirements, the Company recorded severance of approximately $0.3 million, which was expensed to Selling,
general and administrative. This resulted from headcount reductions of three employees or 0.7% of the workforce as compared to June 30, 2007. As of March 29, 2008, approximately $21,000 has been paid in cash and approximately $0.3 million
remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the third quarter of fiscal 2009.

In the first quarter of fiscal 2008, primarily as the result of an effort to improve sales effectiveness and channel management, the Company recorded
severance of approximately $0.6 million, which was expensed to Selling, general and administrative. This resulted from headcount reductions of twelve employees or 2.7% of the workforce as compared to June 30, 2007. As of March 29, 2008,
approximately $0.4 million has been paid in cash and approximately $0.2 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the first quarter of fiscal
2009.

Fiscal 2007 Restructuring Initiatives

In the fourth quarter of fiscal 2007, as a result of local economic conditions in Japan, the Company changed its Japan sales strategy and approved a restructuring plan related to the Japanese operations which resulted in the closure of
certain office facilities in Japan, which included lease termination costs. As a result of the office closures, there were headcount reductions of four employees or 0.9% of the workforce as compared to June 30, 2006. As a result, the Company
recorded severance and related expenses of approximately $0.1 million and facility closure costs of approximately $0.2 million, which was expensed to Selling, general and administrative. As of March 29, 2008, approximately $0.3 million has been
paid in cash and no accrual remains on the Consolidated Balance Sheet.

Fiscal 2007 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2007, an intangible asset failed the impairment test due to a change in the Companys product strategy and,
accordingly, the Company took an approximate $0.3 million non-cash charge to Cost of revenues for the impairment.

In the third quarter of
fiscal 2007, prompted by the acquisition of Catalyst, the Company evaluated certain business processes and staffing requirements. As a result, the Company recorded severance and related expense, of approximately $1.6 million, of which approximately
$0.3 million was expensed to Cost of revenues, $1.2 million was expensed to Selling, general and administrative and $0.1 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of
thirty-three employees or 7.2% of the workforce as compared to June 30, 2006. As of March 29, 2008, approximately $1.4 million has been paid in cash and approximately $0.2 million remains in Accrued expenses and other current liabilities.
Severance and other related amounts under this plan are estimated to be paid by the end of the second quarter of fiscal 2009.

In the
second quarter of fiscal 2007, as a result of a change in the Companys organization stemming from the Catalyst acquisition, the Company recorded severance and related expenses of approximately $0.4 million, of which approximately $0.1 million
was expensed to Selling, general and administrative and $0.3 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of eleven employees or 2.4% of the workforce as compared to June 30,
2006. Severance and other related amounts under this plan were fully paid by the end of fiscal 2007.

5. Derivatives

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

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



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Interest Rate Swap

As required by the terms of the Companys Prior Credit Agreement (See Note 13Long-term Debt and Capital Leases), on January 27, 2005 the Company entered into a Master Agreement for an interest rate
swap with M&T Bank, the purpose of which was to protect against rising interest rates during the term of the Credit Agreement. On October 16, 2006 in conjunction with the repayment of the term loan, the Company terminated its interest rate
swap with M&T Bank. The net interest income earned on the swap was zero and approximately $0.3 million for the quarter and three quarters ended March 31, 2007.

As of March 29, 2008 the Company has the following derivative instruments:

Forward foreign
exchange contracts

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

The net losses or gains resulting from changes in the fair value of these derivatives and on transactions denominated in other than their functional currencies were net losses of approximately $0.1 million for both
the quarters ended March 29, 2008 and March 31, 2007, as compared to net losses of approximately $0.4 million and $0.2 million for the three quarters ended March 29, 2008 and March 31, 2007, respectively. These amounts are
included in Other, net in the Consolidated Statements of Operations. At March 29, 2008 and June 30, 2007, the notional amounts of the Companys open foreign exchange forward contracts, all with maturities of less than six months, were
approximately $19.1 million and $12.9 million, respectively.

6. Comprehensive Income (Loss)

The following table presents the components of comprehensive income (loss) (in thousands):



|                                         |  |               |       |               |                      |        |               |  |               |       |  |   |         |  
|---------------------------------------- |  | ------------- | ----- | ------------- | -------------------- | ------ | ------------- |  | ------------- | ----- |  | - | ------- | -
|                                         |  | Quarter Ended |       |               | Three Quarters Ended |       
|                                         |  | March 29,2008 |       | March 31,2007 |                      |        | March 29,2008 |  | March 31,2007 |      
|Net income (loss)                        |  | $             | 653   |               | $                    | (3,935 | )             |  | $             | 2,522 |  | $ | (10,982 | )
|Foreign currency translation gain (loss) |  |               | 1,561 |               |                      | 11     |               |  |               | 2,572 |  |   | (17     | )
|                                         |  |               |       |               |                      |        |               |  |               |       |  |   |         |  
|Comprehensive income (loss)              |  | $             | 2,214 |               | $                    | (3,924 | )             |  | $             | 5,094 |  |   | (10,999 | )
|                                         |  |               |       |               |                      |        |               |  |               |       |  |   |         |  

7. Accounts Receivable, net

The allowance for doubtful accounts and sales returns was approximately $0.7 million and $0.9 million as of March 29, 2008 and June 30, 2007, respectively.

8. Inventories, net

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



|                |  |               |        |              |   |       
|--------------- |  | ------------- | ------ | ------------ | - | ------
|                |  | March 29,2008 |        | June 30,2007
|Raw materials   |  | $             | 11,111 |              | $ | 9,312 
|Work in process |  |               | 5,113  |              |   | 7,354 
|Finished goods  |  |               | 17,968 |              |   | 21,979
|                |  |               |        |              |   |       
|                |  | $             | 34,192 |              | $ | 38,645
|                |  |               |        |              |   |       

The value of demonstration units included in finished goods was approximately $10.9 million and
$13.6 million at March 29, 2008 and June 30, 2007, 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 (raw materials and work in progress), included above, amounted to approximately $2.3 million and $2.7 million at March 29, 2008 and June 30, 2007, respectively.



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In fiscal 2008, the Company recorded approximately $0.8 million to Cost of revenues for inventory
write-offs related to certain inventory recorded at fair value in the purchase accounting for Catalyst, a portion of which the Company was indemnified. Additionally, in fiscal 2007, the Company recorded approximately $1.8 million to Cost of revenues
for inventory write-offs, including inventory recorded at fair value in the purchase accounting for Catalyst.

9. Other Current Assets

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



|                           |  |               |        |              |   |      
|-------------------------- |  | ------------- | ------ | ------------ | - | -----
|                           |  | March 29,2008 |        | June 30,2007
|Deferred tax assets, net   |  | $             | 5,313  |              | $ | 4,863
|Prepaid taxes              |  |               | 371    |              |   | 381  
|Other receivables          |  |               | 1,334  |              |   | 1,371
|Value-added tax receivable |  |               | 913    |              |   | 808  
|Other                      |  |               | 2,538  |              |   | 2,185
|                           |  |               |        |              |   |      
|                           |  | $             | 10,469 |              | $ | 9,608
|                           |  |               |        |              |   |      

10. Goodwill and Other Non-current Assets

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



|                                             |  |               |         |              |   |        
|-------------------------------------------- |  | ------------- | ------- | ------------ | - | -------
|                                             |  | March 29,2008 |         | June 30,2007
|Goodwill                                     |  | $             | 105,771 |              | $ | 105,885
|                                             |  |               |         |              |   |        
|Intangibles, net                             |  | $             | 1,861   |              | $ | 3,032  
|Deferred tax assets, net                     |  |               | 9,186   |              |   | 7,809  
|Deferred financing costs on convertible note |  |               | 2,220   |              |   | 2,642  
|Other                                        |  |               | 1,015   |              |   | 970    
|                                             |  |               |         |              |   |        
|                                             |  | $             | 14,282  |              | $ | 14,453 
|                                             |  |               |         |              |   |        

Goodwill

The Company completed the acquisition of its two complementary protocol businesses, CATC, on October 29, 2004 and Catalyst, on October 2, 2006. These acquisitions were completed because of their strategic
fit with the Companys existing business and because they were of such a nature and size as to establish new products for growth of the Company. Each of the acquisitions resulted in the recognition of goodwill in the Companys consolidated
financial statements. This goodwill arose because the purchase prices for these businesses reflect a number of factors, including the future earnings and cash flow potential of these products and the multiple to earnings, cash flow and other factors
at which similar businesses have been purchased by other acquirers.

The primary contributors to the CATC goodwill, included,
(i) substantial revenue potential, due to synergies in geographic and end-market opportunities; (ii) synergy benefits derived through the termination of costly third party distributors, using a direct sales model, leveraging an existing
LeCroy worldwide sales-force and customer support infrastructure; (iii) access to an expanded base of industry knowledge and workforce expertise; (iv) the resulting synergies CATC brings to existing operations, particularly the ability to
capitalize on growing serial data test application standards; and (v) immediate savings in general and administrative expenses due to elimination of CATCs public company costs.

The primary contributors to the Catalyst goodwill, included, (i) substantial revenue benefits due to synergies in product offerings and platforms
between the Catalyst and CATC product portfolio; (ii) expanded base of industry knowledge; (iii) economies of scale benefits for the protocol products and the complementary strategic fit with the CATC products, including the expansion of
protocol products; and (iv) opportunity to further strengthen direct sales model with Catalysts already experienced sales team.



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Under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142),
goodwill is tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount of the asset might be impaired. The goodwill impairment test is a two-step process which requires the Company to
make judgmental assumptions regarding fair value. Testing is required between annual tests if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. Such an event
may occur if, for an extended period of time, the market value of the Companys common stock plus a control premium were less than the carrying value of the Company. The Company obtains information on sales of similar sized companies in the
technology industry to estimate a control premium.

Management also reviews the Companys financial position quarterly for other
triggering events as described in SFAS No. 142. Should actual results not meet expectations or assumptions change in future years, the impairment assessment could result in a lower fair value estimate which could result in an impairment charge
that may materially affect the carrying value of the Companys assets and results from operations.

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. The Company has one reporting unit, in the test and measurement business, because none of the components of the Company constitute a business for which discrete financial information is available and for which Company
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 the reporting unit with its carrying amount, including goodwill. If the fair value of the 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 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.

As the Company consists of only one reporting unit, and is publicly traded,
management estimates the fair value of its reporting unit utilizing the Companys market capitalization, multiplying the number of actual shares outstanding by a one year average market price, as reflected on NASDAQ National Market, and
applying an additional premium to give effect to the Companys best estimate of a control premium, as if the Company were to be acquired by a single stockholder, which seeks to give effect to the increased consideration a potential acquirer
would be willing to pay in order to gain sufficient ownership to set policies, direct operations and make decisions related to the Company.

