##### Table of Contents





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 October 3, 2009

OR



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

Commission File Number: 0-26634





LeCROY
CORPORATION

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 13-2507777                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|700 CHESTNUT RIDGE ROAD CHESTNUT RIDGE, NEW YORK               |  | 10977                               
|(Address of Principal Executive Office)                        |  | (Zip Code)                          

(845) 425-2000

(Registrants Telephone Number, Including Area Code)

Not Applicable

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





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    YES   ̈    NO   ̈

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



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

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

The number of shares of common stock outstanding as of November 11, 2009 was 12,592,297.









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##### Table of Contents

LeCROY CORPORATION

FORM 10-Q

INDEX



|                             |  |                                                                                                                                       |  |         
|---------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|                             |  |                                                                                                                                       |  | Page No.
|PART I FINANCIAL INFORMATION |  | 1                                                                                                                                    
|                             |  |                                                                                                                                      
|Item 1.                      |  | Financial Statements:                                                                                                                 |  | 1       
|                             |  |                                                                                                                                      
|                             |  | Consolidated Balance Sheets (Unaudited) as of October 3, 2009 and June 27, 2009                                                       |  | 1       
|                             |  | Consolidated Statements of Operations (Unaudited) for the Quarter ended October 3, 2009 (14 weeks) and September
 27, 2008 (13 weeks) |  | 2       
|                             |  | Consolidated Statements of Cash Flows (Unaudited) for the Quarter ended October 3, 2009 (14 weeks) and September
 27, 2008 (13 weeks) |  | 3       
|                             |  | Notes to Consolidated Financial Statements (Unaudited)                                                                                |  | 4       
|                             |  |                                                                                                                                      
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                                                 |  | 20      
|                             |  |                                                                                                                                      
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                                                            |  | 25      
|                             |  |                                                                                                                                      
|Item 4.                      |  | Controls and Procedures                                                                                                               |  | 25      
|                             | 
|PART II OTHER INFORMATION    |  | 26                                                                                                                                   
|                             |  |                                                                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                                                                     |  | 26      
|                             |  |                                                                                                                                      
|Item 1A.                     |  | Risk Factors                                                                                                                          |  | 26      
|                             |  |                                                                                                                                      
|Item 6.                      |  | Exhibits                                                                                                                              |  | 27      
|                             | 
|Signature                    |  | 28                                                                                                                                   

