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

                                  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 31, 2006

                                       OR

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

                         Commission File Number: 0-26634

                               LECROY CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

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

        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, or a non-accelerated filer (as defined in Rule
12b-2 of the Exchange Act).

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

Indicate by check mark ("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 5, 2006
 ----------------------------------------           --------------------------
  Common stock, par value $.01 share                       12,339,139

================================================================================
<PAGE>

                               LECROY CORPORATION
                                    FORM 10-Q

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                       PAGE NO.
<S>                                                                                                   <C>
PART I      FINANCIAL INFORMATION

 Item 1.    Financial Statements:
            Consolidated Balance Sheets (Unaudited) as of March 31, 2006 and June 30, 2005..........      3
            Consolidated Statements of Operations (Unaudited) for the Three and Nine Months ended
              March 31, 2006 and 2005...............................................................      4
            Consolidated Statements of Cash Flows (Unaudited) for the Nine Months ended
              March 31, 2006 and 2005...............................................................      5
            Notes to Consolidated Financial Statements (Unaudited) .................................      6
 Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations.............................................................     29
 Item 3.    Quantitative and Qualitative Disclosures About Market Risk..............................     38
 Item 4.    Controls and Procedures.................................................................     39

PART II     OTHER INFORMATION

 Item 1.    Legal Proceedings.......................................................................     40
 Item 1A.   Risk Factors............................................................................     40
 Item 6.    Exhibits................................................................................     41

Signature     .....................................................................................      44

</TABLE>


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

                                       2

<PAGE>



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                               LECROY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                                                                            MARCH 31,     JUNE 30,
IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA                                                  2006         2005
-------------------------------------------------------------------------------------      -----------   -----------

                                         ASSETS

<S>                                                                                        <C>          <C>
Current assets:
    Cash and cash equivalents........................................................      $    10,218  $    13,866
    Accounts receivable, net.........................................................           30,176       28,275
    Inventories, net.................................................................           32,014       27,661
    Other current assets.............................................................           15,077       12,681
                                                                                           -----------  -----------
      Total current assets...........................................................           87,485       82,483

Property and equipment, net..........................................................           19,101       19,078

Goodwill.............................................................................           78,848       78,848

Other non-current assets.............................................................           10,391       12,759
                                                                                            ----------  -----------
TOTAL ASSETS.........................................................................       $  195,825  $   193,168
                                                                                            ==========  ===========

                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable.................................................................      $    14,534  $    14,806
    Accrued expenses and other current liabilities...................................           15,666       14,642
    Current portion of long-term debt and capital leases.............................            9,521        8,656
                                                                                           -----------  -----------
      Total current liabilities......................................................           39,721       38,104


Long-term debt and capital leases....................................................           27,471       36,833
Deferred revenue and other non-current liabilities...................................            1,383        1,413
                                                                                           -----------  -----------
      Total liabilities..............................................................           68,575       76,350

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.01 par value (authorized 5,000,000 shares; none issued and
    outstanding as of March 31, 2006 and June 30, 2005)..............................               --           --
  Common stock, $.01 par value (authorized 45,000,000 shares; 12,838,549 and
    12,634,233 shares issued and outstanding as of March 31, 2006 and June 30, 2005,
    respectively)....................................................................              128          127
  Additional paid-in capital.........................................................          112,649      115,394
  Accumulated other comprehensive income.............................................              791          779
  Deferred stock compensation........................................................               --       (8,602)
  Retained earnings..................................................................           13,682        9,120
                                                                                           -----------  -----------
      Total stockholders' equity.....................................................          127,250      116,818
                                                                                           -----------  -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...........................................      $   195,825  $   193,168
                                                                                           ===========  ===========
</TABLE>


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


                                       3
<PAGE>



                               LECROY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                     Three months ended             Nine months ended
                                                                          March 31,                      March 31,
In thousands, except per share data                                 2006            2005           2006           2005
--------------------------------------------------------------  --------------  -------------   ------------  -------------
                                                                 (13 weeks)      (13 weeks)     (39 weeks)     (40 weeks)
<S>                                                              <C>            <C>            <C>            <C>
Revenues:
    Test and measurement products ............................       $ 37,184       $ 40,879       $116,304       $114,564
    Service and other ........................................          1,697          2,011          5,657          6,619
                                                                --------------  -------------   ------------  -------------
         Total revenues ......................................         38,881         42,890        121,961        121,183

Cost of revenues .............................................         15,250         16,947         47,749         53,902
                                                                --------------  -------------   ------------  -------------
         Gross profit ........................................         23,631         25,943         74,212         67,281

Operating expenses:
    Selling, general and administrative ......................         12,361         14,126         39,198         41,476
    Legal settlements ........................................          2,792          1,000          2,792          1,000
    Research and development .................................          7,671          7,027         22,901         20,567
                                                                --------------  -------------   ------------  -------------
         Total operating expenses ............................         22,824         22,153         64,891         63,043
                                                                --------------  -------------   ------------  -------------

Operating income .............................................            807          3,790          9,321          4,238

Other (expense) income:
    Interest income ..........................................            215            148            723            457
    Interest expense .........................................           (739)          (927)        (2,431)        (1,810)
    Other, net ...............................................            121           (119)           (86)           395
                                                                --------------  -------------   ------------  -------------
         Other expense, net ..................................           (403)          (898)        (1,794)          (958)
                                                                --------------  -------------   ------------  -------------
Income before income taxes ...................................            404          2,892          7,527          3,280
    Provision for income taxes ...............................            252             10          2,965            964
                                                                --------------  -------------   ------------  -------------
Net income ...................................................          $ 152        $ 2,882        $ 4,562        $ 2,316
                                                                ==============  =============   ============  =============

Net income per common share :
              Basic ..........................................         $ 0.01         $ 0.24         $ 0.37         $ 0.20
              Diluted ........................................         $ 0.01         $ 0.23         $ 0.37         $ 0.19

Weighted average number of common shares:
              Basic ..........................................         12,275         11,847         12,191         11,702
              Diluted ........................................         12,556         12,672         12,454         12,262


</TABLE>

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


                                       4
<PAGE>



                               LECROY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                 NINE MONTHS ENDED
                                                                                                     MARCH 31,
IN THOUSANDS                                                                                     2006         2005
------------------------------------------------------------------------------------------   ------------ --------

<S>                                                                                          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................   $     4,562  $     2,316
Adjustments to reconcile net income to net cash provided by operating activities:
  Write-off of acquired in-process research and development...............................            --        2,190
  Depreciation and amortization...........................................................         5,727        5,928
  Share-based compensation................................................................         4,145        1,876
  Amortization of debt issuance costs.....................................................           300          268
  Deferred income taxes...................................................................         1,589         (592)
  Recognition of deferred license revenue.................................................          (665)        (972)
  Loss on disposal of property and equipment, net.........................................           169           91
  Tax benefit from exercise of stock options..............................................            --        1,026
  Write-off of inventory..................................................................           361        2,723
  Impairment of intangible assets.........................................................            --        1,500
Change in operating assets and liabilities, net of assets acquired and liabilities
  assumed in an acquisition:
  Accounts receivable.....................................................................        (1,905)        (513)
  Inventories.............................................................................        (5,783)      (5,060)
  Other current and non-current assets....................................................        (3,024)         527
  Accounts payable, accrued expenses and other liabilities................................         1,051        1,692
                                                                                             -----------  -----------
Net cash provided by operating activities.................................................         6,527       13,000
                                                                                             -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment......................................................        (2,776)      (2,661)
  Proceeds from sale of marketable securities.............................................             --       9,534
  Business acquisition costs, net of acquired cash........................................             --     (80,402)
  Purchase of intangible assets...........................................................          (809)        (100)
                                                                                             ------------ -----------
Net cash used in investing activities.....................................................        (3,585)     (73,629)
                                                                                             ------------ -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of borrowings of long-term debt and capital leases............................        (8,437)      (3,579)
  Borrowings under long-term debt.........................................................            --       50,000
  Debt issuance costs.....................................................................            --       (1,378)
  Payments related to issuance of common stock............................................            --           (7)
  Proceeds from employee stock purchase and option plans..................................         1,852        4,127
  Payment of seller-financed intangible assets............................................            --         (449)
                                                                                             ------------ ------------
Net cash (used in) provided by financing activities.......................................        (6,585)      48,714
                                                                                             ------------ -----------
Effect of exchange rate changes on cash and cash equivalents..............................            (5)          18
                                                                                             ------------ -----------
  Net decrease in cash and cash equivalents...............................................        (3,648)     (11,897)
  Cash and cash equivalents at beginning of the period....................................        13,866       28,566
                                                                                             -----------  -----------
  Cash and cash equivalents at end of the period..........................................   $    10,218  $    16,669
                                                                                             ===========  ===========

Supplemental Cash Flow Disclosure Cash paid during the period for:
    Interest..............................................................................   $     1,988  $     1,094
    Income taxes..........................................................................         1,122          913
Non-cash investing and financing activities:
  Acquisition of seller-financed intangible assets........................................   $        --  $     1,331
  Issuance of LeCroy stock options for business acquisition...............................            --        3,166

</TABLE>


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




                                       5
<PAGE>


                               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, 2005. The Consolidated Balance Sheet as of June 30, 2005 has been
derived from those audited Consolidated Financial Statements. Certain
reclassifications have been made to prior-period amounts to conform to the
current-period presentation. 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, which require
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the Consolidated Financial
Statements and the revenues and expenses reported during the period. The most
significant of these estimates and assumptions relate to revenue recognition,
allowance for doubtful accounts, allowance for excess and obsolete inventory,
deferred tax assets, share-based compensation, valuation of long-lived and
intangible assets, goodwill and warranty. These estimates and assumptions are
based on management's judgment and available information and, consequently,
actual results could differ from these estimates.

    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. The Company's fiscal periods end on
the Saturday closest to the end of the period, which resulted in the reporting
periods ending on April 1, 2006 and April 2, 2005. For clarity of presentation,
period-end references are stated as March 31 and June 30. Fiscal 2006 is a
fifty-two week period as compared to a fifty-three week period in fiscal 2005.
As a result, the nine month period ended March 31, 2006 was a 39-week period
compared with a 40-week period for the nine months ended March 31, 2005. The
three months ended March 31, 2006 and 2005 were both 13-week periods.

2. CATC ACQUISITION

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

    Total consideration paid to acquire CATC was approximately $130.0 million.
The Merger was recorded under the purchase method of accounting, in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," which requires that the total consideration be allocated to the
assets acquired and liabilities assumed based on their fair values. On the
effective date of the Merger, each share of CATC common stock issued and
outstanding immediately prior thereto was canceled and converted into the right
to receive $6.00 in cash. In addition, LeCroy paid cash to the holders of CATC's
outstanding, vested, in-the-money stock options and







                                       6
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)



employee stock purchase plan (the "CATC ESPP") purchase rights. Further, LeCroy
assumed CATC's outstanding unvested stock options, as well as certain vested but
unexercised stock options, by granting to CATC employees a total of 648,284
options to purchase LeCroy common stock (the "LeCroy Options"). The LeCroy
Options were recorded at their fair values using the Black-Scholes option
pricing model based on a stock price of $16.83 per share, which was the closing
price of LeCroy common stock on October 29, 2004, less the intrinsic value of
unvested options, which was to be charged as compensation expense to operations
as earned by employees over their remaining vesting periods. (See Note 3 -
Share-Based Compensation for further discussion of the accounting for these
options following the Company's adoption of SFAS No. 123R.) LeCroy paid cash of
$80.4 million, net of cash acquired, using $30.4 million of cash on hand and
borrowings of $50.0 million under the Company's $75.0 million senior, secured,
five-year credit agreement entered into on October 29, 2004, with the lenders
listed therein and The Bank of New York, as administrative agent for such
lenders (the "Credit Agreement"). (See Note 14 - Long-term Debt and Capital
Leases.) The Merger consideration is summarized below (in thousands):


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

    The fair value of tangible and intangible assets acquired and liabilities
assumed was established based upon the unaudited October 28, 2004 Consolidated
Balance Sheet of CATC, as well as certain assumptions made regarding fair
values. The fair value of finished goods and work in process inventory was
valued based on estimated selling prices less direct costs to sell and a profit
margin on the selling effort. The fair value of the in-process research and
development ("IPR&D"), purchased technology, trade name and purchase orders was
determined by an independent appraisal firm. The fair value of the IPR&D was
based on the total estimated costs to develop the related technologies less the
costs incurred to date for the projects, and the intangible asset values were
based on estimates of future cash flows associated with those assets. The
purchased technology, trade name and purchase orders related to this acquisition
are being amortized over their estimated economic useful lives ranging from two
to twenty-nine months. The excess of the purchase price over the fair value of
the net assets acquired has been allocated to goodwill. The principle factors
that contributed to a purchase price that resulted in the recognition of
goodwill was the fair value of the going-concern element of the CATC business,
which includes the assembled workforce and their technology position within
emerging communication standards, as well as the expected synergies that will be
achieved by combining both companies. The goodwill is not deductible for tax
purposes. During the fourth quarter of fiscal 2005, the Company reduced its CATC
goodwill by approximately $2.9 million as a result of a reversal of a valuation
allowance against the CATC deferred tax assets and a reversal of a
pre-acquisition contingency reserve. The final purchase price allocation is
summarized below (in thousands):










                                       7
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)



Cash                                                      $ 46,466
Accounts receivable                                          2,296
Inventory                                                    3,710
Other current assets                                           133
Fixed assets                                                   663
Other assets                                                    28
Deferred tax asset, net                                        367
In-process research and development                          2,190
Purchased technology                                         3,080
Purchased trade name                                            70
Purchased purchase orders                                       90
Goodwill                                                    76,974
Current liabilities assumed                                 (5,420)
Long-term liabilities assumed                                 (652)
                                                       -----------
Total purchase price                                      $129,995
                                                       ============


    The following table presents the details of the amortizable intangible
assets acquired in the Merger and their carrying values as of March 31, 2006 (in
thousands):

<TABLE>
<CAPTION>

                                                                  WEIGHTED                 ACCUMULATED
                                                               AVERAGE LIVES     COST      AMORTIZATION      NET
                                                               -------------     ----      ------------      ---
<S>                                                              <C>             <C>        <C>         <C>
   Amortizable intangible assets:
       Purchased technology..................................    2.0 years       $  3,080   $  2,259    $     821

       Purchased trade name..................................    1.0 year              70         70            -

       Purchased purchase orders.............................    0.2 years             90         90            -
                                                                              -----------  ---------    ---------
     Total intangibles purchased.............................                    $  3,240   $  2,419    $     821
                                                                              ===========  =========    =========
</TABLE>

    Amortization expense for intangible assets acquired in the Merger was $0.2
million and $1.1 million for the three and nine months ended March 31, 2006,
respectively, of which $0.2 million and $1.1 million were recorded in Cost of
revenues and none and $23,000 were recorded in Selling, general and
administrative expense in the Consolidated Statements of Operations,
respectively. Amortization expense for the three and nine month periods ended
March 31, 2005 was $0.5 million and $0.9 million, respectively.