A 30% control premium was utilized in our interim goodwill impairment testing in fiscal 2008. This control premium is not a standard amount based on broad assumptions; rather, the amount is based on detailed analysis that considers
appropriate industry, market, economic and other pertinent factors, including, indications of such premiums from data on recent acquisition transactions. The control premium is reviewed periodically, taking into consideration current industry,
market and economic conditions along with other factors or available information specific to our business.

The Company completed the
annual impairment test required under SFAS 142 as of June 30, 2007 and determined that there was no impairment to the recorded goodwill balance of $105.9 million. The Company did, however, during the fourth quarter of fiscal 2007 and 2006,
reduce the goodwill by approximately $0.1 million and $0.4 million, respectively, as a result of a reversal of a pre-acquisition tax contingency reserve. Additionally, upon adoption of FIN 48, some accruals for uncertain tax positions related
to the acquisition of CATC were reduced, resulting in a decrease to goodwill of approximately $0.1 million.

As a result of the decline in
the Companys stock price since June 30, 2007, which affected the Companys market capitalization, the Company updated its goodwill impairment test as of September 29, 2007, December 29, 2007, and March 29, 2008
respectively, to identify whether a potential impairment of the Companys recorded goodwill existed. For the first quarter ended September 29, 2007 the Companys market capitalization, without regard to a control premium, exceeded its
carrying value. For the second quarter testing as of December 29, 2007, the fair value of the Companys reporting unit was determined to be $142.8 million, using the 30% control premium, which exceeded the carrying amount by $25.6 million,
or 21%. For the third quarter testing as of March 29, 2008, the fair value of the Companys reporting unit was determined to be $137.8 million, using the 30% control premium, which exceeded the carrying amount by $18.5 million, or 15.5%.
Managements estimate of an appropriate control premium to apply in determining fair value is an important variable in the Companys goodwill impairment assessment, and is subject to change. A significant impairment could result in
additional charges and have a material adverse impact on the consolidated financial condition and operating results.



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Other Non-current Assets

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



|                                                  |  |                               |  |               |        |   |              |   |        |  
|------------------------------------------------- |  | ----------------------------- |  | ------------- | ------ | - | ------------ | - | ------ | -
|                                                  |  | OriginalWeightedAverage Lives |  | March 29,2008 |        |   | June 30,2007 |  
|Amortizable intangible assets:                    |  |                               |  |               |        |   |              |   |        |  
|Technology, manufacturing and distribution rights |  | 2.9 years                     |  | $             | 8,296  |   |              | $ | 8,296  |  
|Accumulated amortization                          |  |                               |  |               | (7,579 | ) |              |   | (6,599 | )
|                                                  |  |                               |  |               |        |   |              |   |        |  
|Net carrying amount                               |  |                               |  | $             | 717    |   |              | $ | 1,697  |  
|                                                  |  |                               |  |               |        |   |              |   |        |  
|Patents and other intangible assets               |  | 5.9 years                     |  | $             | 1,592  |   |              | $ | 1,592  |  
|Accumulated amortization                          |  |                               |  |               | (1,148 | ) |              |   | (957   | )
|                                                  |  |                               |  |               |        |   |              |   |        |  
|Net carrying amount                               |  |                               |  | $             | 444    |   |              | $ | 635    |  
|                                                  |  |                               |  |               |        |   |              |   |        |  
|Total net carrying amount                         |  |                               |  | $             | 1,161  |   |              | $ | 2,332  |  
|                                                  |  |                               |  |               |        |   |              |   |        |  

Amortization expense for intangible assets, with finite lives, was approximately $0.1 million and
$1.2 million for the quarter and three quarters ended March 29, 2008, respectively, as compared to approximately $1.2 million and $2.4 million for the quarter and three quarters ended March 31, 2007, respectively. The cost of an
amortizable intangible asset is amortized on a straight-line basis over the estimated economic life of the asset.

As of March 29,
2008 and June 30, 2007, there was approximately $0.7 million for the Catalyst tradename, an asset with an indefinite life, included in Intangibles, net on the Consolidated balance sheet.

11. Accrued Expenses and Other Current Liabilities

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



|                                                  |  |               |        |              |   |       
|------------------------------------------------- |  | ------------- | ------ | ------------ | - | ------
|                                                  |  | March 29,2008 |        | June 30,2007
|Compensation and benefits, including severance    |  | $             | 7,388  |              | $ | 6,494 
|Income taxes                                      |  |               | 754    |              |   | 1,996 
|Warranty                                          |  |               | 1,341  |              |   | 1,190 
|Deferred revenue, current portion                 |  |               | 1,309  |              |   | 1,195 
|Accrued interest on debt                          |  |               | 1,340  |              |   | 1,033 
|Retained liabilities from discontinued operations |  |               | 160    |              |   | 160   
|Other current liabilities                         |  |               | 2,634  |              |   | 3,340 
|                                                  |  |               |        |              |   |       
|                                                  |  | $             | 14,926 |              | $ | 15,408
|                                                  |  |               |        |              |   |       

12. Warranties

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

The following table is a reconciliation of the changes in the Companys aggregate product warranty liability during the quarter and three quarters ended March 29, 2008 and March 31, 2007 (in thousands):



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##### Table of Contents

|                                                       |  |               |       |   |                      |   |       |               |  |   |               |   |  |   |       |  
|------------------------------------------------------ |  | ------------- | ----- | - | -------------------- | - | ----- | ------------- |  | - | ------------- | - |  | - | ----- | -
|                                                       |  | Quarter Ended |       |   | Three Quarters Ended |  
|                                                       |  | March 29,2008 |       |   | March 31,2007        |   |       | March 29,2008 |  |   | March 31,2007 |  
|Balance at beginning of period                         |  | $             | 1,223 |   |                      | $ | 1,107 |               |  | $ | 1,190         |   |  | $ | 1,005 |  
|Accruals for warranties entered into during the period |  |               | 288   |   |                      |   | 310   |               |  |   | 718           |   |  |   | 617   |  
|Warranty costs incurred during the period              |  |               | (170  | ) |                      |   | (252  | )             |  |   | (567          | ) |  |   | (607  | )
|Warranty liability assumed in the Catalyst Merger      |  |               |      |   |                      |   |      |               |  |   |              |   |  |   | 150   |  
|                                                       |  |               |       |   |                      |   |       |               |  |   |               |   |  |   |       |  
|Balance at end of period                               |  | $             | 1,341 |   |                      | $ | 1,165 |               |  | $ | 1,341         |   |  | $ | 1,165 |  
|                                                       |  |               |       |   |                      |   |       |               |  |   |               |   |  |   |       |  

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

13.
Long-term Debt and Capital Leases

Credit Agreement

On March 30, 2007, the Company entered into a $40.0 million senior, secured, four-year credit agreement with the lenders listed therein and Manufacturers and Traders Trust Company (M&T Bank), as
administrative agent for such lenders (the New Credit Agreement), which replaced LeCroys existing credit facility that was entered into on October 29, 2004 and subsequently amended (the Prior Credit Agreement). The
terms of the New Credit Agreement (since amended) provided LeCroy with a $40.0 million revolving credit facility (Revolver), which includes a $5.0 million swingline loan subfacility and a $5.0 million letter of credit subfacility. The
performance by LeCroy of its obligations under the New Credit Agreement is secured by all of the assets of LeCroy and its domestic subsidiaries, and is guaranteed by LeCroys domestic subsidiaries. On March 30, 2007 the Company borrowed
$9.4 million under the New Credit Agreement which was used to pay the outstanding balance under LeCroys Prior Credit Agreement and for general corporate purposes, including the financing of working capital requirements and capital
expenditures. As of March 29, 2008, the Company has zero outstanding borrowings against the Revolver and nothing against the letter of credit subfacility or the swingline loan subfacility.

Effective as of April 26, 2007, LeCroy, in accordance with New Credit Agreement, entered into a First Modification and Lender Joinder Agreement
(Joinder Agreement). This Joinder Agreement increased the Companys credit limit to $50.0 million and added North Fork Bank to the New Credit Agreement.

Borrowings under the New Credit Agreement bear interest at variable rates equal to, at LeCroys election, (1) the higher of (a) the prime rate or (b) the federal funds rate plus 0.5% plus an
applicable margin based on LeCroys leverage ratio or (2) LIBOR plus an applicable margin based on LeCroys leverage ratio. In addition, LeCroy must pay commitment fees during the term of the New Credit Agreement at rates dependent on
LeCroys leverage ratio.

The New Credit Agreement contains, among other things, conditions precedent, covenants, representations and
warranties and events of default customary for facilities of this size, type and purpose. Negative covenants include certain restrictions or limitations on, among other things, the incurrence of indebtedness; liens; consolidations and mergers;
investments, loans, advances, guarantees and acquisitions; sales of assets (subject to customary exceptions for sales of inventory in the ordinary course and sales of equipment in connection with the replacement thereof in the ordinary course); sale
and lease-back transactions; hedging agreements; and restricted payments, including repurchase of all or a portion of the convertible notes, dividends and stock repurchases.

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 March 29, 2008, the Company was in compliance with its financial covenants under the New Credit Agreement.

The New Credit Agreement will expire on July 15, 2011, unless, in the absence of any default, extended by LeCroy to April 1, 2012, contingent
on the waiver or extension of the first redemption date of the Companys convertible notes.

The Company incurred approximately $0.6
million of financing costs in connection with entering into the New Credit Agreement, which were deferred and are being amortized, on a straight line basis, over the term of the New Credit Agreement. At March 29, 2008, approximately $0.1
million of deferred financing costs were included in Other current assets and approximately $0.3 million were included in Other non-current assets on the Consolidated Balance Sheets.



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Convertible Debt

On October 12, 2006, the Company sold and issued $72.0 million in convertible senior subordinated notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended
(the Notes). The Notes bear interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and October 15, beginning April 15, 2007. The Notes are direct, unsecured, senior
subordinated obligations of the Company and rank: (i) subordinate in right of payment to all of the Companys existing and future secured indebtedness; (ii) equal in right of payment with all of the Companys existing and future
senior unsecured indebtedness, and (iii) senior in right of payment to all of the Companys existing and future subordinated indebtedness, except that the Notes rank equally with the $3.5 million note issued in connection with the Catalyst
acquisition, which is subordinated to the Companys credit facility. In connection with the issuance and sale of the Notes, the Company entered into an indenture dated as of October 12, 2006, with U.S. Bank National Association as trustee.
The terms of the Notes are governed by the indenture.