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



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##### Table of Contents

PART I. FINANCIAL INFORMATION



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

LeCROY CORPORATION

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | -------------------------------- | - | -------- | -
|In thousands, except par value and share data                                                                                                   |  | October 3,2009 |          |   | June 27,2009As Adjusted(Note 12) |  
|ASSETS                                                                                                                                          |  |                |          |   |                                  |   |          |  
|Current assets:                                                                                                                                 |  |                |          |   |                                  |   |          |  
|Cash and cash equivalents                                                                                                                       |  | $              | 9,328    |   |                                  | $ | 6,413    |  
|Accounts receivable, net of reserves of $614 and $692 at October 3, 2009 and June 27, 2009,
respectively                                        |  |                | 22,373   |   |                                  |   | 25,209   |  
|Inventories, net                                                                                                                                |  |                | 32,156   |   |                                  |   | 34,987   |  
|Other current assets                                                                                                                            |  |                | 11,729   |   |                                  |   | 11,564   |  
|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|Total current assets                                                                                                                            |  |                | 75,586   |   |                                  |   | 78,173   |  
|                                                                                                                                                |  |               
|Property, plant and equipment, net                                                                                                              |  |                | 21,447   |   |                                  |   | 21,817   |  
|Intangible assets, net                                                                                                                          |  |                | 479      |   |                                  |   | 502      |  
|Other non-current assets                                                                                                                        |  |                | 8,076    |   |                                  |   | 7,186    |  
|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|Total assets                                                                                                                                    |  | $              | 105,588  |   |                                  | $ | 107,678  |  
|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|                                                                                                                                                |  |               
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                            |  |                |          |   |                                  |   |          |  
|Current liabilities:                                                                                                                            |  |                |          |   |                                  |   |          |  
|Accounts payable                                                                                                                                |  | $              | 9,373    |   |                                  | $ | 14,169   |  
|Accrued expenses and other current liabilities                                                                                                  |  |                | 12,216   |   |                                  |   | 12,983   |  
|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|Total current liabilities                                                                                                                       |  |                | 21,589   |   |                                  |   | 27,152   |  
|                                                                                                                                                |  |               
|Long-term bank debt                                                                                                                             |  |                | 20,000   |   |                                  |   | 17,500   |  
|Convertible notes, net of unamortized discount of $5,521 and $6,277, respectively                                                               |  |                | 41,829   |   |                                  |   | 42,073   |  
|Deferred revenue and other non-current liabilities                                                                                              |  |                | 4,128    |   |                                  |   | 3,635    |  
|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|Total liabilities                                                                                                                               |  |                | 87,546   |   |                                  |   | 90,360   |  
|                                                                                                                                                |  |               
|Commitments and contingencies                                                                                                                   |  |                |          |   |                                  |   |          |  
|                                                                                                                                                |  |               
|Stockholders equity:                                                                                                                           |  |                |          |   |                                  |   |          |  
|Preferred stock, $.01 par value (authorized 5,000,000 shares; none issued and outstanding as of October 3, 2009 and
June 27, 2009)              |  |                |         |   |                                  |   |         |  
|Common stock, $.01 par value (authorized 45,000,000 shares; 12,901,294 issued at October 3, 2009 and 12,900,551 shares
issued at June 27, 2009) |  |                | 129      |   |                                  |   | 129      |  
|Additional paid-in capital                                                                                                                      |  |                | 126,199  |   |                                  |   | 125,904  |  
|Accumulated other comprehensive income                                                                                                          |  |                | 2,773    |   |                                  |   | 1,862    |  
|Accumulated deficit                                                                                                                             |  |                | (107,961 | ) |                                  |   | (107,479 | )
|Treasury stock, at cost (403,215 shares at October 3, 2009 and June 27, 2009, respectively)                                                     |  |                | (3,098   | ) |                                  |   | (3,098   | )
|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|Total stockholders equity                                                                                                                      |  |                | 18,042   |   |                                  |   | 17,318   |  
|                                                                                                                                                |  |                |          |   |                                  |   |          |  
|Total liabilities and stockholders equity                                                                                                      |  | $              | 105,588  |   |                                  | $ | 107,678  |  
|                                                                                                                                                |  |                |          |   |                                  |   |          |  