    The amortization expense related to intangible assets acquired in the Merger
for the remainder of fiscal 2006 and 2007 is expected to be $0.2 million and
$0.6 million, respectively.

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

    The Consolidated Statements of Operations for the three and nine months
ended March 31, 2006 includes the results of operations of CATC. The following
(unaudited) pro forma consolidated results of operations for the three and nine
months ended March 31, 2005 have been prepared as if the Merger had occurred at
the beginning of each period presented (in thousands, except per share data):



                                       8
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   Three months ended            Nine months ended
(In thousands, except per share data)                                March 31, 2005                March 31, 2005
                                                               ----------------------------   ------------------------

<S>                                                                           <C>                            <C>
Revenues .....................................................               $42,890                     $126,207
Net income before non-recurring charges directly attributable
to the Merger ................................................                $2,901                         $312
Net income per share before non-recurring charges directly
attributable to the Merger - basic ...........................                 $0.24                        $0.03

Net income per share before non-recurring charges directly
attributable to the Merger - diluted .........................                 $0.23                        $0.03


</TABLE>

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

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

3. SHARE-BASED COMPENSATION

         Share-Based Compensation

    Historically, the Company accounted for stock-based compensation under the
recognition and measurement principles of Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and
related interpretations. No compensation expense related to stock option plans
was reflected in the Company's Consolidated Statements of Operations, with the
exception of the CATC Plans described below, as all options had an exercise
price equal to the market value of the underlying common stock on the date of
grant. Compensation cost for restricted stock (non-vested stock) was recorded
based on its market value on the date of grant and was included in the Company's
Consolidated Statements of Operations ratably over the vesting period. Upon the
grant of restricted stock, deferred stock compensation was recorded as an offset
to additional paid-in capital and was amortized on a straight-line basis as
compensation expense over the vesting period. Statement of Financial Accounting
Standards ("SFAS") 123, "Accounting for Stock-Based Compensation," established
accounting and disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. As permitted by SFAS
123, the Company elected to continue to apply the intrinsic-value-based method
of APB No. 25 described above, and adopted only the disclosure requirements of
SFAS 123, as amended by SFAS No. 148, "Accounting For Stock-Based Compensation -
Transition and Disclosure."

    On July 3, 2005, the start of the first quarter of fiscal 2006, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 123
(revised 2004), "Share-Based Payment" ("SFAS 123R"), which requires that the
costs resulting from all share-based payment transactions be recognized in the
financial statements at their fair values. The Company adopted SFAS 123R using
the modified prospective application method under which the provisions of SFAS
123R apply to new awards and to awards modified, repurchased, or cancelled after
the adoption date. Additionally, compensation cost for the portion of the awards
for which the requisite service has not been rendered that are outstanding as of
the adoption date is recognized in the Consolidated Statement of Operations over
the remaining service period after the adoption date based on the award's
original estimate of fair value. In connection with the adoption of SFAS 123R,
the deferred stock compensation at June 30, 2005 of $8.6 million relating to
previous grants of restricted stock and stock options assumed in the Merger were
offset against additional paid-in capital during the first quarter of fiscal
2006. Results for prior periods have not been restated. Total share-based
compensation expense recorded in the Consolidated Statement of Operations for
the three and nine months ended March 31, 2006 is $1.3 million and $4.1 million,
respectively.



                                       9
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


    As a result of adopting SFAS 123R on July 3, 2005, the Company's income
before income taxes and net income for the three months ended March 31, 2006 are
$0.5 million and $0.4 million lower, respectively, than if it had continued to
account for share-based compensation under APB No. 25. For the nine months ended
March 31, 2006, the Company's income before income taxes and net income are $1.9
million and $1.4 million lower, respectively, under SFAS 123R. Basic and diluted
earnings per share for the three months ended March 31, 2006 would both have
been $0.04 per share if the Company had not adopted SFAS 123R, compared to
reported basic and diluted earnings per share of $0.01. Basic and diluted
earnings per share for the nine months ended March 31, 2006 would have been
$0.49 and $0.48, respectively, compared to reported basic and diluted earnings
per share of $0.37. Under APB No. 25, restricted stock was historically being
expensed.

    On November 10, 2005, the FASB issued FASB Staff Position 123(R)-3 ("FSP
123R-3"), "Transition Election Related to Accounting for the Tax Effects of
Share-based Payment Awards," that provides an elective alternative transition
method of calculating the pool of excess tax benefits available to absorb tax
deficiencies recognized subsequent to the adoption of SFAS 123R (the "APIC
Pool") to the method otherwise required by paragraph 81 of SFAS 123R. The
Company may take up to one year from the effective date of this FSP to evaluate
its available alternatives and make its one-time election. The Company is
currently evaluating the alternative methods; however, neither alternative would
have an impact on the Company's results of operations or financial condition for
the three and nine months ended March 31, 2006, due to the fact that the Company
is currently using prior period net operating losses and has not realized any
tax benefits under SFAS 123R. Until and unless the Company elects the transition
method described in this FSP, the Company will follow the transition method
described in paragraph 81 of SFAS 123R.

    The following table illustrates the effect on net income and net income per
common share for the three and nine months ended March 31, 2005, as if the
Company had applied the fair value recognition provisions for stock-based
employee compensation of SFAS 123, as amended. For purposes of the pro forma
presentation, option forfeitures are accounted for as they occurred and no
amounts of compensation expense have been capitalized into inventory or other
assets, but instead were considered as period expenses (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                                            Three Months Ended          Nine Months Ended
                                                                              March 31, 2005               March 31, 2005
                                                                         --------------------------   -----------------------

<S>                                                                              <C>                        <C>
Net income, as reported ...........................................                 $ 2,882                    $ 2,316
Add: share-based compensation expense included in reported
  net loss, net of income taxes ...................................                     491                      1,189
Deduct: share-based compensation expense determined under
  fair value-based method for all awards, net of income taxes .....                  (1,359)                    (2,991)
                                                                                ------------               ------------
Pro forma net income ..............................................                 $ 2,014                      $ 514
                                                                                ============               ============
Net income per common:
  Basic, as reported ..............................................                  $ 0.24                     $ 0.20
  Diluted, as reported ............................................                  $ 0.23                     $ 0.19
  Basic, pro forma ................................................                  $ 0.17                     $ 0.04
  Diluted, pro forma ..............................................                  $ 0.16                     $ 0.04

</TABLE>


    Prior to the adoption of SFAS 123R, the Company presented all tax benefits
of deductions resulting from the exercise of stock options as operating cash
flows in the Statement of Cash Flows. SFAS 123R requires the cash flows
resulting from tax benefits in excess of the compensation cost recognized for
those options (excess tax


                                       10
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


benefits) to be classified as financing cash flows. For the three and nine
months ended March 31, 2006, there was no excess tax benefit recognized
resulting from share-based compensation cost.

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

    The table below presents the assumptions used to calculate the fair value of
options granted during the three and nine months ended March 31, 2006 and 2005.

<TABLE>
<CAPTION>

                                               THREE MONTHS       THREE MONTHS       NINE MONTHS        NINE MONTHS
                                                   ENDED              ENDED             ENDED              ENDED
                                              MARCH 31, 2006     MARCH 31, 2005     MARCH 31, 2006    MARCH 31, 2005
                                              --------------     --------------     --------------    --------------

<S>                                            <C>                <C>                <C>               <C>
Expected holding period (years)..............      5.0                5.0                5.0               5.9
Risk-free interest rate .....................  4.50% - 4.78%      3.68% - 4.30%      3.86% - 4.78%     3.31% - 4.30%
Weighted average risk-free interest rate ....      4.65%              4.08%              4.29%             3.38%
Dividend yield...............................      0.0%               0.0%               0.0%              0.0%
Expected volatility..........................  47.3% - 49.3%      68.8% - 73.6%      47.3% - 64.9%     67.3% - 73.6%
Weighted average expected volatility.........      48.0%              71.8%              57.3%             69.1%
Fair value of options granted................  $6.95 - $7.34      $11.19 - $14.52    $6.95 - $8.43    $10.03 - $14.52
Weighted  average  fair  value  of  options
granted......................................     $7.11              $12.53              $7.82            $11.12

</TABLE>

    Additionally, the Company has an Employee Stock Purchase Plan ("ESPP") with
a look-back option that allows employees to purchase shares of common stock at
85% of the market value at the lower of either the date of enrollment or the
date of purchase. Payment for the ESPP is a fixed amount, set at the beginning
of the period, made through payroll withholding over the enrollment period which
is six months. The number of shares the participant can acquire is variable
based on the fixed amount withheld and the applicable fair value. SFAS No. 123R
requires an ESPP with a purchase price discount of greater than 5% and a
look-back option to be compensatory. The fair value of the `put' and `call'
features of the estimated shares to be purchased are estimated at the beginning
of the purchase period using a Black-Scholes option pricing model. Expected
volatilities are calculated based on the historical six-month volatility of the
Company's stock. The expected holding period is equal to the six-month
enrollment period. The risk-free interest rate for periods within the
contractual life of the share is based on the interest rate of a six-month U.S.
Treasury note in effect on the first day of the enrollment period. The fair
value of the shares is liability classified until the end of the six-month
period at which time the fair value is re-calculated as of the end of the period
and compared to the estimate. The lower amount is then equity classified and any
over accrual reversed. As of March 31, 2006, there is $0.1 million of liability
classified share-based compensation expense included in Accrued expenses and
other current liabilities on the Consolidated Balance Sheet.

         Stock Option Plans

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


                                       11
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


    The 1993 Plan expired on January 4, 2003. All options outstanding under the
1993 Plan at the time of its expiration will continue in full force and effect
in accordance with their terms. No more than 2,608,696 shares of Common Stock
were allowed to be issued pursuant to the exercise of incentive stock options
granted under the 1993 Plan. This limitation did not apply to non-qualified
stock options or restricted stock awards that were granted under the 1993 Plan.
The vesting period and expiration of each grant was determined by the
Compensation Committee of the Board of Directors. In general, the vesting period
is 25% per annum over a four-year period, or 50% after the second year and 25%
for the third and fourth years. The lives of the options are generally ten years
from the date of grant. As of March 31, 2006, there were 1,342,082 options
outstanding under the 1993 Plan, of which 1,248,137 options were vested.

    In July 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the
"ESPP") and reserved for issuance an aggregate of 434,783 shares of Common
Stock. The purpose of the ESPP is twofold: first, to encourage stock ownership
by employees by establishing a program that permits them to purchase shares of
Common Stock on a regular basis through payroll deductions; and second, to offer
employees an opportunity, without adverse tax consequences, to purchase stock at
a price equal to 85% of the market value on the first or last business day of
the offering period. On October 29, 2003, the Company's shareholders approved
the extension of the expiration of the ESPP from June 7, 2005 to November 30,
2006 and increased the number of shares available for issuance under the ESPP
from 434,783 to 684,783 shares. On October 26, 2005, the Company's shareholders
approved the extension of the expiration of the ESPP from November 30, 2006 to
November 30, 2011 and increased the number of shares available for issuance
under the ESPP from 684,783 to 1,060,000 shares. Through March 31, 2006, a total
of 532,962 shares have been issued under the ESPP including 40,449 shares for
the nine months ended March 31, 2006 and 56,214, 49,141 and 45,820 shares for
the years ended June 30, 2005, 2004 and 2003, respectively. As of March 31,
2006, 527,038 shares are available for future issuance.

    In October 1998, the Board of Directors and stockholders terminated the 1995
Non-Employee Director Stock Option Plan ("1995 Plan") and adopted the 1998 Plan.
As of March 31, 2006, stock options to purchase 901 shares of Common Stock
issued pursuant to the 1995 Plan are outstanding and fully vested. On October
26, 2005, the Company's shareholders approved amendments to the 1998 Plan to
extend the termination date of the 1998 Plan to October 27, 2010 and to provide
for the ability to grant restricted stock awards under the 1998 Plan. Pursuant
to the 1998 Plan, each non-employee director receives either a stock option
grant of 15,000 shares to vest ratably over 36 months, or a restricted stock
award of 10,000 shares of Common Stock, subject to such vesting and other
conditions and restrictions as the Board may determine in its discretion.
Additionally, each non-employee director will receive annually a restricted
stock award of 5,000 shares of Common Stock subject to such vesting and other
conditions and restrictions as the Board may determine in its discretion. Prior
to the amendments dated October 26, 2005 and October 25, 2000, the annual award
to each non-employee director was 7,000 stock options and 5,000 stock options,
respectively, all exercisable at the market price on the date of grant and
vesting immediately. A total of 500,000 shares of Common Stock can be issued
during the term of the 1998 Plan. As of March 31, 2006, there were 238,670
options outstanding under the 1998 Plan, of which 232,836 options were vested.

    On October 29, 2003, the Company's shareholders approved the 2003 Plan. The
2003 Plan provides for the grant of incentive stock options, nonqualified stock
options and restricted stock awards to employees (including officers and
employee directors) and consultants. Unless approved by stockholders owning a
majority of shares present and entitled to vote at a duly convened meeting of
stockholders of the Company, the purchase price of any option granted under the
2003 Plan may not be less than 100% of the fair value of the Company's common
stock on the date of grant. The initial aggregate number of shares of Common
Stock that may be issued or transferred pursuant to options or restricted stock
awards under the 2003 Plan shall not exceed 910,167 shares. On October 26, 2005,
the Company's shareholders approved amendments to the 2003 Plan to allow for
awards under the 2003 Plan





                                       12
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

based on performance criteria which awards may then qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code and to increase from 910,167 to up to 1,560,167 shares the number of shares
of Common Stock reserved for issuance under the 2003 Plan. The Compensation
Committee of the Board of Directors administers the 2003 Plan and has the
authority to determine the terms of such options or awards including the number
of shares, exercise or purchase prices and times at which the options become and
remain exercisable or restricted stock is no longer restricted. There are no
performance-based awards approved for fiscal 2006. The 2003 Plan expires on
October 29, 2013. As of March 31, 2006, there were 58,468 options outstanding
under the 2003 Plan, of which 6,768 options were vested.