The Notes mature on October 15, 2026 unless earlier redeemed, repurchased or
converted. Holders of the Notes will have the right to require the Company to repurchase for cash, all or a portion of their Notes on each of October 15, 2011, October 15, 2016 and October 15, 2021, at a repurchase price equal to
100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, up to but not including, the repurchase date. In addition, the Company may redeem the Notes for cash, either in whole or in part, anytime after
October 20, 2011 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, up to but not including the redemption date. The Notes are convertible into Company common stock
by the holders at an initial conversion rate equal to 68.7285 shares per $1,000 principal amount of the Notes (equal to an initial conversion price of approximately $14.55 per share), subject to adjustment as described in the indenture. Upon
conversion, the Company will deliver for each $1,000 principal amount of Notes, an amount consisting of cash equal to the lesser of $1,000 and the conversion value (as defined in the indenture) and, to the extent that the conversion value exceeds
$1,000, at the Companys election, cash or shares of the Companys common stock in respect of the remainder. Prior to September 15, 2026, holders may convert their notes into cash and shares of the Companys common stock, if any,
at the applicable conversion rate, at their option, only under limited circumstances described in the indenture. On or after September 15, 2026, holders may convert their notes into cash and shares of the Companys common stock, if any, at
the applicable conversion price, at the Companys option, at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion of each $1,000 principal amount of notes, the holder will receive
an amount in cash equal to the lesser of (i) $1,000 or (ii) the conversion value, as described in the indenture; if the conversion value exceeds $1,000 on the conversion date, the Company will also deliver, at the Companys election,
cash or common stock or combination of each with a value equal to such excess. As of March 29, 2008, the market value of the convertible notes was $63.6 million.

The Company evaluated the accounting for the conversion feature in accordance with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Companys
Own Stock,, and related issues, at the date of issuance of the Notes and determined that the conversion feature does not need to be accounted for separately from the Notes. The Company updates its analysis of the accounting for the conversion
feature as circumstances warrant. If the conversion feature is required to be bifurcated in the future, changes in the fair value of the conversion feature would be charged or credited to interest expense in each period.

If the Company undergoes a change in control (as defined in the indenture), holders of the Notes will have the right, subject to certain
conditions, to require the Company to repurchase for cash, all or a portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any.

In connection with the sale of its Notes, the Company also entered into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Company filed a shelf registration statement, which has been declared effective by the Securities and Exchange Commission, covering resales by holders of the Notes and any common stock issuable upon conversion of such Notes (subject to certain
conditions specified in the Registration Rights Agreement). The Company has agreed to use its commercially reasonable efforts to keep the registration statement effective until the earliest of the following has occurred: (i) all securities
covered by the registration statement have been sold pursuant to the registration statement or Rule 144 under the Securities Act; (ii) the holders of the Notes and the shares of the Companys common stock issuable upon conversion of the
Notes that are not our affiliates are able to sell all such securities immediately pursuant to Rule 144(k) under the Securities Act; (iii) the date when all of the Notes and shares of common stock issuable upon conversion have ceased to be
outstanding; and (iv) October 12, 2008.

The Company will pay predetermined additional interest on notes that are registerable
securities if the shelf registration statement is unavailable for periods in excess of those permitted under the indenture. The Company believes the likelihood of occurrence of such event is remote and, as such, the Company has not recorded a
liability at March 29, 2008. In the event that it becomes probable that the Company would have to pay additional interest under the registration rights agreement, the Company estimates the maximum potential amount as of March 29, 2008 to
be approximately $0.3 million per year.



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The Company received net proceeds from the sale of the Notes of approximately $69.0 million.
Immediately thereafter, the net proceeds from the sale were used to repay the outstanding term debt balance of approximately $31.9 million under the Companys Prior Credit Agreement, repurchase 850,000 shares of the Companys common
stock at a cost of approximately $9.9 million and repay approximately $22.8 million of revolving debt under the Companys Prior Credit Agreement that was drawn down to fund the acquisition of Catalyst.

The Company incurred approximately $3.0 million of transaction fees in connection with issuing the Notes, which have been deferred and are being
amortized over the term of the Notes using the effective interest method. The term of the Notes for amortization purposes is considered to be five years in accordance with SAB Topic 3-C, Redeemable Preferred Stock, as that is the first
period in which the redemption feature of the Notes can be executed by either the Noteholders or LeCroy and therefore is considered the mandatory redemption date. At March 29, 2008, approximately $2.2 million of unamortized fees related to the
Notes were included in Other non-current assets on the Consolidated Balance Sheet.

The Company maintains certain short-term foreign credit
facilities, principally with two Japanese banks totaling 150.0 million yen (approximately $1.5 million as of March 29, 2008). No amounts were outstanding under these facilities as of March 29, 2008 and June 30, 2007. The
Companys Swiss subsidiary, also has an overdraft facility totaling 1.0 million Swiss francs (approximately $1.0 million as of March 29, 2008). As of March 29, 2008 and June 30, 2007, approximately 0.4 million Swiss
francs were held against supplier obligations leaving an available balance of 0.6 million Swiss francs under this credit facility. These obligations to Swiss suppliers, such as rent and utilities, are payable under the credit facility only in
the event that the subsidiary is unable to meet its financial obligations to those suppliers.

During fiscal 2005, the Company entered into
vendor supplied capital lease agreements for technology rights of approximately $1.3 million. These leases bear interest at 4.5% to 4.88% with three-year terms. At March 29, 2008 and June 30, 2007, the Companys outstanding balances
under these agreements were zero and approximately $0.1 million, respectively. During fiscal 2008, the Company entered into another vendor supplied capital lease agreement for technology rights of approximately $0.7 million. The lease bears interest
at 7.75% with a three-year term. At March 28 2008, the Companys outstanding balance under this agreement was approximately $0.6 million, approximately $0.2 million was included in Current portion of long-term debt and capital leases and
approximately $0.4 million was included in Deferred revenue and other non-current liabilities on the Consolidated Balance Sheet.

14. Commitments and
Contingencies

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 such matters currently pending that the Company expects to have a material adverse affect on its business, results of operations, financial condition or cash flows.

15. Treasury Stock

In May 2006, the
Companys Board of Directors approved the adoption of a share repurchase plan authorizing the Company to purchase up to 2.0 million shares of its common stock. To date, the Company has purchased approximately 1.3 million shares under
the plan. In fiscal 2008, 46,000 shares were repurchased at an average price of $7.28 per share in the first quarter; 78,381 shares were repurchased at an average price of $8.82 per share in the second quarter; and 137,904 shares were repurchased at
an average price of $7.98 per share in the third quarter.

16. Earnings (loss) per Common Share

The following is a presentation of the numerators and the denominators of the basic and diluted net income (loss) per common share computations for the
quarter and three quarters ended March 29, 2008 and March 31, 2007 (in thousands):



|                                     |  |               |        |               |                      |        |               |  |               |        |  |   |         |  
|------------------------------------ |  | ------------- | ------ | ------------- | -------------------- | ------ | ------------- |  | ------------- | ------ |  | - | ------- | -
|                                     |  | Quarter Ended |        |               | Three Quarters Ended |       
|                                     |  | March 29,2008 |        | March 31,2007 |                      |        | March 29,2008 |  | March 31,2007 |       
|Numerator:                           |  |               |        |               |                      |        |               |  |               |        |  |   |         |  
|Net income (loss)                    |  | $             | 653    |               | $                    | (3,935 | )             |  | $             | 2,522  |  | $ | (10,982 | )
|                                     |  |               |        |               |                      |        |               |  |               |        |  |   |         |  
|Denominators:                        |  |               |        |               |                      |        |               |  |               |        |  |   |         |  
|Weighted average shares outstanding: |  |               |        |               |                      |        |               |  |               |        |  |   |         |  
|Basic                                |  |               | 11,763 |               |                      | 11,499 |               |  |               | 11,759 |  |   | 11,736  |  
|Employee stock options and other     |  |               | 269    |               |                      |       |               |  |               | 241    |  |   |        |  
|                                     |  |               |        |               |                      |        |               |  |               |        |  |   |         |  
|Diluted                              |  |               | 12,032 |               |                      | 11,499 |               |  |               | 12,000 |  |   | 11,736  |  
|                                     |  |               |        |               |                      |        |               |  |               |        |  |   |         |  



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The computations of diluted net income per common share for the quarter and three quarters ended
March 29, 2008 do not include approximately 1.6 million and 1.7 million, respectively, of stock options and non-vested stock, as the effect of their inclusion would have been anti-dilutive to earnings per share. The computations of
diluted net loss per common share for the quarter and three quarters ended March 31, 2007 do not include approximately 2.1 million and 2.4 million shares, respectively, of stock options and non-vested stock, as the effect of their
inclusion would have been anti-dilutive to earnings per share. The convertible notes had no impact on diluted EPS for the quarter and three quarters ended March 29, 2008 and March 31, 2007 because the average share price was below $14.55
per share (the initial conversion price), and accordingly, the Notes, if converted, would have required only cash at settlement.

17. Income Taxes

The effective income tax rate for the quarter and three quarters ended March 29, 2008 was 9.0% and 10.4%, respectively, which includes
the effect of discrete items, compared to an effective tax rate of (1.7)% and (12.0)% for the quarter and three quarters ended March 31, 2007, respectively, which also includes the effects of discrete items.

The effective income tax rate for the quarter and three quarters ended March 29, 2008 includes: the effect of a reduction of tax expense of
approximately $0.5 million resulting from both the final true-up of the prior years tax accrual upon filing the actual tax returns and an election for certain R&D credits made by the Company in the second quarter of fiscal 2008; a
reduction of tax expense of approximately $0.4 million from the recognition of unrecognized tax benefits due to the expiration of the statute of limitations; slightly offset by approximately $31,000 increase to tax expense for interest related to
income tax exposures; all of which are treated as discrete items. The effective tax rate for the quarter and three quarters ended March 31, 2007 includes an increase in the valuation allowance of approximately $1.0 million, treated as discrete
item. Additionally, the three quarters ended March 31, 2007 includes the effects of the in-process research and development (IPR&D) charge of $4.0 million related to the Catalyst acquisition, which is not deductible for tax
purposes, which was also treated as a discrete item.

The Company calculates income tax expense based upon an annual estimated effective
tax rate that includes estimates and assumptions that may change during the year. The differences between the annual estimated effective tax rate and the U.S. federal statutory rate of 35% principally result from the Companys geographical
distribution of taxable income, the differences between the book and tax treatment of certain items, and the effect of the discrete items.