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



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                                        |  |                          |        |   |                                                 |   |        |  
|----------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------------------------------------- | - | ------ | -
|                                                                        |  | Quarter Ended            |       
|In thousands, except per share data                                     |  | October 3,2009(14 weeks) |        |   | September 27,2008As Adjusted(Note 12)(13 weeks) |  
|Revenues:                                                               |  |                          |        |   |                                                 |   |        |  
|Test and measurement products                                           |  | $                        | 25,807 |   |                                                 | $ | 38,430 |  
|Service and other                                                       |  |                          | 2,194  |   |                                                 |   | 2,294  |  
|                                                                        |  |                          |        |   |                                                 |   |        |  
|Total revenues                                                          |  |                          | 28,001 |   |                                                 |   | 40,724 |  
|                                                                        |  |                         
|Cost of revenues                                                        |  |                          | 12,334 |   |                                                 |   | 17,690 |  
|                                                                        |  |                          |        |   |                                                 |   |        |  
|Gross profit                                                            |  |                          | 15,667 |   |                                                 |   | 23,034 |  
|                                                                        |  |                         
|Operating expenses:                                                     |  |                          |        |   |                                                 |   |        |  
|Selling, general and administrative                                     |  |                          | 8,903  |   |                                                 |   | 12,583 |  
|Research and development                                                |  |                          | 6,119  |   |                                                 |   | 7,803  |  
|                                                                        |  |                          |        |   |                                                 |   |        |  
|Total operating expenses                                                |  |                          | 15,022 |   |                                                 |   | 20,386 |  
|                                                                        |  |                          |        |   |                                                 |   |        |  
|Operating income                                                        |  |                          | 645    |   |                                                 |   | 2,648  |  
|                                                                        |  |                         
|Other income (expense):                                                 |  |                          |        |   |                                                 |   |        |  
|Gain on extinguishment of convertible debt, net of issue cost write-off |  |                          | 364    |   |                                                 |   | 292    |  
|Interest income                                                         |  |                          | 11     |   |                                                 |   | 35     |  
|Interest expense                                                        |  |                          | (788   | ) |                                                 |   | (854   | )
|Amortization of debt discount on convertible notes                      |  |                          | (605   | ) |                                                 |   | (751   | )
|Other, net                                                              |  |                          | (132   | ) |                                                 |   | 256    |  
|                                                                        |  |                          |        |   |                                                 |   |        |  
|Other expense, net                                                      |  |                          | (1,150 | ) |                                                 |   | (1,022 | )
|                                                                        |  |                          |        |   |                                                 |   |        |  
|(Loss) income before income taxes                                       |  |                          | (505   | ) |                                                 |   | 1,626  |  
|(Benefit) provision for income taxes                                    |  |                          | (23    | ) |                                                 |   | 531    |  
|                                                                        |  |                          |        |   |                                                 |   |        |  
|Net (loss) income                                                       |  | $                        | (482   | ) |                                                 | $ | 1,095  |  
|                                                                        |  |                          |        |   |                                                 |   |        |  
|Net (loss) income per common share:                                     |  |                          |        |   |                                                 |   |        |  
|Basic                                                                   |  | $                        | (0.04  | ) |                                                 | $ | 0.09   |  
|Diluted                                                                 |  | $                        | (0.04  | ) |                                                 | $ | 0.09   |  
|                                                                        |  |                         
|Weighted average number of common shares:                               |  |                          |        |   |                                                 |   |        |  
|Basic                                                                   |  |                          | 12,265 |   |                                                 |   | 11,881 |  
|Diluted                                                                 |  |                          | 12,265 |   |                                                 |   | 12,077 |  

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



2



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------------------------------------- | - | ------ | -
|                                                                                                   |  | Quarter Ended            |       
|In thousands                                                                                       |  | October 3,2009(14 weeks) |        |   | September 27,2008As adjusted(Note 12)(13 weeks) |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                          |        |   |                                                 |   |        |  
|Net (loss) income                                                                                  |  | $                        | (482   | ) |                                                 | $ | 1,095  |  
|Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |  |                          |        |   |                                                 |   |        |  
|Depreciation and amortization                                                                      |  |                          | 1,342  |   |                                                 |   | 1,552  |  
|Share-based compensation                                                                           |  |                          | 893    |   |                                                 |   | 877    |  
|Amortization of debt issuance costs                                                                |  |                          | 120    |   |                                                 |   | 135    |  
|Amortization of debt discount on convertible notes                                                 |  |                          | 605    |   |                                                 |   | 751    |  
|Deferred income taxes                                                                              |  |                          | (185   | ) |                                                 |   | (282   | )
|Gain on extinguishment of convertible debt, net of issue cost write-off                            |  |                          | (364   | ) |                                                 |   | (292   | )
|Change in operating assets and liabilities:                                                        |  |                          |        |   |                                                 |   |        |  
|Accounts receivable                                                                                |  |                          | 3,592  |   |                                                 |   | (218   | )
|Inventories                                                                                        |  |                          | 2,743  |   |                                                 |   | (2,859 | )
|Other current and non-current assets                                                               |  |                          | (867   | ) |                                                 |   | (512   | )
|Accounts payable, accrued expenses and other liabilities                                           |  |                          | (4,596 | ) |                                                 |   | (806   | )
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|Net cash provided by (used in) operating activities                                                |  |                          | 2,801  |   |                                                 |   | (559   | )
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |                          |        |   |                                                 |   |        |  
|Purchase of property, plant and equipment                                                          |  |                          | (713   | ) |                                                 |   | (1,196 | )
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|Net cash used in investing activities                                                              |  |                          | (713   | ) |                                                 |   | (1,196 | )
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |  |                          |        |   |                                                 |   |        |  
|Borrowings under credit line                                                                       |  |                          | 2,500  |   |                                                 |   | 2,500  |  
|Repurchase of convertible notes                                                                    |  |                          | (1,780 | ) |                                                 |   | (2,774 | )
|Payments made on capital leases                                                                    |  |                          | (61    | ) |                                                 |   | (57    | )
|Purchase of treasury shares                                                                        |  |                          |       |   |                                                 |   | (127   | )
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|Net cash provided by (used in) financing activities                                                |  |                          | 659    |   |                                                 |   | (458   | )
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|Effect of exchange rate changes on cash and cash equivalents                                       |  |                          | 168    |   |                                                 |   | (316   | )
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                          | 2,915  |   |                                                 |   | (2,529 | )
|Cash and cash equivalents at beginning of the period                                               |  |                          | 6,413  |   |                                                 |   | 10,224 |  
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|Cash and cash equivalents at end of the period                                                     |  | $                        | 9,328  |   |                                                 | $ | 7,695  |  
|                                                                                                   |  |                          |        |   |                                                 |   |        |  
|Supplemental Cash Flow Disclosure                                                                  |  |                          |        |   |                                                 |   |        |  
|Cash paid during the period for:                                                                   |  |                          |        |   |                                                 |   |        |  
|Interest                                                                                           |  | $                        | 130    |   |                                                 | $ | 41     |  
|Income taxes                                                                                       |  |                          | 139    |   |                                                 |   | 280    |  
|Non-cash transactions:                                                                             |  |                          |        |   |                                                 |   |        |  
|Transfer of inventory into property, plant and equipment                                           |  |                          | 151    |   |                                                 |   | 292    |  
|Treasury stock purchased but unpaid                                                                |  |                          |       |   |                                                 |   | 97     |  