    In connection with the Merger, on October 29, 2004, the Company's Board of
Directors approved the 2004 Plan to promote the interests of the Company and its
stockholders by strengthening the Company's ability to attract and induce
persons to become employees of the Company, including certain of CATC's
employees. The adoption of the 2004 Plan did not require stockholder approval.
The initial number of shares of LeCroy common stock that may be issued or
transferred pursuant to options or restricted stock awards granted under the
2004 Plan is 750,000 shares. On October 29, 2004, the Company issued the
following grants under the 2004 Plan: (i) 70,000 shares of restricted common
stock to certain former officers of CATC, and (ii) options to purchase an
aggregate of 230,984 shares of common stock to 61 former CATC employees who
became non-officer employees of LeCroy (none of whom received an option grant of
more than 20,000 shares). The options were issued with vesting periods of four
to six years. On September 13, 2005, the Board of Directors resolved that no
further grants would be made under the 2004 Plan. The 2004 Plan expires on
October 29, 2014. As of March 31, 2006, there were 186,801 options outstanding
under the 2004 Plan, of which 16,293 were vested.

    In connection with the Merger, LeCroy assumed CATC's 2000 Stock Option/Stock
Issuance Plan, Special 2000 Stock Option Plan, 2000 Stock Incentive Plan and
1994 Stock Option Plan (collectively, the "CATC Stock Plans"). On October 27,
2004, the Board of Directors of CATC approved technical amendments to each of
the CATC Stock Plans in anticipation of their assumption by LeCroy pursuant to
the Merger including, without limitation, amendments reflecting that any stock
option or other award granted thereunder would be exercisable for LeCroy common
stock. Pursuant to FIN 44, the 648,284 unvested stock options, as well as
certain vested but unexercised stock options, granted by the Company in exchange
for the stock options held by the employees of CATC were considered part of the
purchase price for CATC. The $5.1 million fair value of the new awards was
included in the purchase price, less the intrinsic value of unvested options of
$1.9 million, which, during the period from October 29, 2004 to June 30, 2005,
was being charged as compensation expense to operations on a straight-line basis
as earned by employees over their remaining vesting periods. In connection with
the adoption of SFAS 123R, the remaining unamortized deferred compensation was
offset against additional paid-in capital on the date of adoption and
compensation cost for unvested options under the LeCroy (CATC) Plans is being
recognized over the remaining vesting period using the fair value of the options
on the date of the Merger. On September 13, 2005, the Board of Directors
resolved that no further grants would be made under the LeCroy (CATC) Plans. As
of March 31, 2006, there were 459,871 options outstanding under the LeCroy
(CATC) Plans, of which 257,836 options were vested.




                                       13
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


    Stock option transactions for the nine months ended March 31, 2006 under all
plans are as follows:

<TABLE>
<CAPTION>

                                                                              WEIGHTED
                                                                               AVERAGE
                                                                              REMAINING         AGGREGATE
                                            NUMBER OF     WEIGHTED AVERAGE    CONTRACTUAL     INTRINSIC VALUE
                                              SHARES       EXERCISE PRICE   TERMS (YEARS)  AS OF MARCH 31, 2006
                                            ---------     ----------------  -------------- --------------------
                                                                                                    ($000)
<S>                                        <C>               <C>               <C>               <C>
   Outstanding at June 30, 2005............  2,784,288         $ 16.05

   Granted.................................     26,400           14.69
   Exercised...............................   (123,242)          11.39
   Expired.................................     (6,000)          15.75
   Forfeited ..............................   (394,653)          18.34
                                              --------
   Outstanding at March 31, 2006...........  2,286,793           15.87           5.05              $4,675
                                             =========

   Vested and  expected  to vest at
   March 31, 2006........................    2,275,025         $ 15.87           4.99              $4,663
                                            ==========
   Exercisable at March 31, 2006.........    1,762,771         $ 16.50           4.23              $3,376
                                            ==========

</TABLE>

    The weighted-average grant-date fair value of the stock options granted
during the three and nine months ended March 31, 2006 was $7.11 and $7.82 per
option, respectively. The weighted-average grant-date fair value of the stock
options granted during the three and nine months ended March 31, 2005 was $12.53
and $11.12 per option, respectively. The total intrinsic value of stock options
exercised during the three and nine months ended March 31, 2006 was $0.2 million
and $0.5 million, respectively, as compared to $3.1 million and $3.6 million for
the three and nine months ended March 31, 2005, respectively. The fair value of
stock options vested during the three and nine months ended March 31, 2006 was
$0.7 million and $2.8 million, respectively.

    The following table summarizes information about stock options outstanding
at March 31, 2006:

<TABLE>
<CAPTION>
                                                         OPTIONS OUTSTANDING AT               OPTIONS EXERCISABLE AT
                                                             MARCH 31, 2006                       MARCH 31, 2006
                                               -----------------------------------------     -------------------
                                                                WEIGHTED   WEIGHTED AVERAGE                  WEIGHTED
                                                                 AVERAGE       REMAINING                      AVERAGE
    OPTION EXERCISE PRICE                       NUMBER OF       EXERCISE   CONTRACTUAL LIFE    NUMBER OF     EXERCISE
         RANGE                                   SHARES           PRICE         (YEARS)         SHARES         PRICE
   ---------------                             ----------     ----------- -----------------  -----------   ---------
<S>                                             <C>          <C>               <C>             <C>        <C>
   $ 1.35 - $12.00..........................       468,502      $  8.56           5.97            337,237    $  8.25
   $12.01 - $18.00..........................     1,089,358        14.88           5.83            715,985      14.82
   $18.01 - $24.00..........................       666,622        21.39           3.39            647,238      21.42
   $24.01 - $37.00..........................        62,311        29.16           2.26             62,311      29.16
                                                ----------                                     ----------
     Total..................................     2,286,793        15.87           5.05          1,762,771      16.50
                                                ==========                                     ===========

</TABLE>

    Of the total stock options outstanding, 1,762,771 and 1,860,699 options were
exercisable at March 31, 2006 and June 30, 2005, respectively. Stock options and
restricted stock awards available for grant under all plans were 1,178,407 and
1,223,502 at March 31, 2006 and June 30, 2005, respectively.

    As of March 31, 2006, there was approximately $3.7 million of total
unrecognized compensation cost related to stock options granted under the plans.
That cost is expected to be recognized over a weighted-average period of 2.68
years. No compensation cost related to stock options was capitalized in
inventory or any other assets for the three and nine months ended March 31, 2006
or 2005.


                                       14
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


         Restricted Stock

    Compensation expense for restricted stock (referred to as non-vested stock)
was historically recorded based on its market value on the date of grant and
recognized ratably over the associated service period, the period in which
restrictions are removed. Compensation expense for non-vested stock was reported
as deferred stock compensation on the Consolidated Balance Sheets. With the
adoption of SFAS 123R, effective July 3, 2005, deferred stock compensation has
been offset against additional paid-in capital where it is reflected on the
Consolidated Balance Sheet as of March 31, 2006. The fair value of new grants is
determined based on the closing price on the date of grant. Related compensation
expense is recognized ratably over the associated service period. During the
nine months ended March 31, 2006 there were 73,500 shares of restricted stock
granted. Of these shares, 25,000 were issued under the 1998 Plan to non-employee
directors and were immediately vested and 48,500 shares were issued to employees
under the 2003 Plan with 4-year vesting. During the nine months ended March 31,
2006, 32,375 of non-vested stock were forfeited as a result of employee
terminations and corresponding compensation expense of $0.1 million recorded in
previous periods was reversed. An additional 22,650 shares vested during the
nine months ended March 31, 2006. As of March 31, 2006, 538,075 shares are
unvested under both plans.

    The following table summarizes transactions related to non-vested stock for
the nine months ended March 31, 2006:

                                                               WEIGHTED AVERAGE
                                                   NUMBER OF      GRANT DATE
                                                    SHARES        FAIR VALUE
                                                   ---------   ----------------
   Non-vested stock at June 30, 2005............     544,600        $  17.40

   Granted......................................      73,500           15.22
   Vested.......................................     (47,650)          15.57
   Forfeited ...................................     (32,375)          17.74
                                                  ----------

   Non-vested stock at March 31, 2006...........     538,075           17.30
                                                  ==========

    As of March 31, 2006, there was approximately $5.8 million of total
unrecognized compensation cost related to non-vested stock granted under the
plans. That cost is expected to be recognized over a weighted-average period of
2.50 years. No compensation cost related to restricted stock grants was
capitalized in inventory or any other assets for the three and nine months ended
March 31, 2006 and 2005.

4. 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.

     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







                                       15
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


and activated via a key code after the sale is made to the customer. No
post-contract support is provided on the application solutions. All sales of
test and measurement products are based upon separately established prices for
the items and are recorded as revenue according to the above revenue recognition
criteria. Revenues from these products are included in revenues from Test and
measurement products in the Consolidated Statements of Operations. Certain
software is embedded in the Company's oscilloscopes, but the embedded software
component is considered incidental.

     In the first  quarter  of fiscal  2006,  in an effort to  provide  end-user
customers an alternative  to purchasing the Company's  higher end products under
its standard  terms and  conditions,  the Company  began  offering  customers an
opportunity  to enter  into  sales-type  or direct  financing  leases  for these
products.  The Company is accounting  for these leases in  accordance  with SFAS
Statement  No. 13, "  Accounting  for  Leases."  Lease and rental  revenues  are
reported within Test and measurement product revenue and were immaterial for the
nine months ended March 31, 2006.

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

     Software license revenue. The Company recognizes software license revenue
in accordance with SOP 97-2 as amended by SOP 98-9. Revenues from perpetual
software license agreements are recognized upon delivery of the software if
evidence of an arrangement exists, pricing is fixed and determinable, and
collectibility is probable. If an acceptance period is required, revenues are
recognized upon the earlier of customer acceptance or the expiration of the
acceptance period. The Company allocates revenue on software arrangements
involving multiple elements to each element based on the relative fair values of
the elements. The determination of fair value of each element in multiple
element arrangements is based on VSOE. The Company analyzes all of the elements
and determines if there is sufficient VSOE to allocate revenue to maintenance
included in multiple element arrangements. Accordingly, assuming all other
revenue recognition criteria are met, revenue is recognized upon delivery using
the residual method in accordance with SOP 98-9, where the VSOE of the
undelivered elements is deferred and the remaining portion of the arrangement
fee is recognized as license revenue. The revenue allocated to software
maintenance is recognized ratably over the term of the support agreement. The
revenue allocated to licenses is recognized upon delivery of the licenses.
Revenues from perpetual software license agreements are included in Service and
other in the Consolidated Statements of Operations. There was no revenue from
perpetual software license agreements for the three and nine months ended March
31, 2006 and 2005.

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



                                       16
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

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

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

     Beginning in fiscal 2001 with the adoption of the SEC's Staff Accounting
Bulletin, ("SAB") No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," (superseded by SAB 104), certain previously recognized license fee
revenue was deferred and recognized in future periods over the terms of the
agreements. The adoption of SAB 101 was recorded as of the beginning of fiscal
2001 and resulted in a non-cash charge for the cumulative effect of an
accounting change of $4.4 million, net of a tax benefit of $2.7 million. The
deferred revenue is being amortized into revenue over 5.5 years, the remaining
terms of the license agreements. The Company recognized pretax license fee
revenue of $17,000 and $0.3 million for the three months ended March 31, 2006
and 2005, respectively, and $0.7 million and $1.0 million for the nine months
ended March 31, 2006 and 2005, respectively. Such license fees were included in
Service and other revenue in the Consolidated Statements of Operations. As of
March 31, 2006, there is no remaining deferred license fee balance from the
adoption of SAB 101.

5. RESTRUCTURING AND ASSET IMPAIRMENT

     During the first quarter of fiscal 2003, the Company adopted a plan to
scale down fixed infrastructure due to the difficult economic environment and to
implement new management operating systems designed to improve processes in
sales, order management, customer relationship management and financial
performance management. In connection with the adoption of this plan, the
Company recorded a charge for severance and other related expenses in the first
quarter of fiscal 2003 of $2.6 million; $0.2 million of which was recorded in
Cost of sales, $1.9 million recorded in Selling, general and administrative and
$0.5 million in Research and development in the Consolidated Statement of
Operations. As of March 31, 2006, all of the accrued severance costs and other
related expenses have been paid.

     During the second quarter of fiscal 2005, as a result of the Merger, the
Company adopted a plan to restructure the organization and refine its product
strategy. In connection with the adoption of this plan, the Company recorded a
charge for severance and other related expenses in the second quarter of fiscal
2005 of approximately $0.6 million in Selling, general and administrative
expense. The implementation of this plan resulted in headcount reductions of six
employees or approximately 2% of the workforce as compared to June 30, 2004. As
of March 31, 2006, approximately $0.5 million of severance has been paid and
approximately $0.1 million remains in Accrued expenses and other current
liabilities on the Consolidated Balance Sheet. Severance and other related
amounts under this plan are expected to be paid by the end of the second quarter
of fiscal 2007.



                                       17
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


     Additionally, in the second quarter of fiscal 2005, as a result of a change
in our organization stemming from the Merger and a subsequent change in the
Company's low to mid-range oscilloscope manufacturing strategy, the Company
recorded a $1.5 million non-cash charge to Cost of revenues for the impairment
of a related intangible asset.

     Finally,  in the fourth quarter of fiscal 2005, the Company  realigned some
of its business  processes and, as a result,  incurred expenses of approximately
$1.0 million,  consisting of $0.7 million of severance and related  expenses and
$0.3 million of facility closure expenses which included lease termination costs
and asset  write-downs.  Of these  costs,  $0.1  million was recorded in Cost of
revenues,  $0.8 million was recorded in Selling,  general and administrative and
$0.1  million was recorded in Research  and  development.  As of March 31, 2006,
approximately  $0.7  million  of  severance  has been paid and $0.3  million  of
facility charges has been paid in cash or written off and approximately  $24,000
remains in Accrued  expenses and other current  liabilities on the  Consolidated
Balance Sheet. The remaining balance is expected to be paid by the end of fiscal
2006.

6. 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
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.

     As of March 31, 2006, the Company has the following derivative instruments:

       Interest Rate Swap

     As required by the terms of the Credit Agreement (See Note 14 - Long-term
Debt and Capital Leases), on January 27, 2005 the Company entered into a Master
Agreement with Manufacturers & Traders Trust Co. ("M&T Bank"), the purpose of
which is to protect against rising interest rates during the term of the Credit
Agreement.