Effective July 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, as amended by FASB Staff Position
No. 48-1 (FSP-FIN 48-1), Definition of Settlement in FASB Interpretation 48. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements,
uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the position is sustainable,
based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit greater than 50% likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information. A tax
benefit from an uncertain position was previously recognized if it was probable of being sustained. Under FIN 48, the liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within
twelve months of the reporting date. The impact of adopting FIN 48 and FSP-FIN 48-1 on the Companys consolidated financial statements is summarized below:



|                                                   |  |                        |  |                  |   |  |                      
|-------------------------------------------------- |  | ---------------------- |  | ---------------- | - |  | ---------------------
|                                                   |  | Balance atJune 30,2007 |  | FIN 48Adjustment |   |  | Balance atJuly 1,2007
|Goodwill                                           |  | 105,885                |  | (114             | ) |  | 105,771              
|Other non-current assets                           |  | 14,453                 |  | 1,057            |   |  | 15,510               
|Accrued expenses and other current liabilities     |  | 15,408                 |  | (1,968           | ) |  | 13,440               
|Deferred revenue and other non-current liabilities |  | 1,246                  |  | 2,853            |   |  | 4,099                
|Retained earnings                                  |  | 2,486                  |  | 58               |   |  | 2,544                

The Company operates in multiple taxing jurisdictions, both within and outside the United States.
At July 1, 2007 and March 29, 2008, the total amount of unrecognized tax benefits related to federal, state and foreign taxes and accrued interest was approximately $10.1 million (of which approximately $7.5 million would impact the
effective tax rate if recognized). Approximately $2.6 million of the total unrecognized tax benefits are related to the CATC acquisition, and would reduce goodwill if recognized at July 1, 2007 and March 29, 2008. As of March 29,
2008, the Company has approximately $10.1 million of unrecognized tax benefits, of which, approximately $2.7 million are reflected as a non-current liability and approximately $7.4 million are reflected as a reduction of gross deferred tax assets.



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The Company believes it is reasonably possible that approximately $1.1 million of net unrecognized tax
benefits will be recognized during the next twelve months due to the expiration of the statute of limitations and impact the Companys effective tax rate.

The Company recognizes interest and, if applicable, penalties which could be assessed related to unrecognized tax benefits in income tax expense. As of July 1, 2007 and March 29, 2008, the total amount of
accrued interest and penalties, before federal and, if applicable, state effect, was approximately $57,000 and $80,000, respectively.

The
Company files income tax returns in the U.S., various states and in foreign jurisdictions. For federal and foreign income tax purposes, the fiscal 2005 through 2007 tax years remain open for examination by the tax authorities. For state tax
purposes, (principally California and New York) fiscal 2003 through 2007 tax years remain open for examination by the tax authorities.

18. Segment and
Geographic Revenue

The Company operates in a single-reportable segment 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. Revenue from the sale of the Companys products, which are similar in nature, are reflected as Test and measurement product revenue in the
Consolidated Statements of Operations.

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



|                   |  |               |        |                      |   |               |  |               |         |  |   |        
|------------------ |  | ------------- | ------ | -------------------- | - | ------------- |  | ------------- | ------- |  | - | -------
|                   |  | Quarter Ended |        | Three Quarters Ended
|                   |  | March 29,2008 |        | March 31,2007        |   | March 29,2008 |  | March 31,2007
|North America      |  | $             | 13,786 |                      | $ | 13,676        |  | $             | 39,101  |  | $ | 37,625 
|Europe/Middle East |  |               | 14,897 |                      |   | 12,393        |  |               | 44,085  |  |   | 39,277 
|Japan              |  |               | 2,707  |                      |   | 3,592         |  |               | 9,978   |  |   | 15,233 
|Asia/Pacific       |  |               | 9,164  |                      |   | 9,681         |  |               | 26,663  |  |   | 22,364 
|                   |  |               |        |                      |   |               |  |               |         |  |   |        
|Total revenues     |  | $             | 40,554 |                      | $ | 39,342        |  | $             | 119,827 |  | $ | 114,499
|                   |  |               |        |                      |   |               |  |               |         |  |   |        

Total assets by geographic area are as follows:



|                   |  |               |         |              |   |        
|------------------ |  | ------------- | ------- | ------------ | - | -------
|                   |  | March 29,2008 |         | June 30,2007
|North America      |  | $             | 207,306 |              | $ | 211,264
|Europe/Middle East |  |               | 14,646  |              |   | 13,263 
|Japan              |  |               | 1,554   |              |   | 2,813  
|Asia/Pacific       |  |               | 4,126   |              |   | 3,979  
|                   |  |               |         |              |   |        
|Total assets       |  | $             | 227,632 |              | $ | 231,319
|                   |  |               |         |              |   |        

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



|                        |  |               |        |              |   |       
|----------------------- |  | ------------- | ------ | ------------ | - | ------
|                        |  | March 29,2008 |        | June 30,2007
|North America           |  | $             | 19,344 |              | $ | 19,671
|Europe/Middle East      |  |               | 820    |              |   | 513   
|Japan                   |  |               | 109    |              |   | 95    
|Asia/Pacific            |  |               | 396    |              |   | 60    
|                        |  |               |        |              |   |       
|Total long-lived assets |  | $             | 20,669 |              | $ | 20,339
|                        |  |               |        |              |   |       



|(1) | Long-lived assets presented in the table above include only Property and equipment, net.
|--- | ----------------------------------------------------------------------------------------



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19. New Accounting Pronouncements

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

In June 2006, the Emerging Issues Task Force (EITF) issued EITF Abstract 06-2 (EITF 06-2), Accounting for Sabbatical Leave
and Other Similar Benefits Pursuant to FASB Statement No. 43. EITF 06-2 provides guidance that an employees right to a compensated absence under a sabbatical or other similar benefit arrangement should be accrued over the requisite
service period. EITF 06-2 is effective for fiscal years beginning after December 15, 2006. EITF 06-2 allows for adoption through retrospective application to all prior periods or through a cumulative-effect adjustment to retained earnings. The
Company adopted EITF 06-2 beginning July 1, 2007 using the cumulative-effect adjustment approach. The effect of this adoption resulted in a decrease to beginning retained earnings of approximately $0.2 million, a decrease to deferred tax assets
of approximately $0.1 million and an increase to Accrued expenses and other current liabilities and Deferred revenue and other non-current liabilities of approximately $0.2 million and $0.1 million, respectively.

In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An
Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48
was effective for fiscal years beginning after December 15, 2006, and was adopted by the Company effective July 1, 2007. See Note 17  Income Taxes for the impact of the adoption of FIN 48 on the Companys consolidated financial
statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS 157 requires companies to disclose the fair value of their financial instruments according to a fair value
hierarchy as defined in the standard. Additionally, companies are required to provide enhanced disclosure regarding financial instruments in one of the categories, including a reconciliation of the beginning and ending balances separately for each
major category of assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FASB Staff
Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2). FSP FAS 157-2 amends FAS 157 to delay the effective date of FAS 157 for non-financial assets and non-financial liabilities until
fiscal years beginning after November 15, 2008, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Management is currently evaluating the effect that adoption of this statement will
have on the Companys consolidated financial position and results of operations.

In December 2006, the FASB issued FASB Staff
Position EITF 00-19-2, Accounting for Registration Payment Arrangements (FSP EITF 00-19-2). FSP EITF 00-19-2 specifies that registration payment arrangements should play no part in determining the initial classification and
subsequent accounting for the securities to which they relate. FSP EITF 00-19-2 requires the contingent obligation in a registration payment arrangement to be separately analyzed under SFAS No. 5, Accounting for Contingencies, and
FASB Interpretation No. 14, Reasonable Estimations of the Amount of a Loss. If payment in a registration payment arrangement is probable and can be reasonably estimated, a liability should be recorded. FSP EITF 00-19-2 is effective
for fiscal years beginning after December 15, 2006. The adoption of this FSP did not have a material effect on the Companys consolidated financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an Amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS 159 apply only to
entities that elect the fair value option. However, the amendment to SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. SFAS 159 is
effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also
elects to apply the provision of SFAS 157. Management is currently evaluating the effect that adoption of SFAS 159 will have on the Companys consolidated financial position and results of operations.



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In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB
Interpretation No. 48 (FSP-FIN 48-1). FSP-FIN 48-1 further clarifies if it is appropriate for an entity to recognize a previously unrecognized tax benefit when the only change since the initial determination is the completion
of an examination or audit by a taxing authority. FSP-FIN 48-1 provides the determination of whether the position is effectively settled should be taken on a case by case basis; however, positions may be grouped by tax year and considered
effectively settled. The adoption of this position on July 1, 2007 did not have a significant impact on the Companys consolidated financial statements (See Note 17  Income Taxes for additional information).

In June 2007, the Emerging Issues Task Force (EITF) issued EITF 07-3, Accounting for Nonrefundable Advance Payments for Goods or
Services to Be Used in Future Research and Development Activities (EITF 07-3). EITF 07-3 addresses the diversity that exists with respect to the accounting for the non-refundable portion of a payment made by a research and
development entity for future research and development activities. The EITF concluded that an entity must defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the
related services are performed. EITF 07-3 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007. Management is currently evaluating the impact of adopting EITF 07-03 on its financial statements
and results of operations; however, the Company does not expect it will have a material effect on the Companys consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business Combinations. This statement establishes
the principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date fair value. SFAS 141R also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted. Management is currently evaluating the effect that adoption
of SFAS 141R will have on the Companys consolidated financial position and results of operations.

In March 2008, the FASB issued
SFAS No. 161 (SFAS 161), Disclosures about Derivative Instruments and Hedging Activities. This statement requires companies with derivative instruments to disclose information that should enable financial statement
users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
and how derivative instruments and related hedged items affect a companys financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. Management is currently evaluating the effect that adoption of SFAS 161 will have on the Companys consolidated financial position and results of operations.

20. Catalyst Acquisition

The Catalyst Merger was
recorded under the purchase method of accounting in accordance with SFAS 141. On October 2, 2006, the effective date of the Catalyst Merger, all shares of common stock of Catalyst issued and outstanding immediately prior to the Catalyst Merger
were exchanged for approximately $26.7 million in cash immediately. In addition, pursuant to the terms of the Merger Agreement, 10% of the stated consideration of $33.5 million, or $3.35 million, was placed in escrow for the twelve-month period
following the closing of the Catalyst Merger to secure certain indemnification obligations under the terms of the Merger Agreement. On October 2, 2007, approximately $3.1 million was released from the escrow to the Catalyst stockholders,
pursuant to the terms of the Merger Agreement. In the third quarter of fiscal 2008, the Company and the former Catalyst owners agreed to a final indemnification release. The Company received approximately $0.2 million from the remaining Catalyst
escrow balance, representing the indemnification obligation for certain Catalyst inventory, assumed at acquisition.