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



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation and Use of Estimates

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 27, 2009. The accompanying Consolidated Balance Sheet as of June 27, 2009 has been derived from those audited Consolidated Financial Statements, as adjusted for the retrospective adoption of the
Financial Accounting Standards Board (FASB) staff position related to the accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), which was adopted by the Company on
June 28, 2009. See Note 12 Debt and Capital Leases for further details regarding the adoption.

The
Companys Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (US GAAP), which require management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements as well as the revenues and expenses reported during the period. The most significant of
these estimates and assumptions relate to revenue recognition, reserves for accounts receivable, allowance for excess and obsolete inventory, uncertain tax positions, valuation of deferred tax assets, valuation of long-lived assets, share-based
compensation expense, estimation of warranty liabilities and the separation of the convertible notes between debt and equity. 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 presented. Interim period operating results may not be indicative of
the operating results for a full year. Inter-company transactions and balances have been eliminated in consolidation.

The
Companys fiscal years end on the Saturday closest to June 30, resulting in an extra week of results every five or six years. Fiscal 2010 is a fifty-three week year and, as a result, the first quarter of fiscal 2010 was a 14-week period
compared with a 13-week period for the first quarter of fiscal 2009.

2. Share-Based Compensation

Total share-based compensation expense recorded in the Consolidated Statement of Operations for the quarter ended October 3, 2009 and
September 27, 2008 is approximately $0.9 million.

Stock Options

The table below presents the assumptions used to calculate the fair value of options granted during the quarter ended October 3, 2009
and September 27, 2008:



|                                                 |  |                             |       |   |                                |   |       |  
|------------------------------------------------ |  | --------------------------- | ----- | - | ------------------------------ | - | ----- | -
|                                                 |  | Quarter EndedOctober 3,2009 |       |   | Quarter EndedSeptember 27,2008 |  
|Expected holding period (years)                  |  |                             | 5.0   |   |                                |   | 5.0   |  
|Risk-free interest rate                          |  |                             | 2.57  | % |                                |   | 3.23  | %
|Dividend yield                                   |  |                             | 0.0   | % |                                |   | 0.0   | %
|Expected volatility                              |  |                             | 59.01 | % |                                |   | 41.12 | %
|Weighted average fair value of option(s) granted |  | $                           | 2.03  |   |                                | $ | 3.48  |  