     The Credit Agreement obligates the Company to enter into one or more
interest rate swap agreements covering the interest payable with respect to at
least 50% of the outstanding principal amount of the Term Loan (see Note 14) for
a period of at least three years. In connection with the Master Agreement, the
Company entered into an interest rate swap transaction effective January 31,
2005 and continuing through January 31, 2008, corresponding with the repayment
terms of the Credit Agreement. The swap agreement is not designated as a cash
flow hedge under SFAS 133. Accordingly, changes in the fair value of the swap
are charged or credited to operations. In accordance with the interest rate swap
transaction, the Company pays interest quarterly on the notional amount at a
fixed annualized rate of 3.87% to M&T Bank, and receives interest quarterly on
the same notional amount at the three-month LIBOR rate in effect at the
beginning of each quarterly reset period; except for the initial period, which
covered the two months ending March 31, 2005, in which the Company received
interest at a LIBOR rate of 2.64%. The initial notional amount was $25.0 million
and resets quarterly to 50% of the outstanding principal balance with respect to
the original amortization schedule as set forth in the Credit Agreement. The net
interest income earned on the swap was approximately $35,000 and $21,000 during
the three and nine months ended March 31, 2006, respectively. The notional
amount as of March 31, 2006 and June 30, 2005 was approximately $20.2 million
and $23.1 million,




                                       18
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


respectively.  The fair value of the interest  rate swap as of March 31, 2006 is
$0.4 million  compared to $66,000 at June 30, 2005 and  approximates  the amount
that the Company  would have  received from M&T Bank if the Company had canceled
the  transaction  at each  respective  date. The fair value is recorded in Other
non-current  assets in the  Consolidated  Balance Sheet as of March 31, 2006 and
the change in fair value of $0.1  million  and $0.3  million  is  recognized  in
Interest  income in the  Consolidated  Statement of Operations for the three and
nine months ended March 31, 2006, respectively.

       Forward foreign exchange contracts

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

     The net gains (losses) resulting from changes in the fair value of these
derivatives and on transactions denominated in other than their functional
currencies were net gains of $0.1 million for the three months ended March 31,
2006 as compared to net losses of ($0.1) million for the three months ended
March 31, 2005. For the nine months ended March 31, 2006 and 2005 there were net
losses of ($0.1) million and net gains of $0.4 million, respectively. These
amounts are included in Other expense, net in the Consolidated Statements of
Operations and include gross foreign exchange contract gains of $0.5 million and
$0.6 million for the three and nine months ended March 31, 2006, respectively,
as compared to zero and $0.6 million for the three and nine months ended March
31, 2005, respectively. At March 31, 2006 and June 30, 2005, the notional
amounts of the Company's open foreign exchange forward contracts, all with
maturities of less than six months, were approximately $14.4 million and $9.8
million, respectively.

7. COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>

                                                        Three months ended        Nine months ended
                                                            March 31,                 March 31,
                                                  -------------------------  ------------------------
                                                     2006           2005        2006          2005
                                                  ----------     ----------  ----------   -----------

<S>                                               <C>          <C>         <C>           <C>
Net income ....................................        $152         $2,882      $4,562        $2,316
 Unrealized loss on marketable securities .....           -              -           -            (3)
 Plus: reclassification adjustment for realized
 losses inclded in net income .................           -              -           -            16
 Foreign currency translation gain (loss) .....         172           (647)         12           939
                                                  ----------     ----------  ----------   -----------
Comprehensive income                                   $324         $2,235      $4,574        $3,268
 ..............................................   ==========     ==========  ==========   ===========
</TABLE>


8. ACCOUNTS RECEIVABLE, NET

     The Company has agreements with two of its customers, who are also vendors,
which provide the Company with the legal right to offset outstanding accounts
receivable balances against outstanding accounts payable balances. At March 31,
2006 and June 30, 2005, the Company netted approximately $0.5 million and $2.3
million, respectively, of accounts receivable against accounts payable on the
Consolidated Balance Sheets related to these agreements.


                                       19
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


9. INVENTORIES, NET

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


                                                     MARCH 31,   JUNE 30,
                                                       2006      2005 (1)
                                                    ---------   ----------
   Raw materials................................... $   6,308   $    4,284
   Work in process.................................     6,154        3,425
   Finished goods..................................    19,552       19,952
                                                    ---------   ----------
                                                    $  32,014   $   27,661
                                                    =========   ==========

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

     The value of demonstration units included in finished goods was $10.6
million and $10.8 million at March 31, 2006 and June 30, 2005, respectively. The
Company's demonstration units are held for sale and are sold regularly in the
ordinary course of business through its normal sales distribution channels and
existing customer base.

     In the second quarter of fiscal 2005, as a result of the Merger, the
Company reviewed the long-term product support policies in place at LeCroy and
at CATC prior to the Merger with an aim toward developing one policy to best
serve customers. In connection with the resultant change in policy, as well as
changes in the Company's product support strategy, the Company recorded a $2.7
million non-cash charge to cost of revenue in the Consolidated Statement of
Operations for the write-off of excess parts.

10. OTHER CURRENT ASSETS

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

                                                      MARCH 31,   JUNE 30,
                                                        2006        2005
                                                   ----------     ----------
   Deferred tax assets, net....................... $    9,000     $    9,000
   Other receivables..............................        990            456
   Value-added tax................................      1,491            565
   Other..........................................      3,596          2,660
                                                   ----------     ----------
                                                   $   15,077     $   12,681
                                                   ==========     ==========




                                       20
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


11. GOODWILL AND OTHER NON-CURRENT ASSETS

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

                                                        MARCH 31,    JUNE 30,
                                                          2006         2005
                                                       ----------   ----------

   Goodwill.........................................    $  78,848   $   78,848
                                                        =========   ==========

   Intangibles, net.................................    $   4,567   $    5,783
   Deferred tax assets, net.........................        3,856        5,446
   Other............................................        1,968        1,530
                                                        ---------   ----------
                                                        $  10,391   $   12,759
                                                        =========   ==========

    Under SFAS No. 142 "Goodwill and Other Intangible Assets," ("SFAS 142")
goodwill is not amortized but reviewed for impairment annually or more
frequently if certain indicators arise. The Company completed the annual
impairment test required under SFAS 142 during the fourth quarter of fiscal 2005
and determined that there was no impairment to the recorded goodwill balances.
No impairment indicators arose during the first nine months of fiscal 2006.

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

<TABLE>
<CAPTION>

                                                                       ORIGINAL
                                                                       WEIGHTED         MARCH 31,    JUNE 30,
                                                                     AVERAGE LIVES        2006          2005
                                                                     -------------  --------------- --- ----

<S>                                                                   <C>              <C>          <C>
   Amortizable intangible assets:
       Technology, manufacturing and distribution rights..........    3.13 years       $   7,025    $   11,737
       Patents and other intangible assets........................    5.55 years           1,593         1,073
       Accumulated amortization...................................                        (4,051)       (7,027)
                                                                                       ---------    ----------
     Net carrying amount..........................................                     $   4,567    $    5,783
                                                                                       =========    ==========

</TABLE>

    Amortization expense for intangible assets, all with finite lives, was $0.5
million and $2.0 million for the three and nine months ended March 31, 2006,
respectively, as compared to $0.9 million and $2.1 million for the three and
nine months ended March 31, 2005, respectively. The cost of technology,
manufacturing and distribution rights acquired is amortized on a straight-line
basis over the estimated economic life of the asset. For the nine months ended
March 31, 2006, certain technology rights totaling $5.0 million were fully
amortized and removed from the Consolidated Balance Sheet due to contract
expiration. Management estimates intangible assets amortization expense on a
straight-line basis will approximate $0.6 million for the remainder of fiscal
2006 and $1.9 million, $1.0 million, $0.5 million and $0.6 million for fiscal
2007, 2008, 2009 and 2010 and beyond, respectively.



                                       21
<PAGE>




                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

<TABLE>
<CAPTION>


                                                                         MARCH 31,   JUNE 30,
                                                                           2006        2005
                                                                        ----------  ----------
<S>                                                                     <C>         <C>
   Compensation and benefits.......................................     $   6,018   $    5,279
   Income taxes....................................................         3,297        3,046
   Deferred license fee revenue, current portion...................             -          665
   Warranty........................................................           921          971
   Deferred revenue, current portion...............................         1,166        1,049
   Retained liabilities from discontinued operations...............           160          160
   Sales tax/VAT...................................................         1,255          277
   Other current liabilities.......................................         2,849        3,195
                                                                        ---------   ----------
                                                                        $  15,666   $   14,642
                                                                        =========   ==========
</TABLE>

13. 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." Estimated future warranty obligations related to
products are provided by charges to operations in the period that the related
revenue is recognized. These estimates are derived from historical data of
product reliability. The expected failure rate is arrived at in terms of units,
which are then converted into labor hours to which an average fully burdened
cost per hour is applied to derive the amount of accrued warranty required. On a
quarterly basis, the Company studies trends of warranty claims and performance
of specific products and adjusts its warranty obligation through charges or
credits to operations.

    The following table is a reconciliation of the changes in the Company's
aggregate product warranty liability during the three and nine months ended
March 31, 2006 and 2005 (in thousands):


<TABLE>
<CAPTION>
                                                                    Three months ended        Nine months ended
                                                                          March 31,               March 31,
                                                                  ----------------------   ----------------------
                                                                      2006         2005        2006         2005
                                                                      ----         ----        ----         ----
<S>                                                                <C>         <C>           <C>        <C>
Balance at beginning of period ............................          $ 932       $1,372        $971       $1,247
 Accruals for warranties entered into during the period ...            366           24       1,013          892
 Warranty costs incurred during the period ................           (377)        (415)     (1,063)      (1,263)
 Warranty liability assumed in the Merger .................              -            -           -          105
                                                                  ---------   ----------   ---------   ----------
Balance at end of period ..................................          $ 921        $ 981        $921        $ 981
                                                                  =========   ==========   =========   ==========

</TABLE>


    In connection with an agreement to license the Company's MAUI Instrument
Operating System technology entered into by the Company during the third quarter
of fiscal 2003, the Company agreed to indemnify the licensee against losses
arising from any third party claim against the licensee to the extent such claim
arose directly out of the infringement of a U.S. or Japanese patent by any
LeCroy software components delivered under the license agreement. As of March
31, 2006, there have been no claims under such indemnification provisions.

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


                                       22
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

14. LONG-TERM DEBT AND CAPITAL LEASES

    On October 29, 2004, LeCroy entered into a $75.0 million senior, secured,
five-year credit agreement with the lenders listed therein and The Bank of New
York, as administrative agent for such lenders (the "Credit Agreement"), which
replaced LeCroy's prior $25.0 million revolving credit facility with The Bank of
New York. The terms of the Credit Agreement provide LeCroy with a $50.0 million
term loan (the "Term Loan") and a $25.0 million revolving credit facility (the
"Revolver"), which includes a $1.0 million swing-line loan sub-facility and a
$1.0 million letter of credit sub-facility. The performance by LeCroy of its
obligations under the Credit Agreement is secured by all of the assets of LeCroy
and its domestic subsidiaries, and is guaranteed by LeCroy's domestic
subsidiaries. The proceeds under the Term Loan have been used to finance the
acquisition of CATC and pay transaction expenses related to the Merger. Proceeds
from the Revolver may be used for general corporate purposes, including the
financing of working capital requirements, capital expenditures and
acquisitions. As of March 31, 2006, the Company has not borrowed against the
Revolver or the letter of credit sub-facility.

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

    Under the Credit Agreement, the Company is required to comply with certain
financial covenants, measured quarterly, including a minimum interest coverage
ratio, minimum total net worth, maximum leverage ratio, minimum fixed charge
coverage ratio and limitations on capital expenditures. As of March 31, 2006,
the Company was in compliance with its financial covenants under the Credit
Agreement.

    Beginning March 31, 2005, outstanding borrowings of $50.0 million under the
Term Loan were required to be repaid quarterly through October 2009, based on an
annualized amortization rate starting at 15% in calendar year 2005 and
increasing 250 basis points per year during the term of the Credit Agreement. As
of March 31, 2006, the Company has repaid $13.7 million of the principal balance
of this loan including voluntary repayments in excess of those required by the
Credit Agreement aggregating $4.0 million. The outstanding balance to be repaid
is approximately $2.2 million for the remainder of fiscal 2006 and $9.4 million,
$10.6 million, $11.9 million and $2.2 million for the fiscal years ending June
2007, 2008, 2009 and 2010, respectively.

    The Company incurred approximately $1.4 million of transaction fees in
connection with entering into the Credit Agreement, which have been deferred and
are being amortized over the life of the Credit Agreement using the effective
interest method for the Term Loan and the straight-line method for the Revolver.
At March 31, 2006, of the remaining balance of unamortized fees, $0.3 million
were included in Other current assets and $0.5 million were included in Other
non-current assets on the Consolidated Balance Sheet.

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

    As required by the terms of the Credit Agreement, the Company entered into
an interest rate swap transaction effective January 31, 2005 (See Note 6 -
Derivatives).

    In addition to the above U.S.-based credit facilities, the Company maintains
certain short-term foreign credit facilities, principally with two Japanese
banks totaling 150.0 million yen (approximately $1.3 million as of March 31,
2006). No amounts were outstanding under these facilities as of March 31, 2006
and June 30, 2005. The Company's Swiss subsidiary, LeCroy S.A., also has an
overdraft facility totaling 1.0 million Swiss francs


                                       23
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


(approximately $0.8 million as of March 31, 2006). As of March 31, 2006 and June
30, 2005, approximately 0.4 million Swiss francs were held against supplier
obligations leaving an available balance of 0.6 million Swiss francs under this
credit facility. These obligations to suppliers, such as rent and utilities, are
payable under the credit facility only in the event that the Company is unable
to meet its financial obligations to those suppliers.

    The Company had a five year $2.0 million capital lease line of credit that
expired in November 2005 that bore interest at 12.2%, to fund certain capital
expenditures. As of March 31, 2006, there were no outstanding borrowings under
this line of credit.

    During fiscal 2005, the Company entered into vendor supplied capital lease
agreements for technology rights of $1.3 million. These leases bear interest at
4.5% to 4.88% with three-year terms. At March 31, 2006, the Company's
outstanding balance under these agreements was $0.7 million of which $0.5
million was included within Current portion of long-term debt and capital leases
and $0.2 million was included within Long-term debt in the Consolidated Balance
Sheet. Under these capital lease obligations, payments, including interest, are
$0.1 million for the remainder of fiscal 2006 and $0.5 million and $0.1 million
for fiscal years 2007 and 2008, respectively.