21. Subsequent Events

On May 7, 2008, the Company entered into a Second Modification Agreement to modify certain financial and negative covenants of its
New Credit Agreement.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Overview

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

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

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

We employ a direct sales model utilizing a highly skilled global sales force where it makes economic sense to do so. We supplement our
direct sales force with a combination of manufacturers representatives and distributors in certain geographic areas. 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 and are in the early stages of developing a strong manufacturers representative channel. 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 through distributors. In Asia/Pacific, we sell our products directly in South Korea, Singapore and five regions in China.

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

Generally, we transact revenues and pay our operating expenses in the local currencies of the countries in which we have a direct distribution presence
or other operations, with limited exceptions, most notably in China where our sales and operating expenses are denominated in U.S. dollars. In Europe/Middle East, we transact business in Euros, Swiss francs, British pounds, Swedish krona and 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 3 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, have been principally due to the lower level of general market activity during the summer months, particularly in Europe.

Cost of revenues represents manufacturing and service costs, which primarily comprise materials, labor and factory overhead. Gross profits
represent revenues less cost of revenues. Additional factors integral to gross profit earned are product mix, as the list prices of our products range from $2,900 to $205,000 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.



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

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

In addition, in response to fluctuations in the technology markets we target, we continually assess and adopt programs aimed at positioning us for
long-term success. These programs may include streamlining operations, discontinuing older and less profitable product lines, changing our future product strategy, and reducing operating expenses from time to time. As an example, in fiscal 2007 and
2006 we implemented business realignment and restructuring initiatives intended to reduce costs and more efficiently allocate product development resources. For a more detailed discussion of our initiatives see the Section entitled Business
Realignment, Restructuring Initiatives, and Related Asset Impairments below.

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

In furtherance of our drive to meet our customers changing demands, we also look outside our organization for opportunities
to expand our markets. Accordingly, on October 29, 2004 and October 2, 2006, we completed the acquisitions of Computer Access Technology Corporation (CATC) and Catalyst Enterprises, Inc. (Catalyst), respectively, to
complement our expanding portfolio of serial data test solutions. This division, Protocol Solutions Group (PSG), now represents about 20% of our total business. In addition, in March 2006, we completed purchase and settlement agreements
with Iwatsu Electric Corporation that included the rights to a new low-end product line, ViewGo, re-engineered and launched as the WaveJet Family of products, as well as unrelated intellectual property designs and a 10-year non-compete
agreement.

Also during fiscal 2006, we transformed our entire low and mid-range product lines by introducing a new line of WaveRunners and
WaveSurfers and adding the new WaveJet product line noted above. Additionally, we expanded our high-end product line by introducing the SDA 18000. We believe that our diversified product mix strategically positions us to expand our presence in the
oscilloscope market.

Business Realignment, Restructuring Initiatives, and Related Asset Impairments

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

Fiscal 2008 Business Realignment

In the third quarter of fiscal 2008, as a result of streamlining operational management processes and staffing requirements, the Company recorded severance of approximately $0.3 million, which was expensed to Selling, general and
administrative. This resulted from headcount reductions of three employees or 0.7% of the workforce as compared to June 30, 2007. As of March 29, 2008, approximately $21,000 has been paid in cash and approximately $0.3 million remains in
Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the third quarter of fiscal 2009.

In the first quarter of fiscal 2008, primarily as the result of an effort to improve sales effectiveness and channel management, the Company recorded severance of approximately $0.6 million, which was expensed to
Selling, general and administrative. This resulted from headcount reductions of twelve employees or 2.7% of the workforce as compared to June 30, 2007. As of March 29, 2008,



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approximately $0.4 million has been paid in cash and approximately $0.2 million remains in Accrued Expenses and other current liabilities on the Consolidated
Balance Sheet. Severance is estimated to be paid by the end of the first quarter of fiscal 2009.

Fiscal 2007 Restructuring Initiatives

In the fourth quarter of fiscal 2007, as a result of local economic conditions in Japan, the Company changed its Japan sales strategy and approved a
restructuring plan related to the Japanese operations which resulted in the closure of certain office facilities in Japan, which included lease termination costs. As a result of the office closures, there were headcount reductions of four employees
or 0.9% of the workforce as compared to June 30, 2006. As a result, the Company recorded severance and related expenses of approximately $0.1 million and facility closure costs of approximately $0.2 million, which was expensed to Selling,
general and administrative. As of March 29, 2008, approximately $0.3 million has been paid in cash and no accrual remains on the Consolidated Balance Sheet.

Fiscal 2007 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2007, an intangible asset
failed the impairment test due to a change in the Companys product strategy and, accordingly, the Company took an approximate $0.3 million non-cash charge to Cost of revenues for the impairment.

In the third quarter of fiscal 2007, prompted by the acquisition of Catalyst, the Company evaluated certain business processes and staffing requirements.
As a result, the Company recorded severance and related expense, of approximately $1.6 million, of which approximately $0.3 million was expensed to Cost of revenues, $1.2 million was expensed to Selling, general and administrative and $0.1 million
was expensed to Research and development. The implementation of this plan resulted in headcount reductions of thirty-three employees or 7.2% of the workforce as compared to June 30, 2006. As of March 29, 2008, approximately $1.4 million
has been paid in cash and approximately $0.2 million remains in Accrued expenses and other current liabilities. Severance and other related amounts under this plan are estimated to be paid by the end of the second quarter of fiscal 2009.

In the second quarter of fiscal 2007, as a result of a change in the Companys organization stemming from the Catalyst acquisition, the Company
recorded severance and related expenses of approximately $0.4 million, of which approximately $0.1 million was expensed to Selling, general and administrative and $0.3 million was expensed to Research and development. The implementation of this plan
resulted in headcount reductions of eleven employees or 2.4% of the workforce as compared to June 30, 2006. Severance and other related amounts under this plan were fully paid by the end of fiscal 2007.

Critical Accounting Policies

The preparation of our
Consolidated Financial Statements in conformity with U. S. Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities in the Consolidated Financial Statements and accompanying notes. These estimates and assumptions are based on managements judgment and available information and, consequently, actual results
could differ from these estimates.

This management discussion and analysis of financial condition and results of operations should be read
in conjunction with the audited Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2007, which includes a description of our accounting policies. Our critical
accounting policies involve significant judgment by LeCroys management, as described in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2007, and include revenue recognition, reserves on accounts
receivable, allowance for excess and obsolete inventory, valuation of deferred tax assets, valuation of long-lived and intangible assets, estimation of warranty liabilities, share-based compensation expense, valuation of goodwill, and income tax
contingencies. We have expanded our goodwill accounting policy and have adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, as amended by FASB
Staff Position No. 48-1, Definition of Settlement in FASB Interpretation 48, as described below.



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Goodwill

SFAS No. 142, Goodwill and Other Intangible Assets, (SFAS 142) requires goodwill to be tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount
of the asset might be impaired. The goodwill impairment test is a two-step process which requires the Company to make judgmental assumptions regarding fair value. Testing is required between annual tests if events occur or circumstances change that
would, more likely than not, reduce the fair value of the reporting unit below its carrying value. Such an event may occur if, for an extended period of time, the market value of the Companys common stock plus a control premium were less than
the carrying value of the Company. The Company obtains information on sales of similar sized companies in the technology industry to estimate a control premium.

Management also reviews the Companys financial position quarterly for other triggering events as described in SFAS 142. Should actual results not meet expectations or assumptions change in future years, the
impairment assessment could result in a lower fair value estimate which could result in an impairment charge that may materially affect the carrying value of the Companys assets and results from operations.

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. The Company has one reporting unit, in the test and measurement business, because none of the
components of the Company constitute a business for which discrete financial information is available and for which Company 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 the reporting unit with its carrying amount,
including goodwill. If the fair value of the 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 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.

As the Company consists of only one reporting unit, and is publicly traded, management estimates the fair value of its reporting unit utilizing the
Companys market capitalization, multiplying the number of actual shares outstanding by a one year average market price, as reflected on NASDAQ National Market, and applying an additional premium to give effect to the Companys best
estimate of a control premium, as if the Company were to be acquired by a single stockholder, which seeks to give effect to the increased consideration a potential acquirer would be willing to pay in order to gain sufficient ownership to set
policies, direct operations and make decisions related to the Company.

A 30% control premium was utilized in our interim goodwill
impairment testing in fiscal 2008. This control premium is not a standard amount based on broad assumptions; rather, the amount is based on detailed analysis that considers appropriate industry, market, economic and other pertinent factors,
including, indications of such premiums from data on recent acquisition transactions. The control premium is reviewed periodically, taking into consideration current industry, market and economic conditions along with other factors or available
information specific to our business.

The Company completed the annual impairment test required under SFAS 142 as of June 30, 2007
and determined that there was no impairment to the recorded goodwill balance of $105.9 million. The Company did, however, during the fourth quarter of fiscal



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2007 and 2006, reduce the goodwill by approximately $0.1 million and $0.4 million, respectively, as a result of a reversal of a pre-acquisition tax
contingency reserve. Additionally, upon adoption of FIN 48, some accruals for uncertain tax positions related to the acquisition of CATC were reduced, resulting in a decrease to goodwill of approximately $0.1 million (See Note 17  Income
Taxes for more information).

As a result of the decline in the Companys stock price since June 30, 2007, which affected the
Companys market capitalization, the Company updated its goodwill impairment test as of September 29, 2007, December 29, 2007, and March 29, 2008 respectively, to identify whether a potential impairment of the Companys
recorded goodwill existed. For the first quarter ended September 29, 2007 the Companys market capitalization, without regard to a control premium, exceeded its carrying value. For the second quarter testing as of December 29, 2007,
the fair value of the Companys reporting unit was determined to be $142.8 million, using the 30% control premium, which exceeded the carrying amount by $25.6 million, or 21%. For the third quarter testing as of March 29, 2008, the fair
value of the Companys reporting unit was determined to be $137.8 million, using the 30% control premium, which exceeded the carrying amount by $18.5 million, or 15.5%. Managements estimate of an appropriate control premium to apply in
determining fair value is an important variable in the Companys goodwill impairment assessment, and is subject to change. A significant impairment could result in additional charges and have a material adverse impact on the consolidated
financial condition and operating results.