Changes in the Companys stock options for the quarter ended October 3,
2009 are as follows:



|                             |  |                 |   |  |                                |       |                                                   |  |                                | 
|---------------------------- |  | --------------- | - |  | ------------------------------ | ----- | ------------------------------------------------- |  | ------------------------------ | 
|                             |  | Number ofShares |   |  | Weighted AverageExercise Price |       | Weighted AverageRemainingContractualTerms (Years) |  | AggregateIntrinsic Value($000)
|Outstanding at June 27, 2009 |  | 2,426,394       |   |  | $                              | 7.45  |                                                   |  |                                | 
|                             |  |                 |   | 
|Granted                      |  | 4,000           |   |  | $                              | 3.89  |                                                   |  |                                | 
|Exercised                    |  | (3,351          | ) |  | $                              | 0.45  |                                                   |  |                                | 
|Expired                      |  | (44,829         | ) |  | $                              | 17.00 |                                                   |  |                                | 
|Forfeited                    |  | (11,535         | ) |  | $                              | 2.49  |                                                   |  |                                | 
|                             |  |                 |   |  |                                |       |                                                   |  |                                | 



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



|                                               |  |                 |  |                                |       |                                                   |      |                                |   |      
|---------------------------------------------- |  | --------------- |  | ------------------------------ | ----- | ------------------------------------------------- | ---- | ------------------------------ | - | -----
|                                               |  | Number ofShares |  | Weighted AverageExercise Price |       | Weighted AverageRemainingContractualTerms (Years) |      | AggregateIntrinsic Value($000)
|Outstanding at October 3, 2009                 |  | 2,370,679       |  | $                              | 7.30  |                                                   | 5.14 |                                | $ | 1,154
|                                               |  |                 |  |                                |       |                                                   |      |                                |   |      
|Vested and expected to vest at October 3, 2009 |  | 2,252,244       |  | $                              | 6.19  |                                                   | 4.78 |                                | $ | 1,115
|                                               |  |                 |  |                                |       |                                                   |      |                                |   |      
|Exercisable at October 3, 2009                 |  | 875,770         |  | $                              | 13.65 |                                                   | 3.00 |                                | $ | 83   
|                                               |  |                 |  |                                |       |                                                   |      |                                |   |      

The total intrinsic value of stock options exercised during the quarter ended
October 3, 2009 and September 27, 2008 was nearly zero.

As of October 3, 2009, there was approximately $1.9
million of total unrecognized compensation cost, net of estimated forfeitures, related to stock options granted under the plans. That cost is expected to be recognized over a remaining weighted-average period of approximately 3.0 years. Less than
$0.1 million of compensation cost was capitalized in inventory or any other assets for the quarters ended October 3, 2009 and September 27, 2008.

Non-Vested Stock

The following table summarizes transactions
related to non-vested stock for the quarter ended October 3, 2009:



|                                    |  |                 |   |  |                                      |      
|----------------------------------- |  | --------------- | - |  | ------------------------------------ | -----
|                                    |  | Number ofShares |   |  | Weighted AverageGrant Date FairValue
|Non-vested stock at June 27, 2009   |  | 251,784         |   |  | $                                    | 10.47
|                                    |  |                
|Granted                             |  |                |   |  | $                                    |     
|Vested                              |  | (35,816         | ) |  | $                                    | 12.32
|Forfeited                           |  | (2,608          | ) |  | $                                    | 11.53
|                                    |  |                 |   |  |                                      |      
|Non-vested stock at October 3, 2009 |  | 213,360         |   |  | $                                    | 10.14
|                                    |  |                 |   |  |                                      |      

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

As of October 3, 2009, there was approximately $1.6 million of total unrecognized compensation cost, net of
estimated forfeitures, related to non-vested stock granted under the plans. That cost is expected to be recognized over a remaining weighted-average period of 1.7 years.

Employee Stock Purchase Plan

As of October 3, 2009 and
June 27, 2009, there was approximately $0.1 million and less than $0.1 million, respectively, of liability classified share-based compensation expense for the ESPP included in Accrued expenses and other current liabilities on the Consolidated
Balance Sheets.

Cash Settled Stock Appreciation Rights

The Company records compensation expense ratably over the service period and adjusts for changes in the fair value of SARs at each reporting
period. At October 3, 2009, there was approximately $3.1 million of unrecognized compensation cost, net of estimated forfeitures, related to SARs, which is expected to be recognized over a weighted average period of approximately 3.1 years.