15. COMMITMENTS AND CONTINGENCIES

    On April 28, 2003, Tektronix, Inc. ("Tektronix") filed a complaint against
the Company in the United States District Court for the District of Oregon
claiming that the Company infringed on eight of Tektronix' U.S. patents. In the
Company's responsive pleading, the Company denied that it has infringed, or is
infringing, any of these patents, and contends that the patents are invalid. The
Company furthermore filed a counterclaim on August 5, 2003, claiming Tektronix
is infringing three of the Company's patents. On April 11, 2005, all claims
related to two of the Tektronix patents were voluntarily dismissed from the
Tektronix complaint and the Company's counterclaim. All claims related to one of
the Company's patents were also voluntarily dismissed from the Company's
counterclaim. On November 30, 2004, the Company filed a Motion for Summary
Judgment of Non-infringement concerning one of the six Tektronix patents. In
response, Tektronix filed a Cross-Motion for Summary Judgment of Infringement by
the Company concerning the same patent. By order dated May 4, 2005, the court
granted the Company's Motion for Summary Judgment of Non-infringement and denied
Tektronix' Cross-Motion for Summary Judgment of Infringement. On May 11, 2005,
Tektronix and the Company entered into an agreement settling all claims and
counterclaims between the parties in connection with their respective patents.
As part of the settlement agreement, the Company recorded $1.0 million as a
legal settlement for the three and nine months ended March 31, 2005.



                                       24
<PAGE>


                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


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

16. EARNINGS PER COMMON SHARE

    The following is a presentation of the numerators and the denominators of
the basic and diluted net income per common share computations for the three and
nine months ended March 31, 2006 and 2005:


<TABLE>
<CAPTION>
                                                        Three months ended      Nine months ended
                                                              March 31,               March 31,
                                                       ----------------------  --------------------
                                                         2006        2005       2006        2005
                                                         ----        ----       ----        ----
<S>                                                    <C>       <C>        <C>         <C>
Numerator:
  Net income ....................................          $ 152     $ 2,882    $4,562      $2,316
                                                       ==========  ==========  ========   =========
Denominator:
  Weighted average shares outstanding:
        Basic ...................................         12,275      11,847    12,191      11,702
        Employee stock options and other ........            281         825       263         560
                                                       ----------  ----------  --------   ---------
        Diluted .................................         12,556      12,672    12,454      12,262
                                                       ==========  ==========  ========   =========

</TABLE>



    The computations of diluted net income per common share for the three and
nine months ended March 31, 2006 do not include approximately 1.9 million of
stock options and warrants to purchase common stock as the effect of their
inclusion would have been anti-dilutive to earnings per share. The computations
for the three and nine months ended March 31, 2005 do not include approximately
0.6 million of stock options and warrants to purchase common stock as the effect
of their inclusion would have been anti-dilutive to earnings per share.

17. INCOME TAXES

    The effective income tax rate for the three and nine months ended March 31,
2006 was 62.4% and 39.4%, respectively, compared to an effective income tax rate
of 0.4% and 29.4% for the three and nine months ended March 31, 2005,
respectively. Under the provisions of SFAS 123R, which the Company adopted on
July, 3, 2005, only the portion of share-based compensation expense that is
expected to result in a future tax deduction is considered deductible for tax
accounting purposes. The non-deductible portion represents permanent differences
which resulted in the higher effective tax rate in the three months ended March
31, 2006 than in the comparable prior year period. The lower effective tax rate
for the three months ended March 31, 2005 comprised an annualized effective tax
rate of 35% which was offset in the quarter by two discrete tax benefits
aggregating $0.9 million associated with the reversal of a prior year valuation
allowance related to a favorable conclusion to a tax audit and a fiscal 2004
provision-to-return adjustment determined when the Company filed its fiscal 2004
tax returns.



                                       25
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

    On October 22, 2004, the American Jobs Creation Act (the "Act") was signed
into law. The Act includes a provision for the deduction of 85% of certain
foreign earnings that are repatriated, as defined in the Act. The Company
elected to apply this provision to certain repatriations of qualifying earnings
in fiscal year 2005. The Company elected to repatriate $22.1 million pursuant to
its approved domestic reinvestment plan. The income tax effect recognized under
the repatriation provision was approximately $1.2 million which was
substantially offset by the release of a tax reserve related to a favorable
foreign tax audit settlement during the three-month period ended December 31,
2004.

18. SEGMENT AND GEOGRAPHIC REVENUE

    The Company operates in a single 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.

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



                       Three Months Ended           Nine Months Ended
                           March 31,                    March 31,
                     ------------------------   ------------------------
                         2006         2005          2006         2005
                     ----------- ------------   -----------  -----------

North America           $12,429     $ 15,260      $ 40,820     $ 39,494
Europe/Middle East       11,840       11,497        36,834       36,626
Japan                     6,229        5,101        16,817       15,925
Asia/Pacific              8,383       11,032        27,490       29,138
                     ----------- ------------   -----------  -----------
  Total Revenues        $38,881     $ 42,890     $ 121,961    $ 121,183
                     =========== ============   ===========  ===========

    Total net assets by geographic area are as follows (in thousands):


                                            March 31,       June 30,
                                              2006           2005
                                         ---------------  -----------

North America ........................        $ 167,599     $170,685
Europe/Middle East ...................           15,703       11,241
Japan ................................            7,130        6,328
Asia/Pacific .........................            5,393        4,914
                                         ---------------  -----------
  Total net assets ...................        $ 195,825     $193,168
                                         ===============  ===========



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


                                       26
<PAGE>



                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


                                                     March 31,     June 30,
                                                       2006          2005
                                                     ----------   -----------

North America ..................................     $ 103,138     $ 103,839
Europe/Middle East .............................           608           525
Japan ..........................................           314           456
Asia/Pacific ...................................           424           419
                                                     ----------   -----------
  Total long-lived assets ......................     $ 104,484     $ 105,239
                                                     ==========   ===========

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

19. NEW ACCOUNTING PRONOUNCEMENTS

    In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4" ("SFAS 151"). SFAS 151 amends the guidance
in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that
"...under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and re-handling costs may be so abnormal as to require
treatment as current period charges...." SFAS 151 requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal." In addition, SFAS 151 requires that allocation of
fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of SFAS 151 apply to
inventory costs beginning in fiscal year 2006. The adoption of SFAS 151 on July
3, 2005 had no impact on the Company's results of operations or financial
condition.

    In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets, an Amendment of APB Opinion No. 29" ("SFAS 153"). The guidance in APB
Opinion No. 29, "Accounting for Non-monetary Transactions," ("APB 29") is based
on the principle that exchanges of non-monetary assets should be measured based
on the fair value of the assets exchanged. The guidance in APB 29, however,
included certain exceptions to that principle. SFAS 153 amends APB 29 to
eliminate the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The adoption of SFAS 153 on July 3,
2005 did not have an impact on the Company's results of operations or financial
condition.

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

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


                                       27
<PAGE>




                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

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

    On February 16, 2006, the FASB issued SFAS No. 155 ("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 Statement 133; establishes a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring separation; clarifies
that concentrations of credit risk in the form of subordination are not embedded
derivatives; and amends Statement 140 to eliminate the prohibition on a
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. SFAS 155 is effective for all financial instruments acquired or
issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006. The adoption of SFAS 155 is not expected to have any impact
on the Company's results of operations or financial condition as it does not
currently use hybrid instruments.

20. IWATSU SETTLEMENT/PURCHASE AGREEMENT

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





                                       28
<PAGE>




                               LECROY CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)



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

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

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

    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 on our
products are mix, as the list prices of our products range from $3,000 to
$106,000, and the effects of foreign currencies, as approximately two-thirds of
our revenues are derived overseas, much of which is denominated in local
currencies while product manufacturing costs are primarily U.S.
dollar-denominated.

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


                                       29
<PAGE>



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

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

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

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

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

    In furtherance of our drive to meet our customers' changing demands, we also
look outside our organization for opportunities to expand our markets.
Accordingly, on October 29, 2004, we completed the acquisition of Computer
Access Technology Corporation ("CATC") to complement our expanding portfolio of
serial data test solutions. This division, Protocol Solutions Group, now
represents about 15% of our total business. The acquisition of CATC is described
more fully below. In March 2006, we completed purchase and settlement agreements
with Iwatsu Electric Corporation that include 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. It is expected that the WaveJet Family of products will
expand our presence in the low-end oscilloscope market.

    Also during the quarter, 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. While the WaveRunner launched early in the
quarter as planned, the rollout of the new WaveSurfer and the WaveJet was
significantly delayed in the quarter, as we did not complete our negotiations
with Iwatsu until late March 2006. Consequently, our orders in the third quarter
of fiscal 2006 fell short of our expectations as a function of the delayed
launch at the low-end. Solid performance across the rest of our business
segments and careful expense management allowed us to achieve our financial
objectives despite the shortfall in low-end orders.

CATC ACQUISITION

    On October 29, 2004, we completed our acquisition of 100% of the outstanding
common stock of CATC (the "Merger"). CATC is a provider of advanced verification
systems for existing and emerging digital communications standards. CATC's
products are used by semiconductor, device, system and software companies at
each phase of their products' lifecycles from development through production and
market deployment. CATC had approximately




                                       30
<PAGE>


70 employees at the time of the Merger. Through our acquisition of CATC, we
expect to capitalize on the increasing demand for serial data test instruments,
leverage our global, technical, direct sales force to accelerate the growth of
CATC's products, strengthen our position in the data storage market, increase
penetration into the computer market, expand gross profit, increase operating
leverage leading to expanded operating profit and increase cash generation
capabilities.

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

RESTRUCTURING

    During the second quarter of fiscal 2005, as a result of the Merger, we
adopted a plan to restructure our organization and refine our product strategy.
In connection with the adoption of this plan, we recorded a charge for severance
and other related expenses in the second quarter of fiscal 2005 of approximately
$0.6 million, all recorded in selling, general and administrative expense. The
implementation of this plan resulted in headcount reductions of six employees or
approximately 2% of the workforce as compared to June 30, 2004. As of March 31,
2006, $0.5 million of severance has been paid and $0.1 million remains in
accrued expenses and other current liabilities in the Consolidated Balance
Sheet. Severance and other related amounts under this plan are expected to be
paid by the end of the second quarter of fiscal 2007. Additionally, in the
second quarter of fiscal 2005, as a result of a change in our organization
stemming from the Merger and a subsequent change in our low to mid-range
oscilloscope manufacturing strategy, we recorded a $1.5 million non-cash charge
to cost of revenue for the impairment of a related intangible asset.

    Finally, in the fourth quarter of fiscal 2005, we realigned some of our
business processes and, as a result, incurred expenses of approximately $1.0
million, consisting of $0.7 million of severance and related expenses and $0.3
million of facility closure expenses which included lease termination costs and
asset write-downs. Of these costs, $0.1 million was recorded in Cost of
revenues, $0.8 million was recorded in Selling, general and administrative and
$0.1 million was recorded in Research and development. As of March 31, 2006,
approximately $0.7 million of severance has been paid and $0.3 million of
facility charges have been paid in cash or written off and approximately $24,000
remains in Accrued expenses and other current liabilities on the Consolidated
Balance Sheet. The remaining balance is expected to be paid by the end of fiscal
2006.

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




                                       31
<PAGE>


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.

     These Consolidated Financial Statements 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, 2005, which include a
description of our critical accounting policies involving significant judgment
by LeCroy's management. Our critical accounting policies as of June 30, 2005
include revenue recognition, the allowance for doubtful accounts, allowance for
excess and obsolete inventory, valuation of long-lived and intangible assets,
valuation of deferred tax assets, estimation of warranty liabilities and
valuation of goodwill.

    In the first quarter of fiscal 2006, we adopted the provisions of SFAS 123R
which requires that the cost resulting from all share-based payment transactions
be recognized in the financial statements at their fair values. We adopted SFAS
123R using the modified prospective application method under which the
provisions of SFAS 123R apply to new awards and to awards modified, repurchased,
or cancelled after the adoption date. We use the Black Scholes option pricing
model to estimate the fair value of options on the date of grant which requires
certain estimates by management including the expected volatility and expected
term of the option. Management also makes decisions regarding the risk free
interest rate used in the model and makes estimates regarding forfeiture rates.
Fluctuations in the market that affect these estimates could have an impact on
the resulting compensation cost. Additionally, compensation cost for the portion
of awards for which the requisite service has not been rendered that are
outstanding as of the adoption date is recognized over the remaining service
period after the adoption date. (See Note 3 to the Consolidated Financial
Statements for additional information.) There have been no other changes in our
critical accounting policies since June 30, 2005.

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
three and nine-months ended March 31, 2006 and 2005.


<TABLE>
<CAPTION>

                                           Three months ended        Nine months ended
                                                 March 31,                March 31,
                                          ----------------------   -----------------------
(Unaudited)                                  2006        2005         2006        2005
                                          -----------   --------   -----------  ----------
<S>                                      <C>        <C>           <C>         <C>
Revenues:
  Test and measurement products                 95.6 %     95.3 %        95.4 %      94.5 %
  Service and other                              4.4        4.7           4.6         5.5
                                          -----------   --------   -----------  ----------
   Total revenues                              100.0      100.0         100.0       100.0
Cost of revenues                                39.2       39.5          39.2        44.5
                                          -----------   --------   -----------  ----------

Gross profit                                    60.8       60.5          60.8        55.5

Operating expenses:
  Selling, general and administrative           31.8       32.9          32.1        34.2
  Legal settlements                              7.2        2.4           2.3         0.8
  Research and development                      19.7       16.4          18.8        17.0
                                          -----------   --------   -----------  ----------
   Total operating  expenses                    58.7       51.7          53.2        52.0

Operating income                                 2.1        8.8           7.6         3.5
  Other (expense), net                          (1.1)      (2.1)         (1.4)       (0.8)
                                          -----------   --------   -----------  ----------

Income before income taxes                       1.0        6.7           6.2         2.7
  Provision for  income taxes                    0.6          -           2.5         0.8
                                          -----------   --------   -----------  ----------
Net income                                       0.4 %      6.7 %         3.7 %       1.9 %
                                          ===========   ========   ===========  ==========

</TABLE>




                                       32
<PAGE>



COMPARISON OF THE THREE-MONTH PERIODS ENDED MARCH 31, 2006 AND 2005

    Total revenues were $38.9 million for the quarter ended March 31, 2006,
compared to $42.9 million for the comparable prior year period, representing a
decrease of 9.3%, or approximately $4.0 million, primarily as a result of
decreased sales of Test and measurement products. Foreign currency fluctuations
reduced total revenues by $1.5 million in the third quarter of fiscal 2006 as
compared to the same period last year. The decrease in Test and measurement
products was mainly due to protracted negotiations for rights to the new low-end
WaveJet product which delayed the launch of this new product as well as that of
our new WaveSurfer oscilloscope family. This decrease was partially offset by
increased revenues in the high-end of the oscilloscope business. Sales from the
Protocol Solutions Group ("PSG," formally "CATC") were essentially flat compared
to the same period last year mainly as a result of the delay in the rollout of
new standards, including PCI Express Gen II, UWB and 6Gb SAS, which have been a
major focus of our PSG division.