Income Tax Contingencies

We adopted FIN 48 on July 1, 2007. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company
has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the position is sustainable, based on its technical merits. The tax
benefit of a qualifying position is the largest amount of tax benefit greater than 50% likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information. A tax benefit from an uncertain position was
previously recognized if it was probable of being sustained. Under FIN 48, the liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within twelve months of the reporting date
(See Note 17Income Taxes for additional information).

There have been no other changes or updates to our critical accounting
policies since June 30, 2007.

Consolidated Results of Operations

The following table indicates the percentage of total revenues represented by each item in the Companys Consolidated Statements of Operations for the quarter and three quarters ended March 29, 2008 and
March 31, 2007:



|                                    |  |               |   |  |                      |   |  |               |   |  |               |  
|----------------------------------- |  | ------------- | - |  | -------------------- | - |  | ------------- | - |  | ------------- | -
|                                    |  | Quarter ended |   |  | Three Quarters ended |  
|(Unaudited)                         |  | March 29,2008 |   |  | March 31,2007        |   |  | March 29,2008 |   |  | March 31,2007 |  
|Revenues:                           |  |               |   |  |                      |   |  |               |   |  |               |  
|Test and measurement products (1)   |  | 93.1          | % |  | 94.8                 | % |  | 94.4          | % |  | 94.4          | %
|Service and other (1)               |  | 6.9           |   |  | 5.2                  |   |  | 5.6           |   |  | 5.6           |  
|                                    |  |               |   |  |                      |   |  |               |   |  |               |  
|Total revenues                      |  | 100.0         |   |  | 100.0                |   |  | 100.0         |   |  | 100.0         |  
|Cost of revenues                    |  | 43.9          |   |  | 47.1                 |   |  | 42.6          |   |  | 45.1          |  
|                                    |  |               |   |  |                      |   |  |               |   |  |               |  
|Gross profit                        |  | 56.1          |   |  | 52.9                 |   |  | 57.4          |   |  | 54.9          |  
|                                    |  |               |   | 
|Operating expenses (income):        |  |               |   |  |                      |   |  |               |   |  |               |  
|Selling, general and administrative |  | 32.4          |   |  | 38.3                 |   |  | 33.1          |   |  | 37.2          |  
|Research and development            |  | 20.0          |   |  | 20.5                 |   |  | 19.2          |   |  | 25.0          |  
|Reimbursement from escrow account   |  | (0.6          | ) |  |                     |   |  | (0.2          | ) |  |              |  
|                                    |  |               |   |  |                      |   |  |               |   |  |               |  
|Total operating expenses            |  | 51.8          |   |  | 58.8                 |   |  | 52.1          |   |  | 62.2          |  
|                                    |  |               |   | 
|Operating income (loss)             |  | 4.3           |   |  | (5.9                 | ) |  | 5.3           |   |  | (7.3          | )
|                                    |  |               |   | 
|Interest income                     |  | 0.2           |   |  | 0.2                  |   |  | 0.2           |   |  | 0.1           |  
|Interest expense                    |  | (2.5          | ) |  | (3.0                 | ) |  | (2.8          | ) |  | (2.8          | )
|Loss on extinguishment of debt      |  |              |   |  | (1.4                 | ) |  |              |   |  | (0.8          | )
|Other, net                          |  | (0.2          | ) |  |                     |   |  | (0.4          | ) |  | (0.1          | )



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|                                     |  |               |   |  |                      |    |  |               |   |  |               |   
|------------------------------------ |  | ------------- | - |  | -------------------- | -- |  | ------------- | - |  | ------------- | --
|                                     |  | Quarter ended |   |  | Three Quarters ended |   
|(Unaudited)                          |  | March 29,2008 |   |  | March 31,2007        |    |  | March 29,2008 |   |  | March 31,2007 |   
|Other (expense), net                 |  | (2.5          | ) |  | (4.2                 | )  |  | (3.0          | ) |  | (3.6          | ) 
|Income (loss) before income taxes    |  | 1.8           |   |  | (10.1                | )  |  | 2.3           |   |  | (10.9         | ) 
|Provision (benefit) for income taxes |  | 0.2           |   |  | (0.1                 | )  |  | 0.2           |   |  | (1.3          | ) 
|                                     |  |               |   |  |                      |    |  |               |   |  |               |   
|Net income (loss)                    |  | 1.6           | % |  | (10.0                | )% |  | 2.1           | % |  | (9.6          | )%
|                                     |  |               |   |  |                      |    |  |               |   |  |               |   



|(1) | The three quarters ended March 29, 2008 reflects a reclassification of a sales return reserve of approximately $1.1 million from Service and other to Test and measurement
products for the two quarters ended December 29, 2007 to conform to the current period presentation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of the
fiscal year 2008 company-wide service initiative, certain service products have been reclassified from Test and measurement products to Service and other revenue. The quarter and the three quarters ended March 31, 2007 reflect the
reclassification of approximately $0.3 million and $1.1 million, respectively, to conform to the current period presentation.

Comparison of the Quarter
Ended March 29, 2008 and March 31, 2007

Total revenues were approximately $40.6 million for the quarter ended March 29,
2008, compared to approximately $39.3 million for the comparable prior year period, representing an increase of 3.1%, or approximately $1.2 million, primarily as a result of positive foreign currency fluctuations which increased total revenues by
approximately $1.2 million in the third quarter of fiscal 2008 as compared to the same period last year. Test and measurement product revenue remained flat as a result of increased volume and market traction for oscilloscope products, offset by
weakness in sales of protocol analyzer products and decreased demand and softness in orders from Japan. Increased volume for oscilloscope products continues as a result of a stronger and more effective distribution channel, while decreases in sales
of protocol analyzer products in the quarter were driven by softness in storage market.

Service and other revenues primarily consist of
service revenues and maintenance fees. Service and other revenues were approximately $2.8 million for the quarter ended March 29, 2008, representing an increase of 36.6% or approximately $0.7 million, compared to approximately $2.0 million for
the comparable prior year period. The increase was attributable to a company-wide service initiative that began during the fiscal year to improve customer service by focusing on opportunities to add value to our products.

Revenues by geographic location expressed in dollars and as a percentage of total revenues were:



|                   |  |                          |        |   |               |   |        |  
|------------------ |  | ------------------------ | ------ | - | ------------- | - | ------ | -
|                   |  | Quarter ended(unaudited) |       
|                   |  | March 29,2008            |        |   | March 31,2007 |  
|                   |  | (In thousands)           |       
|North America      |  | $                        | 13,786 |   |               | $ | 13,676 |  
|Europe/Middle East |  |                          | 14,897 |   |               |   | 12,393 |  
|Japan              |  |                          | 2,707  |   |               |   | 3,592  |  
|Asia/Pacific       |  |                          | 9,164  |   |               |   | 9,681  |  
|                   |  |                          |        |   |               |   |        |  
|Total revenues     |  | $                        | 40,554 |   |               | $ | 39,342 |  
|                   |  |                          |        |   |               |   |        |  
|                   | 
|                   |  | Quarter ended(unaudited) |       
|                   |  | March 29,2008            |        |   | March 31,2007 |  
|North America      |  |                          | 34.0   | % |               |   | 34.8   | %



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|                   |  |                          |   |  |               |  
|------------------ |  | ------------------------ | - |  | ------------- | -
|                   |  | Quarter ended(unaudited) |  
|                   |  | March 29,2008            |   |  | March 31,2007 |  
|                   |  | (In thousands)           |  
|Europe/Middle East |  | 36.7                     |   |  | 31.5          |  
|Japan              |  | 6.7                      |   |  | 9.1           |  
|Asia/Pacific       |  | 22.6                     |   |  | 24.6          |  
|                   |  |                          |   |  |               |  
|Total revenues     |  | 100.0                    | % |  | 100.0         | %
|                   |  |                          |   |  |               |  

For the quarter ended March 29, 2008, geographic revenue was higher in Europe/Middle East.
The increase resulted from improved sales productivity supported by strong distribution channels and foreign currency. Foreign currency fluctuations positively impacted Europe/Middle East revenues by approximately $1.2 million in the third quarter
of fiscal 2008, as compared to the same period last year. The increase was partially offset by decreases in Japan and Asia/Pacific, primarily resulting from local economic conditions and softness in orders from Japan.

Gross profit for the quarter ended March 29, 2008 was approximately $22.7 million, or 56.1% gross margin, compared to approximately $20.8 million,
or 52.9% gross margin, for the comparable prior year period. The lower gross margin in fiscal 2007 was primarily attributable to non-cash charges of approximately $1.8 million for inventory write-offs, including inventory recorded at fair value in
the purchase accounting for Catalyst, approximately $0.3 million associated with business realignment and approximately $0.3 million for the amortization of acquired Catalyst intangible assets. The fiscal 2008 gross margins were also impacted by
non-cash charges of approximately $0.8 million for inventory write-offs related to certain inventory recorded at fair value in the purchase accounting for Catalyst, a portion for which the Company was indemnified. Absent these non-cash charges,
fiscal 2008 margins as a percentage of sales were lower than the prior year period due to product mix, as oscilloscope revenue comprised a higher proportion of total revenue in the current quarter.

Selling, general and administrative (SG&A) expense was approximately $13.1 million for the quarter ended March 29, 2008 compared to
approximately $15.1 million for the quarter ended March 31, 2007, representing a decrease of approximately 12.9% or $1.9 million. The decrease was mainly due to a reduction in general spending levels, resulting from the prior years
cost-cutting and business realignment efforts, including approximately $1.2 million in severance and related expenses taken in the prior year period, compared to $0.3 million of realignment charges in the current period. As a percentage of total
revenues, SG&A expense decreased from approximately 38.3% in the third quarter of fiscal 2007 to approximately 32.4% in the third quarter of fiscal 2008 as a result of a higher sales base as well as benefits derived from prior years
cost-cutting and realignment efforts.

Research and development (R&D) expense was approximately $8.1 million for both the
quarters ended March 29, 2008 and March 31, 2007. The fiscal 2007 R&D expense included approximately $0.1 million of costs associated with business realignment. As a percentage of total revenues, R&D expense decreased from
approximately 20.5% in the third quarter of fiscal 2007 to 20.0% in the third quarter of fiscal 2008, as a result of a higher sales base.

Reimbursement from escrow account represents current quarter income resulting from the final Catalyst indemnification release. The Company received approximately $0.2 million from the remaining Catalyst escrow balance, representing the
indemnification obligation for certain Catalyst inventory, assumed at acquisition.