The table below presents the assumptions used to remeasure the value of the SARs at each reporting period:



|                                                            |  |                             |  |                          
|----------------------------------------------------------- |  | --------------------------- |  | -------------------------
|                                                            |  | Quarter EndedOctober 3,2009 |  | Quarter EndedJune 27,2009
|Weighted average expected holding period (years)            |  | 4.2                         |  | 4.4                      
|Risk-free interest rate                                     |  | 1.59% - 2.22%               |  | 1.40% - 2.53%            
|Dividend yield                                              |  | 0.0%                        |  | 0.0%                     
|Expected volatility                                         |  | 56.56% - 62.43%             |  | 56.91% - 61.53%          
|Weighted average fair value of SARs granted and outstanding |  | $1.32                       |  | $1.12                    



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



The fair value of the SARs is liability classified because the awards are payable in
cash. As of October 3, 2009 and June 27, 2009, there was approximately $1.1 million and $0.7 million, respectively, of liability classified share-based compensation expense for the SARs included in Accrued expenses and other current
liabilities on the Consolidated Balance Sheets.

Changes in the Companys SARs for the quarter ended October 3, 2009
are as follows:



|                                               |  |                 |  |                                |      |                                                  |      |                                |   |  
|---------------------------------------------- |  | --------------- |  | ------------------------------ | ---- | ------------------------------------------------ | ---- | ------------------------------ | - | -
|                                               |  | Number ofShares |  | Weighted AverageExercise Price |      | WeightedAverageRemainingContractualTerms (Years) |      | AggregateIntrinsic Value($000)
|Outstanding at June 27, 2009                   |  | 3,329,000       |  | $                              | 6.81 |                                                  |      |                                |   |  
|                                               |  |                 |  |                                |      |                                                  |      |                                |   |  
|Outstanding at October 3, 2009                 |  | 3,329,000       |  | $                              | 6.81 |                                                  | 5.41 |                                | $ | 
|                                               |  |                 |  |                                |      |                                                  |      |                                |   |  
|Vested and expected to vest at October 3, 2009 |  | 3,160,402       |  | $                              | 6.83 |                                                  | 5.35 |                                | $ | 
|                                               |  |                 |  |                                |      |                                                  |      |                                |   |  
|Exercisable at October 3, 2009                 |  | 742,000         |  | $                              | 7.87 |                                                  | 3.66 |                                | $ | 
|                                               |  |                 |  |                                |      |                                                  |      |                                |   |  

3. Revenue Recognition

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

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.

Application solutions, which provide oscilloscopes with additional analysis capabilities, are either delivered via compact disc or are already loaded in the oscilloscopes and activated via a key code after the sale is made to the customer.
No post-contract support is provided on the application solutions. Revenues from oscilloscope products are included in Test and measurement products in the Consolidated Statements of Operations, net of any applicable sales or value added taxes.
Certain software is embedded in the Companys oscilloscopes, but the embedded software component is considered incidental.

Software maintenance support revenue on protocol analyzer products is deferred based on its vendor specific objective evidence of fair value (VSOE) and recognized ratably over the maintenance support periods. In limited
circumstances where VSOE does not exist for software maintenance support, the Company recognizes revenues and accrues costs, if applicable, by the facts and circumstances of each transaction. Revenues from protocol analyzer products are included in
Test and measurement products in the Consolidated Statements of Operations, net of any applicable sales or value added taxes.

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 offers customers an opportunity to enter into sales-type or direct financing
leases for these products. Lease and rental revenues are reported within Test and measurement product revenue and were approximately $0.3 million for the quarter ended October 3, 2009 and approximately $0.1 for the quarter ended
September 27, 2008.



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



Service and other revenue

Service and other revenue includes extended warranty contracts, software maintenance agreements, repairs and calibrations performed on
instruments after the expiration of their normal warranty period, direct service accessories and packages and payments for research and development activities, in accordance with a third party agreement. The Company records deferred revenue for
extended warranty contracts, software maintenance agreements and calibration services and recognizes such revenue on a straight-line basis over the related service period. When arrangements include multiple elements, the Company uses relative fair
values to allocate revenue to the elements and recognizes revenue when the criteria for revenue recognition have been met for each element.