    Service and other revenues primarily consist of service revenues and license
and maintenance fees. Service and other revenues were approximately $1.7 million
for the quarter ended March 31, 2006, representing a decrease of 15.6% or
approximately $0.3 million, compared to approximately $2.0 million for the
comparable prior year period. The decrease was primarily the result of a
reduction in the amount recognized of previously deferred revenue from the
adoption of the SEC's Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue
Recognition in Financial Statements," as of the beginning of fiscal 2001. The
three months ended March 31, 2006 included $17,000 of revenue from previously
deferred revenue compared to $0.3 million in the comparable prior year period.

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

                                                        THREE MONTHS ENDED
                                                              MARCH 31,
                                                     -------------------------
                                                             (UNAUDITED)
                                                          2006          2005
                                                     -------------   ---------
                                                          (IN THOUSANDS)
North America......................................    $  12,429     $  15,260
Europe/Middle East.................................       11,840        11,497
Japan..............................................        6,229         5,101
Asia/Pacific.......................................        8,383        11,032
                                                       ---------     ---------
   Total revenues..................................    $  38,881     $  42,890
                                                       =========     =========

                                                          THREE MONTHS ENDED
                                                              MARCH 31,
                                                       -----------------------
                                                             (UNAUDITED)
                                                          2006          2005
                                                          ----          ----
North America......................................        32.0%          35.6%
Europe/Middle East.................................        30.5           26.8
Japan..............................................        16.0           11.9
Asia/Pacific.......................................        21.5           25.7
                                                       --------      ---------
   Total revenues..................................       100.0%         100.0%
                                                       ========      =========

    Gross profit for the quarter ended March 31, 2006 was $23.6 million, or
60.8% gross margin, compared to $25.9 million, or 60.5% gross margin, for the
comparable prior year period. Though gross profit dollars decreased our margin
remained approximately the same primarily due to product mix where our high-end
product margins partially compensated for the decline in low-end product
revenue. In the third quarter of fiscal 2006 we received a price reduction from
a vendor for inventory purchases which positively impacted our gross margin by
about 2.0%.

    Selling, general and administrative ("SG&A") expense was $12.4 million for
the quarter ended March 31, 2006 compared to $14.1 million for the quarter ended
March 31, 2005, representing a decrease of 12.5% or $1.8 million. The decrease
was mainly the result of approximately $1.9 million in personnel-related
expenses due to lower headcount and prior year office closings, and lower legal
and consulting expenses. These decreases were partially offset by an increase of
$0.2 million in non-cash share-based compensation expense. As a percentage of
total revenues, SG&A expense decreased from 32.9% in the third quarter of fiscal
2005 to 31.8% in the third quarter of fiscal 2006.


                                       33
<PAGE>


    Legal settlement expense of $2.8 million, for the quarter ended March 31,
2006, is related to the settlement of a dispute with Iwatsu pertaining to the
ownership rights of certain intellectual property relating to Iwatsu's `ViewGo'
product line. (See Note 20 to the Consolidated Interim Financial Statements.)
Legal settlement expense of $1.0 million, for the quarter ended March 31, 2005,
was related to the patent litigation settlement agreement reached with
Tektronix, Inc. ("Tektronix") on May 11, 2005. (See Note 15 to the Consolidated
Interim Financial Statements for more information.)

    Research and development ("R&D") expense was $7.7 million for the quarter
ended March 31, 2006, compared to $7.0 million for the comparable prior year
period, an increase of 9.2% or $0.6 million. The increase was mainly due to $0.6
million in higher personnel-related expenses resulting from increased headcount
and merit increases and $0.3 million in non-cash share-based compensation
expense, partially offset by a decrease in consulting fees from a reduction in
outside consulting services. As a percentage of total revenues, R&D expense
increased from 16.4% in the third quarter of fiscal 2005 to 19.7% in the third
quarter of fiscal 2006, primarily attributable to the decreased revenue in
fiscal 2006.

    Other expense, net, which consists primarily of net interest income and
expense and foreign exchange gains and losses, was an expense of ($0.4) million
in the third quarter of fiscal 2006 compared to ($0.9) million for the third
quarter of fiscal 2005. Net interest expense was approximately ($0.5) million
for the quarter ended March 31, 2006 as compared to ($0.8) million for the
comparable prior year period, but there was a foreign exchange gain of $0.1
million in the third quarter of fiscal 2006 compared to a foreign exchange loss
of ($0.1) million in the comparable prior year period. The net interest expense
is due to the Term Loan outstanding under our Credit Agreement, as well as
interest on capital leases.

    Our effective income tax rate for the quarter ended March 31, 2006 was 62.4%
compared to 0.4% tax rate for the comparable prior year period. The higher
effective tax rate in fiscal 2006 results from an annualized effective tax rate
of 39.4% adjusted for certain non-deductible share-based compensation expenses
incurred in fiscal 2006 in connection with our adoption of SFAS 123R. The lower
effective tax rate in fiscal 2005 results from an annualized effective tax rate
of 35%, offset by two discrete tax benefits aggregating $0.9 million associated
with the reversal of a prior year valuation allowance related to a favorable
conclusion to a tax audit and a fiscal 2004 provision-to-return adjustment
determined when we filed our fiscal 2004 tax returns.

COMPARISON OF THE NINE-MONTH PERIODS ENDED MARCH 31, 2006 AND 2005

    Total revenues were $122.0 million in the nine months ended March 31, 2006,
compared to $121.2 million in the nine months ended March 31, 2005, an increase
of 0.6% or $0.8 million. Foreign currency fluctuations reduced total revenues by
approximately $1.9 million in the nine months ended March 31, 2006, compared to
the same period last year. An increase of $1.7 million in Test and measurement
products was partially offset by a decrease in Services of $0.9 million. The
increase in Test and measurement products was mainly due to increased revenue
from our high-end oscilloscopes and sales from PSG. There were nine months of
revenue related to PSG in fiscal 2006 which resulted in an additional
contribution to total revenue of approximately 6.3% over the comparable prior
year period that only included five months of PSG revenue. This increase was
mostly offset by a decrease in revenue from our low-end products due to the
delays referenced above in the Executive Summary.

    Service and other revenue decreased primarily from a lower volume of locally
provided items in our foreign operations. The decrease was also the result of a
reduction in the amount recognized of previously deferred revenue from the
adoption of the SEC's SAB 101 as of the beginning of fiscal 2001. The nine
months ended March 31, 2006 included $0.7 million of revenue recognized from
previously deferred revenue compared to $1.0 million in the comparable prior
year period.


                                       34
<PAGE>



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

                                                          NINE MONTHS ENDED
                                                              MARCH 31,
(IN THOUSANDS)                                               (UNAUDITED)
                                                     -------------------------
                                                          2006          2005
                                                     -------------   ---------
North America......................................    $  40,820     $  39,494
Europe/Middle East.................................       36,834        36,626
Japan..............................................       16,817        15,925
Asia/Pacific.......................................       27,490        29,138
                                                       ---------     ---------
   Total revenues..................................    $ 121,961     $ 121,183
                                                       =========     =========

                                                          NINE MONTHS ENDED
                                                              MARCH 31,
                                                             (UNAUDITED)
                                                     -------------------------
                                                         2006           2005
                                                     ------------    ---------
   North America.................................        33.5%           32.6%
   Europe/Middle East............................        30.2            30.2
   Japan.........................................        13.8            13.2
   Asia/Pacific..................................        22.5            24.0
                                                       ------          ------
      Total revenues.............................       100.0%          100.0%
                                                       ======          ======

    Gross margin was 60.8% for the nine months ended March 31, 2006 compared to
55.5% in the same period in fiscal 2005. The lower gross margin in fiscal 2005
was primarily attributable to second fiscal quarter Merger-related non-cash
charges of $2.7 million for the write-down of inventory related to the changes
in our long-term product support policy and product roadmap strategy as well as
$1.5 million for the impairment of an intangible asset due to a change in our
manufacturing strategy. In the nine months ended March 31, 2006 there were no
similar write-downs affecting gross margin; however, we received price
reductions from a vendor for inventory purchases which increased our overall
gross margin on resulting product sales. In addition, gross margins benefited
from higher PSG margins which increased gross margin by approximately 3.8
percentage points over the full nine month period in fiscal 2006 as compared to
2.4 percentage points for the nine-month period in fiscal 2005 that included
only five months of PSG activity.

     SG&A expense for the nine months ended March 31, 2006 was $39.2 million
compared to $41.5 million for the nine months ended March 31, 2005, a decrease
of 5.5% or $2.3 million. The decrease was mainly attributable to $3.5 million in
lower personnel-related expenses and lower legal and consulting expenses. These
decreases were partially offset by an increase of $1.3 million in non-cash
share-based compensation expense. As a percentage of sales, SG&A expense
decreased from 34.2% in the nine months ended March 31, 2005 to 32.1% in the
nine months ended March 31, 2006. This decrease as a percentage of revenues was
primarily due to our continued ability to leverage expenses over the incremental
revenues.

     Legal settlements relate to the disputes described above in the comparison
of the three-month periods.

     R&D expense was $22.9 million for the nine months ended March 31, 2006,
compared to $20.6 million in the same period in fiscal 2005, an increase of
11.3% or $2.3 million. There was approximately $3.4 million of increased expense
primarily attributable to nine months of personnel-related expenses as a result
of the Merger compared to only five months of expenses in the comparable prior
year period. Additionally, non-cash share-based compensation expense increased
R&D expense by $1.0 million. These increases were partially offset by a $2.2
million charge for IPR&D included in the second fiscal quarter of 2005 in
connection with the Merger. There is no similar charge in the fiscal 2006
period. As a percentage of total revenues, R&D expense increased from 17.0% in
the nine months ended March 31, 2005 to 18.8% in the nine months ended March 31,
2006, primarily attributable to the inclusion of PSG for the entire period.

     Other expense, net, was ($1.8) million for the nine months ended March 31,
2006 compared to ($1.0) million for the nine months ended March 31, 2005. Other
expense, net, for the nine months ended March 31, 2006 includes




                                       35
<PAGE>


nine months of interest expense, or ($2.4) million, related to the Term Loan as
compared to five months of interest expense in the fiscal 2005 period, or ($1.8)
million. Interest expense for both periods also includes interest on capital
lease agreements and, for the fiscal 2005 period only, the write-off of
unamortized fees associated with a previous credit facility. For the nine months
ended March 31, 2006, other expense also includes a foreign exchange loss of
($0.1) million resulting from the changes in our foreign exchange forward
contracts and on transactions denominated in other than their functional
currencies. These expenses were partially offset by interest income of $0.7
million for the period. For the nine months ended March 31, 2005, interest
expense was partially offset by interest income of $0.5 million and by net
foreign exchange gains of $0.4 million for the period.

    Our effective tax rate was 39.4% for the nine months ended March 31, 2006,
compared to 29.4% for the nine months ended March 31, 2005. Our effective tax
rate for the fiscal 2006 period includes the effect of certain non-deductible
share-based compensation costs in connection with the adoption of SFAS 123R. The
effective tax rate for the nine months ended March 31, 2005 was based on the
estimated annual effective tax rate of 35.0%, increased by the discrete
nondeductible IPR&D tax expense of $2.2 million associated with the Merger, and
decreased by two discrete tax benefits aggregating $0.9 million associated with
the reversal of a prior year valuation allowance related to a favorable
conclusion to a tax audit and a fiscal 2004 provision-to-return adjustment
determined when we filed our fiscal 2004 tax returns.

LIQUIDITY AND CAPITAL RESOURCES

    Cash and cash equivalents at March 31, 2006 were $10.2 million compared to
$13.9 million at June 30, 2005.

    We provided $6.5 million of net cash from operating activities in the nine
months ended March 31, 2006 compared to $13.0 million in the same period last
year. The net income and cash generative effects of non-cash charges in net
income were partially offset by $9.7 million of cash consumed by working capital
requirements in the nine months ended March 31, 2006. This compared to $3.4
million of cash consumed by working capital in the same period last year. Cash
consumed by working capital in fiscal 2006 resulted primarily from increases in
other current and non-current assets due to a prepaid technology engineering
services agreement, continued strategic investments in inventory and an increase
in accounts receivable due to the timing of sales at the end of the quarter.
Cash provided by operating activities in the fiscal 2005 period was mostly the
result of the generative effects of non-cash charges including depreciation,
share-based compensation expense and non-cash charges resulting from the merger.

    Net cash used in investing activities was ($3.6) million in the nine months
ended March 31, 2006 compared to ($73.6) million in the same period in fiscal
2005. Net cash used in the fiscal 2006 period was mainly for the purchase of
property and equipment, but also included the purchase of intangible assets
resulting from the agreements with Iwatsu. Net cash used in the fiscal 2005
period was primarily due to $80.4 million, net of cash acquired, paid in the
second quarter of fiscal 2005 as a result of the Merger and $2.7 million in
capital expenditures partially offset by the liquidation of $9.5 million of
investments to partially fund such acquisition (see CATC Acquisition in this
Discussion and Analysis of Financial Condition and Results of Operations above).

    Net cash used in financing activities was ($6.6) million in the nine months
ended March 31, 2006 compared to net cash provided of $48.7 million in the same
period in fiscal 2005. Net cash used in financing activities in the fiscal 2006
period was mainly for repayment of the Term Loan partially offset by proceeds
received from the exercise of stock options and purchase of stock under the
employee stock purchase plan. Net cash provided by financing activities in the
fiscal 2005 period was primarily due to the borrowings under the Credit
Agreement used in connection with the acquisition of CATC, net of the cost of
such issuance, and proceeds received from employee stock-related transactions,
partially offset by repayments of the Term Loan.