Other expense, net, which consists primarily of net
interest income and expense and foreign exchange gains and losses, was an expense of approximately $1.0 million in the third quarter of fiscal 2008 compared to approximately $1.7 million for the third quarter of fiscal 2007. Net interest expense was
approximately $1.0 million for the quarter ended March 29, 2008 as compared to $1.1 million for the comparable prior period. In addition, there was a foreign exchange loss of approximately $0.1 million in both the third quarters of fiscal 2008
and 2007. The other expense, net decrease reflects the absence of approximately $0.6 million for loss on extinguishment of debt in the third quarter of fiscal 2007, related to the write-off of deferred finance charges associated with the revolver
that terminated during the prior year period.

The effective tax rate for the quarter ended March 29, 2008 was 9.0%, compared to an
effective tax rate of (1.7)% for the quarter ended March 31, 2007. The effective tax rate for the quarter ended March 29, 2008 includes a reduction of tax expense of approximately $0.4 million from the recognition of unrecognized tax
benefits due to the expiration of the statute of limitations, slightly offset by approximately $16,000 increase to tax expense for interest related to income tax exposures, both of which are treated as discrete items. The effective tax rate for the
quarter ended March 31, 2007 includes the effects of an increase to the valuation allowance of approximately $1.0 million, which was treated as a discrete item. The Company calculates income tax expense



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(benefit) based upon an annual estimated effective tax rate that includes estimates and assumptions that may change during the year. The differences between
the annual estimated effective tax rate and the U.S. federal statutory rate of 35% principally result from the Companys geographical distribution of taxable income, and differences between the book and tax treatment of certain items.

Comparison of the Three Quarters Ended March 29, 2008 and March 31, 2007

Total revenues were approximately $119.8 million for the three quarters ended March 29, 2008, compared to approximately $114.5 million for the
comparable prior year period, representing an increase of 4.7%, or approximately $5.3 million, primarily as a result of increased sales of Test and measurement products and positive foreign currency impact. Foreign currency fluctuations increased
total revenues by approximately $3.4 million in the three quarters of fiscal 2008 as compared to the same period last year. The increase in Test and measurement products was driven mainly by increased oscilloscope product shipments as a result of an
improved distribution channel and the incremental impact from the Catalyst acquisition in the second quarter of fiscal 2007 which was approximately 2.4% of revenues. These increases were partially offset by decreased demand and softness in orders
from Japan.

Service and other revenues primarily consist of service revenues and maintenance fees. Service and other revenues were
approximately $6.7 million for the three quarters ended March 29, 2008, representing an increase of 5.0% or approximately $0.3 million, compared to approximately $6.4 million for the comparable prior year period. The increase was primarily the
result of a company-wide service initiative that began during the fiscal year to improve customer service by focusing on opportunities to add value to our products.

Revenues by geographic location expressed in dollars and as a percentage of total revenues were:



|                   |  |                                 |         |   |               |   |         |  
|------------------ |  | ------------------------------- | ------- | - | ------------- | - | ------- | -
|                   |  | Three Quarters Ended(unaudited) |        
|                   |  | March 29,2008                   |         |   | March 31,2007 |  
|                   |  | (In thousands)                  |        
|North America      |  | $                               | 39,101  |   |               | $ | 37,625  |  
|Europe/Middle East |  |                                 | 44,085  |   |               |   | 39,277  |  
|Japan              |  |                                 | 9,978   |   |               |   | 15,233  |  
|Asia/Pacific       |  |                                 | 26,663  |   |               |   | 22,364  |  
|                   |  |                                 |         |   |               |   |         |  
|Total revenues     |  |                                 | 119,827 |   |               |   | 114,499 |  
|                   |  |                                 |         |   |               |   |         |  
|                   | 
|                   |  | Three Quarters Ended(unaudited) |        
|                   |  | March 29,2008                   |         |   | March 312007  |  
|North America      |  |                                 | 32.6    | % |               |   | 32.9    | %
|Europe/Middle East |  |                                 | 36.8    |   |               |   | 34.3    |  
|Japan              |  |                                 | 8.3     |   |               |   | 13.3    |  
|Asia/Pacific       |  |                                 | 22.3    |   |               |   | 19.5    |  
|                   |  |                                 |         |   |               |   |         |  
|Total revenues     |  |                                 | 100.0   | % |               |   | 100.0   | %
|                   |  |                                 |         |   |               |   |         |  

For the three quarters ended March 29, 2008, geographic revenue in terms of dollars was
higher in all regions except Japan. The increases in Europe/Middle East and Asia/Pacific were driven by strong distribution channels and improved sales productivity, as well as favorable foreign currency impact. Improved performance in North America
resulted from our distribution channel restructuring. Foreign currency fluctuations increased Europe/Middle East revenues by approximately $3.3 million in the three quarters of fiscal 2008 as compared to the same period last year. These increases
were offset by decreases in Japan, primarily from the realignment of our Japan operations and local economic conditions.

Gross profit for
the three quarters ended March 29, 2008 was approximately $68.8 million, or 57.4% gross margin, compared to approximately $62.9 million, or 54.9% gross margin, for the comparable prior year period. The lower gross margin in fiscal 2007 was



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primarily attributable to approximately $1.8 million for inventory write-offs, including inventory recorded at fair value in the purchase accounting for
Catalyst, $1.5 million of costs associated with the sell through of stepped up inventory acquired in the Catalyst acquisition and $0.3 million associated with business realignment. The fiscal 2008 gross margins also benefited
approximately $1.0 million, resulting from a decrease in amortization expense for acquired Catalyst intangible assets. Absent these non-cash charges, fiscal 2008 margins as a percentage of sales were lower than the prior year period due to
competitive pricing pressures for our products.

Selling, general and administrative (SG&A) expense was approximately $39.6
million for the three quarters ended March 29, 2008 compared to approximately $42.6 million for the three quarters ended March 31, 2007, representing a decrease of 7.0% or approximately $3.0 million. The decrease was primarily attributable
to a reduction in general spending levels, resulting from the prior years cost-cutting efforts. Business realignment costs were approximately $0.9 million for the three quarters ended March 29, 2008 compared to $1.3 million for the three
quarters ended March 31, 2007. As a percentage of total revenues, SG&A expense decreased from 37.2% in the three quarters ended March 31, 2007 to 33.1% in the three quarters ended March 29, 2008 as a result of a higher sales base
as well as benefits derived from prior years cost-cutting and realignment efforts.

Research and development (R&D)
expense was approximately $23.0 million for the three quarters ended March 29, 2008, compared to $28.6 million for the comparable prior year period, a decrease of 19.4% or approximately $5.6 million. As a percentage of total revenues, R&D
expense decreased from 25.0% in the three quarters ended March 31, 2007 to 19.2% in the three quarters ended March 29, 2008. The decrease resulted primarily from the $4.0 million charge for acquired in-process research and development
costs related to the Catalyst acquisition and approximately $0.4 million of realignment charges, both recorded in the prior year period. Also contributing to the decrease in R&D expense were reductions in expenses incurred for prototype
materials and supplies and general spending levels.

Other expense, net, which consists primarily of net interest income and expense and
foreign exchange gains and losses, was an expense of approximately $3.6 million and $4.2 million for the three quarters ended March 29, 2008 and March 31, 2007, respectively. Net interest expense was approximately $3.1 million for the
three quarters ended March 29, 2008 and March 31, 2007. In addition, there was a foreign exchange loss of approximately $0.4 million for the three quarters ended March 29, 2008 compared to a foreign exchange loss of approximately $0.2
million for the comparable prior year period. The other expense, net decrease reflects the absence of approximately $1.0 million for loss on extinguishment of debt related to the write-off of deferred financing costs associated with the repayment of
the term loan and revolver under the prior credit agreement.

The effective tax rate for the three quarters ended March 29, 2008 was
10.4%, compared to an effective tax rate of (12.0)% for three quarters ended March 31, 2007. The effective tax rate for the three quarters ended March 29, 2008 includes: the effect of a reduction of tax expense of approximately $0.5
million resulting from both the final true-up of the prior years tax accrual upon filing the actual tax returns and an election for certain R&D credits made by the Company in the second quarter of fiscal 2008; a reduction of tax expense of
approximately $0.4 million from the recognition of unrecognized tax benefits due to the expiration of the statute of limitations; slightly offset by approximately $31,000 increase to tax expense for interest related to income tax exposures; all of
which are treated as discrete items. The effective tax rate for the three quarters ended March 31, 2007 includes the effects of the in-process research and development (IPR&D) charge of $4.0 million related to the Catalyst
acquisition, which is not deductible for tax purposes, and an increase in the valuation allowance of approximately $1.0 million, both of which were treated as discrete items. The Company calculates income tax expense (benefit) based upon an annual
estimated effective tax rate that includes estimates and assumptions that may change during the year. The differences between the annual estimated effective tax rate and the U.S. federal statutory rate of 35% principally result from the
Companys geographical distribution of taxable income, and differences between the book and tax treatment of certain items.

Liquidity and Capital
Resources

Cash and cash equivalents at March 29, 2008 were approximately $11.6 million compared to approximately $10.4 million at
June 30, 2007.

Net cash provided by (used in) operating activities was approximately $17.1 million in the three quarters ended
March 29, 2008 compared to approximately $(0.2) million in the same period last year. The net cash provided by operating activities was attributable to net income of approximately $2.5 million, working capital contributions of approximately
$5.3 million, and non-cash depreciation and amortization of approximately $5.4 million and share-based compensation of approximately $3.7 million.

Net cash used in investing activities was approximately $2.3 million in three quarters ended March 29, 2008 compared to approximately $35.6 million in the same period in fiscal 2007. Net cash used in fiscal 2008 relates to the purchase
of property and equipment, while net cash used in fiscal 2007 was primarily due to approximately $31.5 million net cash paid in connection with the Catalyst acquisition.



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Net cash (used in) provided by financing activities was approximately $(14.7) million in the three
quarters ended March 29, 2008 compared to approximately $29.9 million in the same period in fiscal 2007. Net cash used in financing activities in fiscal 2008 primarily resulted from approximately $9.4 million repayment of borrowings under the
credit agreement, $3.5 million payment of related party note payable and approximately $2.1 million for repurchases of treasury stock. Net cash provided by financing activities in fiscal 2007 was primarily attributable to proceeds from the issuance
of convertible notes of $72.0 million and borrowings under the credit agreement of approximately $40.2 million, partially offset by the repayments under the credit agreement of approximately $34.3 million, repayments of the term loan for
approximately $34.1 million, purchase of treasury shares for approximately $10.5 million and payment of debt issuance costs related to the convertible note of approximately $3.7 million.