Effective in the first quarter of fiscal 2010, the Company entered into a research and development and distribution agreement with a third party. Both the Company and the third party are active
participants in the development efforts and are exposed to risks and rewards dependent on the commercial success of the product development. LeCroy is solely responsible for providing the development efforts contemplated under the agreement and will
retain all title and intellectual property rights for any product developed under the agreement. The Company will utilize its own personnel, facilities, equipment, computer software and information in order to meet the obligations under the
agreement. The payments owed by the third party are nonrefundable and are not based on milestone deliverables and are not tied directly to any development spending made by the Company. The Company recognized approximately $0.3 million in other
revenue related to this agreement in the first quarter of fiscal 2010. Revenue is being recognized ratably over the three year term of the agreement. Any research and development costs incurred in conjunction with this arrangement are recognized as
incurred.

Deferred license revenue

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

4. Business Realignment and Restructuring Initiatives

Fiscal 2010 Business Realignment

In the first quarter of fiscal 2010, as a result of a further effort to streamline expenses internationally, the Company recorded severance of approximately $0.1 million, which was expensed to Selling,
general and administrative (SG&A). This resulted from headcount reductions of four employees or approximately 1.0% of the workforce as compared to June 27, 2009. As of October 3, 2009, approximately $0.1 million has been
paid in cash and nearly zero remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet.

Fiscal 2009 Restructuring Initiatives

In the fourth quarter of fiscal 2009, as a result of the current
economic downturn and resulting business realignment decisions affecting personnel in Europe, the Company vacated certain space at its Swiss facility. This resulted in a restructuring charge to SG&A expense of approximately $0.7 million, which
represented the present value of the estimated future cash payments, net of estimated subrental income and expense, through the remainder of the lease term which will expire in the first quarter of fiscal 2014. As of October 3, 2009,
approximately $0.2 million remains in Accrued expenses and other current liabilities and approximately $0.5 million remains in Deferred revenue and other non-current liabilities on the Consolidated Balance Sheet.

Fiscal 2009 Business Realignment

In the fourth quarter of fiscal 2009, in an effort to further streamline expenses in response to the current economic environment, the Company recorded severance of approximately $0.2 million, of which
less than $0.1 million was expensed to Cost of revenues, approximately $0.1 million was expensed to SG&A and less than $0.1 million was expensed to Research and development. This resulted from headcount reductions of twelve employees or
approximately 2.6% of the workforce as compared to June 28, 2008. As of October 3, 2009, approximately $0.2 million has been paid in cash and nearly zero remains in Accrued expenses and other current liabilities on the Consolidated Balance
Sheet.



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



In the third quarter of fiscal 2009, in an effort to further streamline expenses in
response to the dramatic deterioration in economic and market conditions, the Company recorded severance of approximately $2.6 million, of which approximately $0.6 million was expensed to Cost of revenues, approximately $1.1 million was expensed to
SG&A and approximately $0.9 million was expensed to Research and development. This resulted from headcount reductions of sixty-two employees or approximately 13.6% of the workforce as compared to June 28, 2008. As of October 3, 2009,
approximately $1.9 million has been paid in cash, and approximately $0.5 million remains in Accrued expenses and other current liabilities and approximately $0.2 million remains in Deferred revenue and other non-current liabilities on the
Consolidated Balance Sheet. Severance is estimated to be paid by the end of the third quarter of fiscal 2012.

In the second
quarter of fiscal 2009, in an effort to streamline expenses in anticipation of further deterioration in the economic environment, the Company recorded severance of approximately $1.5 million, of which approximately $0.1 million was expensed to Cost
of revenues, approximately $0.8 million was expensed to SG&A and approximately $0.6 million was expensed to Research and development. This resulted from headcount reductions of ten employees or 2.2% of the workforce as compared to June 28,
2008. As of October 3, 2009, approximately $1.2 million has been paid in cash and approximately $0.3 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the
end of the third quarter of fiscal 2010.

5. Derivative Instruments and Fair Value

The Company is exposed to global market exchange rate risks and, as a result, enters into forward foreign exchange contracts to manage
financial exposures resulting from changes in foreign currency rates. These forward exchange agreements are generally 30-day forward contracts, which are monitored and updated on a monthly basis, and used to reduce exposure to fluctuation on foreign
currency exchange rates on assets and liabilities denominated in currencies other than the Companys functional currency. The Company does not use derivative financial instruments for trading or other speculative purposes.