    On October 29, 2004, we entered into a $75.0 million senior, secured,
five-year credit agreement with the lenders listed therein and The Bank of New
York, as administrative agent for such lenders (the "Credit Agreement"). The
terms of the Credit Agreement provide us with a $50.0 million term loan (the
"Term Loan") and a $25.0 million revolving credit facility (the "Revolver"),
which includes a $1.0 million swing-line loan sub-facility and a $1.0 million



                                       36
<PAGE>


letter of credit sub-facility. The borrowings by us under the Credit Agreement
are secured by all of our assets and the assets of our domestic subsidiaries,
and our performance thereunder is guaranteed by our domestic subsidiaries.
Proceeds of $50.0 million under the Term Loan were used to finance the
acquisition of CATC and pay transaction expenses related to the Merger. Proceeds
from the Revolver may be used for general corporate purposes, including the
financing of working capital requirements, capital expenditures and
acquisitions. As of March 31, 2006, there were no outstanding borrowings against
the Revolver or letter of credit sub-facility.

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

    Under the Credit Agreement, we are required to comply with certain financial
covenants, measured quarterly, including a minimum interest coverage ratio,
minimum total net worth, maximum leverage ratio, minimum fixed charge coverage
ratio and limitations on capital expenditures. As of March 31, 2006, we were in
compliance with our financial covenants under the Credit Agreement.

    Beginning March 31, 2005, outstanding borrowings of $50.0 million under the
Term Loan were required to be repaid quarterly through October 2009, based on an
annualized amortization rate starting at 15% in calendar year 2005 and
increasing 250 basis points per year during the term of the Credit Agreement. As
of March 31, 2006, we have repaid $13.7 million of the principal balance of this
loan including voluntary repayments in excess of those required by the Credit
Agreement aggregating $4.0 million.

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

    In addition to the above U.S.-based credit facilities, we maintain certain
short-term foreign credit facilities, principally with two Japanese banks
totaling 150.0 million yen (approximately $1.3 million as of March 31, 2006). No
amounts were outstanding under these facilities as of March 31, 2006. Our Swiss
subsidiary, LeCroy S.A., also has an overdraft facility totaling 1.0 million
Swiss francs (approximately $0.8 million as of March 31, 2006). As of March 31,
2006 and June 30, 2005, approximately 0.4 million Swiss francs were held against
supplier obligations leaving an available balance of 0.6 million Swiss francs
under this credit facility. These obligations to suppliers, such as rent and
utilities, are payable under the credit facility only in the event that we are
unable to meet our financial obligations to those suppliers.

    We believe that our cash and cash equivalents on hand, cash flow generated
by our continuing operations and our availability under our revolving credit
lines will be sufficient to fund working capital, capital expenditures and debt
service requirements for at least the next twelve months.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

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

<TABLE>
<CAPTION>
                                                            PAYMENTS DUE BY PERIOD AS OF MARCH 31, 2006
                                                       -------------------------------------------------------
                                                                LESS THAN                          MORE THAN 5
                                                       TOTAL     1 YEAR     1-3 YEARS  3-5 YEARS      YEARS
   (IN THOUSANDS)                                      -----     -------    ---------  ---------      -----

<S>                                                  <C>       <C>         <C>        <C>         <C>
   Capital lease obligations...................           695   $    458    $   237    $    --     $    --
   Severance...................................            41         41         --         --          --
   Supplier agreements.........................         7,885      7,885         --         --          --
   Operating lease obligations.................         4,779      1,909       2,416        377         77

   Term Loan obligations ......................        36,297      9,063      21,875      5,359         --
                                                     --------   --------    --------   --------    --------
   Total.......................................      $ 49,697   $ 19,356    $ 24,528   $  5,736    $    77
                                                     ========   ========    ========   ========    ========
</TABLE>


                                       37
<PAGE>


FORWARD-LOOKING INFORMATION

    This Form 10-Q contains forward-looking statements. When used in this Form
10-Q, the words "anticipate," "believe," "estimate," "will," "plan," "intend,"
and "expect" and similar expressions identify forward-looking statements.
Although we believe that our plans, intentions, and expectations reflected in
any forward-looking statements are reasonable, these plans, intentions, or
expectations may not be achieved. Our actual results, performance, or
achievements could differ materially from those contemplated, expressed, or
implied, by the forward looking statements contained in this Form 10-Q.
Important factors that could cause actual results to differ materially from our
forward looking statements are set forth in our 2005 Annual Report on Form 10-K
under the heading "Risks Related to Our Business." All forward looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements set forth in this Form
10-Q. Except as required by federal securities laws, we are under no obligation
to update any forward looking statement, whether as a result of new information,
future events, or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

    The net gains (losses) resulting from changes in the fair value of these
derivatives and on transactions denominated in other than their functional
currencies were $0.1 million and ($0.1) million for the three and nine months
ended March 31, 2006, respectively. For the three and nine months ended March
31, 2005 there were net (losses) gains of ($0.1) million and $0.4 million,
respectively. These amounts are included in Other expense, net in the
Consolidated Statements of Operations and include gross foreign exchange
contract gains of $0.5 million and $0.6 million for the three and nine months
ended March 31, 2006, respectively, as compared to zero and $0.6 million for the
three and nine months ended March 31, 2005, respectively. At March 31, 2006 and
June 30, 2005, the notional amounts of the Company's open foreign exchange
forward contracts, all with maturities of less than six months, were
approximately $14.4 million and $9.8 million, respectively.

     We performed a sensitivity analysis for the first nine months of fiscal
2006 assuming a hypothetical 10% adverse change in foreign currency exchange
rates on our foreign exchange forward contracts and our assets or liabilities
denominated in other than their functional currencies. In management's opinion,
a 10% adverse change in foreign currency exchange rates would not have a
material effect on these instruments or, therefore, our results of operations,
financial position or cash flows.


                                       38
<PAGE>


     We are exposed to adverse changes in interest rates primarily due to our
investment in cash and cash equivalents as well as our $75.0 million credit
facility. Market risk is estimated as the potential change in fair value
resulting from a hypothetical 1% adverse change in interest rates, which would
have been immaterial to our results of operations, financial position or cash
flows for the three and nine months ended March 31, 2006. See Note 14 - Long
Term Debt and Capital Leases, for specifics related to our credit facility.

    As required by the terms of the Credit Agreement (see Note 14 - Long Term
Debt and Capital Leases), on January 27, 2005 we entered into a Master Agreement
with Manufacturers & Traders Trust Co. ("M&T Bank"), the purpose of which is to
protect against rising interest rates during the term of the Credit Agreement.
Under the Credit Agreement we are obligated to enter into one or more interest
rate swap agreements covering the interest payable with respect to at least 50%
of the outstanding principal amount of the Term Loan for a period of at least
three years. In compliance with the Master Agreement, we entered into an
interest rate swap transaction effective January 31, 2005 and continuing through
January 31, 2008, corresponding with the repayment terms of the Credit
Agreement. In accordance with the interest rate swap transaction, we pay
interest quarterly on the notional amount at a fixed annualized rate of 3.87% to
M&T Bank, and receive interest quarterly on the same notional amount at the
three-month LIBOR rate in effect at the beginning of each quarterly reset
period; except for the initial period, which covered the two months ending March
31, 2005, in which the Company received interest at a LIBOR rate of 2.64%. The
initial notional amount was $25.0 million and resets quarterly to 50% of the
outstanding principal balance with respect to the original amortization schedule
as set forth in the Credit Agreement. The net interest income earned on the swap
was approximately $35,000 and $21,000 during the three and nine months ended
March 31, 2006, respectively. The notional amount as of March 31, 2006 and June
30, 2005 was approximately $20.2 million and $23.1 million, respectively. The
fair value of the interest rate swap as of March 31, 2006 was $0.4 million
compared to $66,000 at June 30, 2005 and approximates the amount that the
Company would have received from M&T Bank if the Company had canceled the
transaction on each respective date. The fair value is recorded in Other
non-current assets in the Consolidated Balance Sheet as of March 31, 2006 and
the change in fair value of $0.1 million and $0.3 million for the three and nine
months ended March 31, 2006, respectively, is recognized in Interest income in
the Consolidated Statement of Operations. This interest rate swap does not
qualify for hedge accounting in accordance with SFAS No. 133.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls Over Financial Reporting

    There have been no changes in the Company's internal control over financial
reporting during the quarter ended March 31, 2006 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.



                                       39
<PAGE>



                               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 matters 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 in our risk factors from those
disclosed in our 2005 Annual Report on Form 10-K.




                                       40
<PAGE>




ITEM 6. EXHIBITS

The following exhibits are filed herewith or incorporated by reference to
exhibits previously filed with the SEC.

Exhibit
Number                               Description
------                               -----------
2.1            Agreement and Plan of Merger, dated as of September 1, 2004,
               among the Registrant, Cobalt Acquisition Corporation and Computer
               Access Technology Corporation, filed as Exhibit 2.1 to Form 8-K
               dated September 2, 2004, incorporated herein by reference.
3.1            Certificate of Incorporation of the Registrant as of July 24,
               1995, filed as Exhibit 3.1 to Form S-1 Registration Statement No.
               33-95620, incorporated herein by reference.
3.2            Amendment to the Certificate of Designation of the Series A
               Convertible Redeemable Preferred Stock as of April 9, 2001, filed
               as Exhibit 10.37 to Form 10-Q for the quarterly period ended
               March 31, 2001, incorporated herein by reference.
3.3            By-Laws of the Registrant, as amended, dated August 16, 2000,
               filed as Exhibit 3.3 to Form 10-Q for the quarterly period ended
               September 30, 2000, incorporated herein by reference.
10.1           Warrant to purchase 28,571 shares of the Registrant's Common
               Stock, dated June 15, 2004, issued by the Registrant to Capital
               Ventures International, filed as Exhibit 10.52 to Form S-3
               Registration Statement No. 333-1119730, incorporated herein by
               reference.
10.2           Warrant to purchase 250,000 shares of the Registrant's Common
               Stock, dated June 30, 1999, issued by the Registrant to certain
               investors named therein, filed as Exhibit 2.2 to Form S-3
               Registration Statement No. 333-88239, incorporated herein by
               reference.
10.3           Credit Agreement, dated as of October 29, 2004, among the
               Registrant, the lenders party thereto and The Bank of New York,
               as Administrative Agent, filed as Exhibit 10.14 to Form 8-K filed
               on November 2, 2004, incorporated herein by reference.
10.4           LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan
               filed as Exhibit 10.1 to Form S-1 Registration Statement No.
               33-95620, incorporated herein by reference.*
10.5           Amendment to LeCroy Corporation Amended and Restated 1993 Stock
               Incentive Plan, filed as Exhibit 10.33 to Form 10-Q for the
               quarterly period ended September 30, 2000, incorporated herein by
               reference.*
10.6           LeCroy Corporation 1995 Non-Employee Director Stock Option Plan
               filed as Exhibit 10.2 to Form S-1 Registration Statement No.
               33-95620, incorporated herein by reference.*
10.7           LeCroy Corporation 1995 Employee Stock Purchase Plan, filed as
               Exhibit 10.3 to Form S-1 Registration Statement No. 33-95620,
               incorporated herein by reference.*
10.8           LeCroy Corporation 1998 Non-Employee Director Stock Option Plan,
               incorporated by reference to Appendix A to the Company's
               Definitive Proxy Statement filed on September 18, 1998.
10.9           Amendment to the LeCroy Corporation 1998 Non-Employee Director
               Stock Option Plan, dated August 16, 2000, filed as Exhibit 10.34
               to Form 10-Q for the quarterly period ended September 30, 2000,
               incorporated herein by reference.*
10.10          Amendment to the LeCroy Corporation 1998 Non-Employee Director
               Stock Option Plan, dated October 25, 2000, filed as Exhibit 10.35
               to Form 10-Q for the quarterly period ended September 30, 2000,
               incorporated herein by reference.*
10.11          LeCroy Corporation's 2003 Stock Incentive Plan, incorporated by
               reference to Appendix A to the Company's Definitive Proxy
               Statement filed on September 26, 2003.*
10.12          Form of Restricted Stock Purchase Agreement, filed as Exhibit
               10.41 to Form 10-K for the fiscal year ended June 30, 2002,
               incorporated herein by reference.*
10.13          LeCroy Corporation Amended and Restated 1995 Employee Stock
               Purchase Plan, incorporated by reference to Appendix B to the
               Registrant's Definitive Proxy Statement filed on September 26,
               2003.*
10.14          LeCroy Corporation's 2004 Employment Inducement Stock Plan, filed
               as Exhibit 10.5 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*