We believe that our cash and cash equivalents on hand, cash flow generated by our continuing operations and availability under our revolving credit line
will be sufficient to fund our operations, working capital, debt repayment (excluding the repurchase of all or a portion of the convertible notes), share repurchases and capital expenditure requirements for the foreseeable future and provide funds
for potential acquisition opportunities.



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Contractual Obligations and Other Commitments

Our contractual obligations and commitments include obligations associated with our employee severance agreements, supplier agreements, operating and
capital leases, and convertible note obligations as set forth in the table below:



|                                        |  |                                             |        |                 |   |           |  |           |       |                  |   |        |  |   |  
|--------------------------------------- |  | ------------------------------------------- | ------ | --------------- | - | --------- |  | --------- | ----- | ---------------- | - | ------ |  | - | -
|                                        |  | Payments due by Period as of March 29, 2008
|(In thousands)                          |  | Total                                       |        | Less than1 Year |   | 1-3 Years |  | 3-5 Years |       | More than 5Years
|Severance                               |  | $                                           | 769    |                 | $ | 769       |  | $         |      |                  | $ |       |  | $ | 
|Supplier agreements                     |  |                                             | 674    |                 |   | 674       |  |           |      |                  |   |       |  |   | 
|Operating lease obligations             |  |                                             | 4,140  |                 |   | 2,165     |  |           | 1,771 |                  |   | 204    |  |   | 
|Vendor supplied capital lease agreement |  |                                             | 610    |                 |   | 230       |  |           | 380   |                  |   |       |  |   | 
|Convertible notes (1)                   |  |                                             | 72,000 |                 |   |          |  |           |      |                  |   | 72,000 |  |   | 
|                                        |  |                                             |        |                 |   |           |  |           |       |                  |   |        |  |   |  
|Total (2)                               |  | $                                           | 78,193 |                 | $ | 3,838     |  | $         | 2,151 |                  | $ | 72,204 |  | $ | 
|                                        |  |                                             |        |                 |   |           |  |           |       |                  |   |        |  |   |  



|(1) | The Convertible notes mature on October 15, 2026. Holders of the Convertible notes have the right to require the Company to purchase all or a portion of the Convertible notes
on October 15, 2011, which is reflected above.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Contractual Obligations and Other Commitments disclosed in our Form 10-K for the year ended June 30, 2007 did not include any reserves for income taxes under FIN 48.
Because we are unable to reasonably predict the ultimate amount or timing of settlement of our reserves for income taxes, the Contractual Obligations and Other Commitments table has not been updated to include our reserves for income taxes. As of
March 29, 2008, our reserves for income taxes totaled approximately $2.7 million which is reflected as a non-current liability and included in Deferred revenue and other non-current liabilities on our Consolidated Balance Sheets (See Note 17
 Income Taxes for additional information).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155 (SFAS 155), Accounting for Certain Hybrid Instruments, an amendment of FASB Statements No. 133 and 140. SFAS 155 allows financial
instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to separate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. It also clarifies which
interest-only strips and principal-only strips are not subject to the requirements of SFAS133; establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring separation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS No. 140 to eliminate the prohibition on a
qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after
the beginning of an entitys first fiscal year that begins after September 15, 2006. The adoption of SFAS 155 did not have a material effect on our consolidated financial position or results of operations.

In June 2006, the Emerging Issues Task Force (EITF) issued EITF Abstract 06-2 (EITF 06-2), Accounting for Sabbatical Leave
and Other Similar Benefits Pursuant to FASB Statement No. 43. EITF 06-2 provides guidance that an employees right to a compensated absence under a sabbatical or other similar benefit arrangement should be accrued over the requisite
service period. EITF 06-2 is effective for fiscal years beginning after December 15, 2006. EITF 06-2 allows for adoption through retrospective application to all prior periods or through a cumulative-effect adjustment to retained earnings. The
Company adopted EITF 06-2 beginning July 1, 2007 using the cumulative-effect adjustment approach. The effect of this adoption resulted in a decrease to beginning retained earnings of approximately $0.2 million, a decrease to deferred tax assets
of approximately $0.1 million and an increase to Accrued expenses and other current liabilities and Deferred revenue and other non-current liabilities of approximately $0.2 million and $0.1 million, respectively.

In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An
Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48
was effective for fiscal years beginning after December 15, 2006, and was adopted by the Company effective July 1, 2007. See Note 17  Income Taxes for the impact of the adoption of FIN 48 on the Companys consolidated financial
statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS 157 requires companies to disclose the fair value of their financial instruments according to a fair value
hierarchy as defined in the standard. Additionally, companies are required to provide enhanced disclosure regarding financial instruments in one of the categories, including a reconciliation of the beginning and ending balances separately for each
major category of assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FASB Staff
Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2). FSP FAS 157-2 amends FAS 157 to delay the effective date of FAS 157 for non-financial assets and non-financial liabilities until
fiscal years beginning after November 15, 2008, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Management is currently evaluating the effect that adoption of this statement will
have on our consolidated financial position and results of operations.

In December 2006, the FASB issued FASB Staff Position EITF 00-19-2,
Accounting for Registration Payment Arrangements (FSP EITF 00-19-2). FSP EITF 00-19-2 specifies that registration payment arrangements should play no part in determining the initial classification and subsequent accounting
for the securities to which they relate. FSP EITF 00-19-2 requires the contingent obligation in a registration payment arrangement to be separately analyzed under SFAS No. 5, Accounting for Contingencies, and FASB Interpretation
No. 14, Reasonable Estimations of the Amount of a Loss. If payment in a registration payment arrangement is probable and can be reasonably estimated, a liability should be recorded. FSP EITF 00-19-2 is effective for fiscal years
beginning after December 15, 2006. The adoption of this FSP did not have a material effect on our consolidated financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of FASB Statement No. 115.
This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS 159 apply only to entities that elect the fair value option. However, the amendment to SFAS
No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. SFAS 159 is effective as of the beginning of an entitys first fiscal



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year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15,
2007, provided the entity also elects to apply the provision of SFAS 157. Management is currently evaluating the effect that adoption of SFAS 159 will have on the Companys consolidated financial position and results of operations.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (FSP-FIN
48-1). FSP-FIN 48-1 further clarifies if it is appropriate for an entity to recognize a previously unrecognized tax benefit when the only change since the initial determination is the completion of an examination or audit by a taxing
authority. FSP-FIN 48-1 provides the determination of whether the position is effectively settled should be taken on a case by case basis; however, positions may be grouped by tax year and considered effectively settled. The adoption of this
position on July 1, 2007 did not have a significant impact on the Companys consolidated financial statements (See Note 17  Income Taxes for additional information).

In June 2007, the Emerging Issues Task Force (EITF) issued EITF 07-3, Accounting for Nonrefundable Advance Payments for Goods or
Services to Be Used in Future Research and Development Activities (EITF 07-3). EITF 07-3 addresses the diversity that exists with respect to the accounting for the non-refundable portion of a payment made by a research and
development entity for future research and development activities. The EITF concluded that an entity must defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the
related services are performed. EITF 07-3 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007. Management is currently evaluating the impact of adopting EITF 07-03 on its financial statements
and results of operations; however, we do not expect it will have a material effect on our consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), Business Combinations. This statement establishes the principles and requirements for how an acquirer in a
business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS 141R also establishes
disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted. Management is currently evaluating the effect that adoption of SFAS 141R will have on our consolidated financial position
and results of operations.

In March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about
Derivative Instruments and Hedging Activities. This statement requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments,
how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities and how derivative instruments and related hedged items affect a
companys financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the
effect that adoption of SFAS 161 will have on our consolidated financial position and results of operations.

Forward-Looking Information

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to
our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally are identified by the words believe, project, expect, anticipate, estimate, intend, strategy, plan, may,
should, will, would, will be, will continue, will likely result, and similar expressions. Forward-looking statements are based on current expectations and assumptions that are
subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ
materially from such forward-looking statements is included in our 2007 Annual Report on Form 10-K under the heading Risks Related to Our Business. We undertake no obligation to update or revise publicly any forward-looking statements,
whether as a result of new information, future events, or otherwise.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

There have been no material changes in market risk since the filing of the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2007.



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|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and
15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure
that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There have been no 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 March 29, 2008 that have materially affected, or are reasonably likely to materially affect, its internal control over
financial reporting.



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LECROY CORPORATION

PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

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



|ITEM 1A. | RISK FACTORS
|-------- | ------------

There have been no material changes
with respect to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Issuer Repurchases of Equity Securities

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

The following
table sets forth information regarding LeCroys purchases of its common stock on a monthly basis during the third quarter of fiscal 2008. Share repurchases are recorded on a trade date basis.



|                                      |  |                               |  |                            |  |                                                                             |  |                                                                           
|------------------------------------- |  | ----------------------------- |  | -------------------------- |  | --------------------------------------------------------------------------- |  | --------------------------------------------------------------------------
|Period                                |  | TotalNumber ofSharesPurchased |  | AveragePrice Paidper Share |  | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor
Program |  | Maximum Numberof Shares that MayYet Be PurchasedUnder the Plans orPrograms
|January 1, 2008 to January 31, 2008   |  | 13,750                        |  | 9.43                       |  | 13,750                                                                      |  | 823,586                                                                   
|February 1, 2008 to February 29, 2008 |  | 28,500                        |  | 8.28                       |  | 28,500                                                                      |  | 795,086                                                                   
|March 1, 2008 to March 29, 2008       |  | 95,654                        |  | 7.68                       |  | 95,654                                                                      |  | 699,432                                                                   
|                                      |  |                               |  |                            |  |                                                                             |  |                                                                           
|Total                                 |  | 137,904                       |  | 7.98                       |  | 137,904                                                                     |  | 699,432                                                                   
|                                      |  |                               |  |                            |  |                                                                             |  |                                                                           



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

On May 7, 2008, the Company
entered into a Second Modification Agreement to modify certain financial and negative covenants of its New Credit Agreement, as included in Item 6, Exhibit 10.45.



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|ITEM 6. | EXHIBITS
|------- | --------

The following exhibits are filed herewith.



|              |  |                                                                                                                                                                                                                                     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                         
|10.45         |  | Second Modification Agreement, dated as of May 7, 2008, among Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed as Exhibit 10.45
to Form 10-Q filed on May 8, 2008.
|              | 
|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.                                                                                                                                                    



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.



|                  |  |                                                                    
|----------------- |  | -------------------------------------------------------------------
|Date: May 8, 2008 |  | LeCROY CORPORATION                                                 
|                  | 
|                  |  | /s/ Sean B. OConnor                                               
|                  |  | Sean B. OConnor                                                   
|                  |  | Vice President and Chief Financial Officer, Secretary and Treasurer



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