                                       41
<PAGE>


10.15          Computer Access Technology Corporation Special 2000 Stock Option
               Plan, filed as Exhibit 10.7 to Form 8-K filed on November 2,
               2004, incorporated herein by reference.*
10.16          Amendments to Computer Access Technology Corporation 2000 Special
               Stock Option Plan, filed as Exhibit 10.11 to Form 8-K filed on
               November 2, 2004, incorporated herein by reference.*
10.17          Amendment to LeCroy Corporation (CATC) Special 2000 Stock Option
               Plan, filed as Exhibit 10.2 to Form 8-K filed on November 19,
               2004, incorporated herein by reference.*
10.18          Computer Access Technology Corporation 2000 Stock Incentive Plan,
               filed as Exhibit 10.8 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*
10.19          Amendments to Computer Access Technology Corporation 2000 Stock
               Incentive Plan, filed as Exhibit 10.12 to Form 8-K filed on
               November 2, 2004, incorporated herein by reference.*
10.20          Amendment to LeCroy Corporation (CATC) 2000 Stock Incentive Plan,
               filed as Exhibit 10.3 to Form 8-K filed on November 19, 2004,
               incorporated herein by reference.*
10.21          Computer Access Technology Corporation 1994 Stock Option Plan,
               filed as Exhibit 10.9 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*
10.22          Amendments to Computer Access Technology Corporation 1994 Stock
               Option Plan, filed as Exhibit 10.13 to Form 8-K filed on November
               2, 2004, incorporated herein by reference.*
10.23          Amendment to LeCroy Corporation (CATC) 1994 Stock Option Plan,
               filed as Exhibit 10.4 to Form 8-K filed on November 19, 2004,
               incorporated herein by reference.*
10.24          Employee Agreement Regarding Inventions, Confidentiality and
               Non-Competition, dated as of March 28, 1995, between the
               Registrant and Lutz. P. Henckels, filed as Exhibit 10.12 to Form
               S-1 Registration Statement No. 33-95620, incorporated herein by
               reference.*
10.25          Employee Agreement Regarding Inventions, Confidentiality and
               Non-Competition, dated as of March 28, 1995, between the
               Registrant and Walter O. LeCroy, Jr., filed as Exhibit 10.13 to
               Form S-1 Registration Statement No. 33-95620, incorporated herein
               by reference.*
10.26          Form of Indemnification Agreement, between the Registrant and
               each of its executive officers and directors filed as Exhibit
               10.29 to Form S-1 Registration Statement No. 33-95620,
               incorporated herein by reference.*
10.27          Employment Agreement, dated August 13, 2001, between the
               Registrant and R. Scott Bausback, filed as Exhibit 10.38 to Form
               10-Q for the quarterly period ended December 31, 2001,
               incorporated herein by reference.*
10.28          Separation Agreement, dated August 19, 2004, between the
               Registrant and R. Scott Bausback, filed as Exhibit 10.50 to Form
               10-K for the fiscal year ended June 30, 2004, incorporated herein
               by reference.*
10.29          Amended and Restated Employment Agreement, dated January 18,
               2002, between the Registrant and Lutz P. Henckels, filed as
               Exhibit 10.39 to Form 10-Q for the quarterly period ended
               December 31, 2001, incorporated herein by reference.*
10.30          Amendment No. 1 to the Amended and Restated Employment Agreement,
               dated November 25, 2003, between the Registrant and Lutz P.
               Henckels, filed as Exhibit 99.1 to Form 8-K filed on December 1,
               2003, incorporated by reference herein.*
10.31          Employment Agreement, dated January 1, 2002, between the
               Registrant and Thomas H. Reslewic, filed as Exhibit 10.40 to Form
               10-Q for the quarterly period ended March 31, 2003, incorporated
               herein by reference.*
10.32          Amendment No. 1 to Employment Agreement, dated December 16, 2002,
               between the Registrant and Thomas H. Reslewic, filed as Exhibit
               10.43 to Form 10-Q for the quarterly period ended March 31, 2003,
               incorporated herein by reference.*
10.33          Separation Agreement, dated August 19, 2004, between the
               Registrant and Thomas H. Reslewic, filed as Exhibit 10.49 to Form
               10-K for the fiscal year ended June 30, 2004, incorporated herein
               by reference.*
10.34          Separation Agreement, dated January 6, 2003, between the
               Registrant and Raymond F. Kunzmann, filed as Exhibit 10.42 to
               Form 10-Q for the quarterly period ended December 31, 2002,
               incorporated herein by reference.*
10.35          Form of Separation Agreement between the Registrant and certain
               of its executive officers, filed as Exhibit 10.51 to Form 10-K
               for the fiscal year ended June 30, 2004, incorporated herein by
               reference.*




                                       42
<PAGE>


10.36          Employment Agreement, dated September 1, 2004 and effective
               October 29, 2004, between the Registrant and Carmine Napolitano,
               filed as Exhibit 10.1 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*
10.37          Amendment No. 1 to Employment Agreement, dated September 30, 2004
               and effective October 29, 2004, between the Registrant and
               Carmine Napolitano, filed as Exhibit 10.2 to Form 8-K filed on
               November 2, 2004, incorporated herein by reference.*
10.38          Services Agreement, dated August 31, 2004, between Computer
               Access Technology Corporation and Dan Wilnai, filed as Exhibit
               10.3 to Form 8-K filed on November 2, 2004, incorporated herein
               by reference.*
10.39          Employment Agreement, dated August 31, 2004, between Computer
               Access Technology Corporation and Peretz Tzarnotsky, filed as
               Exhibit 10.4 to Form 8-K filed on November 2, 2004, incorporated
               herein by reference.*
10.40          Amendment No.2 to Credit Agreement, dated as of May 9, 2006,
               among the Registrant, the lenders party thereto and The Bank of
               New York, as Administrative Agent.
31.1           Certification by the Chief Executive Officer pursuant to Rule
               13a-14(a) under the Securities Exchange Act of 1934.
31.2           Certification by the Chief Financial Officer pursuant to Rule
               13a-14(a) under the Securities Exchange Act of 1934.
32.1           Certification by the Chief Executive Officer pursuant to 18
               U.S.C. Section 1350.
32.2           Certification by the Chief Financial Officer pursuant to 18
               U.S.C. Section 1350.


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



                                       43
<PAGE>




                                    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 10, 2006                LeCROY CORPORATION

                                 /s/ Sean B. O'Connor
                                 -----------------------------------------------
                                     Sean B. O'Connor
                                     Vice President and Chief Financial Officer,
                                     Secretary and Treasurer



                                       44
<PAGE>



                                  EXHIBIT INDEX


Exhibit
Number                                   Description
------                                   -----------
2.1            Agreement and Plan of Merger, dated as of September 1, 2004,
               among the Registrant, Cobalt Acquisition Corporation and Computer
               Access Technology Corporation, filed as Exhibit 2.1 to Form 8-K
               dated September 2, 2004, incorporated herein by reference.
3.1            Certificate of Incorporation of the Registrant as of July 24,
               1995, filed as Exhibit 3.1 to Form S-1 Registration Statement No.
               33-95620, incorporated herein by reference.
3.2            Amendment to the Certificate of Designation of the Series A
               Convertible Redeemable Preferred Stock as of April 9, 2001, filed
               as Exhibit 10.37 to Form 10-Q for the quarterly period ended
               March 31, 2001, incorporated herein by reference.
3.3            By-Laws of the Registrant, as amended, dated August 16, 2000,
               filed as Exhibit 3.3 to Form 10-Q for the quarterly period ended
               September 30, 2000, incorporated herein by reference.
10.1           Warrant to purchase 28,571 shares of the Registrant's Common
               Stock, dated June 15, 2004, issued by the Registrant to Capital
               Ventures International, filed as Exhibit 10.52 to Form S-3
               Registration Statement No. 333-1119730, incorporated herein by
               reference.
10.2           Warrant to purchase 250,000 shares of the Registrant's Common
               Stock, dated June 30, 1999, issued by the Registrant to certain
               investors named therein, filed as Exhibit 2.2 to Form S-3
               Registration Statement No. 333-88239, incorporated herein by
               reference.
10.3           Credit Agreement, dated as of October 29, 2004, among the
               Registrant, the lenders party thereto and The Bank of New York,
               as Administrative Agent, filed as Exhibit 10.14 to Form 8-K filed
               on November 2, 2004, incorporated herein by reference.
10.4           LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan
               filed as Exhibit 10.1 to Form S-1 Registration Statement No.
               33-95620, incorporated herein by reference.*
10.5           Amendment to LeCroy Corporation Amended and Restated 1993 Stock
               Incentive Plan, filed as Exhibit 10.33 to Form 10-Q for the
               quarterly period ended September 30, 2000, incorporated herein by
               reference.*
10.6           LeCroy Corporation 1995 Non-Employee Director Stock Option Plan
               filed as Exhibit 10.2 to Form S-1 Registration Statement No.
               33-95620, incorporated herein by reference.*
10.7           LeCroy Corporation 1995 Employee Stock Purchase Plan, filed as
               Exhibit 10.3 to Form S-1 Registration Statement No. 33-95620,
               incorporated herein by reference.*
10.8           LeCroy Corporation 1998 Non-Employee Director Stock Option Plan,
               incorporated by reference to Appendix A to the Company's
               Definitive Proxy Statement filed on September 18, 1998.
10.9           Amendment to the LeCroy Corporation 1998 Non-Employee Director
               Stock Option Plan, dated August 16, 2000, filed as Exhibit 10.34
               to Form 10-Q for the quarterly period ended September 30, 2000,
               incorporated herein by reference.*
10.10          Amendment to the LeCroy Corporation 1998 Non-Employee Director
               Stock Option Plan, dated October 25, 2000, filed as Exhibit 10.35
               to Form 10-Q for the quarterly period ended September 30, 2000,
               incorporated herein by reference.*
10.11          LeCroy Corporation's 2003 Stock Incentive Plan, incorporated by
               reference to Appendix A to the Company's Definitive Proxy
               Statement filed on September 26, 2003.*
10.12          Form of Restricted Stock Purchase Agreement, filed as Exhibit
               10.41 to Form 10-K for the fiscal year ended June 30, 2002,
               incorporated herein by reference.*
10.13          LeCroy Corporation Amended and Restated 1995 Employee Stock
               Purchase Plan, incorporated by reference to Appendix B to the
               Registrant's Definitive Proxy Statement filed on September 26,
               2003.*
10.14          LeCroy Corporation's 2004 Employment Inducement Stock Plan, filed
               as Exhibit 10.5 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*
10.15          Computer Access Technology Corporation Special 2000 Stock Option
               Plan, filed as Exhibit 10.7 to Form 8-K filed on November 2,
               2004, incorporated herein by reference.*



                                       45
<PAGE>


10.16          Amendments to Computer Access Technology Corporation 2000 Special
               Stock Option Plan, filed as Exhibit 10.11 to Form 8-K filed on
               November 2, 2004, incorporated herein by reference.*
10.17          Amendment to LeCroy Corporation (CATC) Special 2000 Stock Option
               Plan, filed as Exhibit 10.2 to Form 8-K filed on November 19,
               2004, incorporated herein by reference.*
10.18          Computer Access Technology Corporation 2000 Stock Incentive Plan,
               filed as Exhibit 10.8 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*
10.19          Amendments to Computer Access Technology Corporation 2000 Stock
               Incentive Plan, filed as Exhibit 10.12 to Form 8-K filed on
               November 2, 2004, incorporated herein by reference.*
10.20          Amendment to LeCroy Corporation (CATC) 2000 Stock Incentive Plan,
               filed as Exhibit 10.3 to Form 8-K filed on November 19, 2004,
               incorporated herein by reference.*
10.21          Computer Access Technology Corporation 1994 Stock Option Plan,
               filed as Exhibit 10.9 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*
10.22          Amendments to Computer Access Technology Corporation 1994 Stock
               Option Plan, filed as Exhibit 10.13 to Form 8-K filed on November
               2, 2004, incorporated herein by reference.*
10.23          Amendment to LeCroy Corporation (CATC) 1994 Stock Option Plan,
               filed as Exhibit 10.4 to Form 8-K filed on November 19, 2004,
               incorporated herein by reference.*
10.24          Employee Agreement Regarding Inventions, Confidentiality and
               Non-Competition, dated as of March 28, 1995, between the
               Registrant and Lutz. P. Henckels, filed as Exhibit 10.12 to Form
               S-1 Registration Statement No. 33-95620, incorporated herein by
               reference.*
10.25          Employee Agreement Regarding Inventions, Confidentiality and
               Non-Competition, dated as of March 28, 1995, between the
               Registrant and Walter O. LeCroy, Jr., filed as Exhibit 10.13 to
               Form S-1 Registration Statement No. 33-95620, incorporated herein
               by reference.*
10.26          Form of Indemnification Agreement, between the Registrant and
               each of its executive officers and directors filed as Exhibit
               10.29 to Form S-1 Registration Statement No. 33-95620,
               incorporated herein by reference.*
10.27          Employment Agreement, dated August 13, 2001, between the
               Registrant and R. Scott Bausback, filed as Exhibit 10.38 to Form
               10-Q for the quarterly period ended December 31, 2001,
               incorporated herein by reference.*
10.28          Separation Agreement, dated August 19, 2004, between the
               Registrant and R. Scott Bausback, filed as Exhibit 10.50 to Form
               10-K for the fiscal year ended June 30, 2004, incorporated herein
               by reference.*
10.29          Amended and Restated Employment Agreement, dated January 18,
               2002, between the Registrant and Lutz P. Henckels, filed as
               Exhibit 10.39 to Form 10-Q for the quarterly period ended
               December 31, 2001, incorporated herein by reference.*
10.30          Amendment No. 1 to the Amended and Restated Employment Agreement,
               dated November 25, 2003, between the Registrant and Lutz P.
               Henckels, filed as Exhibit 99.1 to Form 8-K filed on December 1,
               2003, incorporated by reference herein.*
10.31          Employment Agreement, dated January 1, 2002, between the
               Registrant and Thomas H. Reslewic, filed as Exhibit 10.40 to Form
               10-Q for the quarterly period ended March 31, 2003, incorporated
               herein by reference.*
10.32          Amendment No. 1 to Employment Agreement, dated December 16, 2002,
               between the Registrant and Thomas H. Reslewic, filed as Exhibit
               10.43 to Form 10-Q for the quarterly period ended March 31, 2003,
               incorporated herein by reference.*
10.33          Separation Agreement, dated August 19, 2004, between the
               Registrant and Thomas H. Reslewic, filed as Exhibit 10.49 to Form
               10-K for the fiscal year ended June 30, 2004, incorporated herein
               by reference.*
10.34          Separation Agreement, dated January 6, 2003, between the
               Registrant and Raymond F. Kunzmann, filed as Exhibit 10.42 to
               Form 10-Q for the quarterly period ended December 31, 2002,
               incorporated herein by reference.*
10.35          Form of Separation Agreement between the Registrant and certain
               of its executive officers, filed as Exhibit 10.51 to Form 10-K
               for the fiscal year ended June 30, 2004, incorporated herein by
               reference.*
10.36          Employment Agreement, dated September 1, 2004 and effective
               October 29, 2004, between the Registrant and Carmine Napolitano,
               filed as Exhibit 10.1 to Form 8-K filed on November 2, 2004,
               incorporated herein by reference.*


                                       46
<PAGE>



10.37          Amendment No. 1 to Employment Agreement, dated September 30, 2004
               and effective October 29, 2004, between the Registrant and
               Carmine Napolitano, filed as Exhibit 10.2 to Form 8-K filed on
               November 2, 2004, incorporated herein by reference.*
10.38          Services Agreement, dated August 31, 2004, between Computer
               Access Technology Corporation and Dan Wilnai, filed as Exhibit
               10.3 to Form 8-K filed on November 2, 2004, incorporated herein
               by reference.*
10.39          Employment Agreement, dated August 31, 2004, between Computer
               Access Technology Corporation and Peretz Tzarnotsky, filed as
               Exhibit 10.4 to Form 8-K filed on November 2, 2004, incorporated
               herein by reference.*
10.40          Amendment No.2 to Credit Agreement, dated as of May 9, 2006,
               among the Registrant, the lenders party thereto and The Bank of
               New York, as Administrative Agent.
31.1           Certification by the Chief Executive Officer pursuant to Rule
               13a-14(a) under the Securities Exchange Act of 1934.
31.2           Certification by the Chief Financial Officer pursuant to Rule
               13a-14(a) under the Securities Exchange Act of 1934.
32.1           Certification by the Chief Executive Officer pursuant to 18
               U.S.C. Section 1350.
32.2           Certification by the Chief Financial Officer pursuant to 18
               U.S.C. Section 1350.

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



                                       47