The Companys forward contracts are not accounted for as hedges. The Company records these short-term forward exchange agreements on
the balance sheet at fair value in Other current assets and Accrued expenses and other current liabilities. The changes in the fair value are recognized in Other, net in the Consolidated Statement of Operations. The net gains or losses resulting
from changes in the fair value of these derivatives and on transactions denominated in other than their functional currencies were net losses of approximately $0.1 million for the quarter ended October 3, 2009 and net gains of approximately
$0.3 million for the quarter ended September 27, 2008.

The effect of derivative instruments on the Consolidated
Statement of Operations for the quarter ended October 3, 2009 is as follows (in thousands):



|                                   |  |                                                           |  |                                                                                     |    
|---------------------------------- |  | --------------------------------------------------------- |  | ----------------------------------------------------------------------------------- | ---
|Derivatives                        |  | Location of Gain/(Loss)Recognized in Income onDerivatives |  | Quarter endedOctober 3,
2009Amount of Gain/(Loss)Recognized in Income onDerivatives
|Foreign exchange forward contracts |  | Other, net                                                |  | $                                                                                   | 287

At October 3, 2009, the U.S. dollar equivalent of outstanding forward foreign
exchange contracts, all with maturities of less than six months, totaled approximately $17.5 million in notional amounts, including approximately $9.8 million in contracts to buy Swiss Francs for US Dollars, $3.1 million in contracts to sell Euro
for US Dollars and $2.1 million in contracts to sell Euros for Swiss Francs, with the remaining contracts totaling approximately $2.5 million covering a variety of other foreign currencies. At June 27, 2009, the U.S. dollar equivalent of
outstanding forward foreign exchange contracts, all with maturities of less than six months, totaled approximately $17.5 million in notional amounts, including approximately $9.4 million in contracts to buy Swiss francs for US dollars, approximately
$3.1 million in contracts to sell Euro for US dollars, and approximately $3.2 million in contracts to sell Euros for Swiss francs, with the remaining contracts totaling approximately $1.8 million covering a variety of other foreign currencies.



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



The fair value framework requires the categorization of assets and liabilities into
three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as
follows:



| |  |  | Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or
quoted prices for identical assets or liabilities in inactive markets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Unobservable inputs reflecting managements own assumptions about the inputs used in pricing the asset or liability.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

As of October 3, 2009, the fair values of the Companys financial assets and liabilities are
categorized as follows (in thousands):



|                                                |  |       |    |         |   |         |   |         |  |  
|----------------------------------------------- |  | ----- | -- | ------- | - | ------- | - | ------- |  | -
|                                                |  | Total |    | Level 1 |   | Level 2 |   | Level 3
|Other current assets:                           |  |       |    |         |   |         |   |         |  |  
|Foreign exchange forward contracts              |  | $     | 47 |         |  |         | $ | 47      |  | 
|                                                |  |       |    |        
|Accrued expenses and other current liabilities: |  |       |    |         |   |         |   |         |  |  
|Foreign exchange forward contracts              |  | $     | 30 |         |  |         | $ | 30      |  | 

The fair values above were based on observable market transactions of spot currency
rates and forward currency prices. The net fair value of the open foreign exchange forward contracts is a net asset of almost zero at October 3, 2009 as compared to a net asset of approximately $0.1 million at June 27, 2009.

6. Comprehensive Income (Loss)

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



|                                         |  |                |      |   |                   |   |        |  
|---------------------------------------- |  | -------------- | ---- | - | ----------------- | - | ------ | -
|                                         |  | Quarter Ended  |     
|                                         |  | October 3,2009 |      |   | September 27,2008 |  
|Net (loss) income, as adjusted (Note 12) |  | $              | (482 | ) |                   | $ | 1,095  |  
|Foreign currency translation gain (loss) |  |                | 911  |   |                   |   | (1,349 | )
|                                         |  |                |      |   |                   |   |        |  
|Comprehensive income (loss)              |  | $              | 429  |   |                   | $ | (254   | )
|                                         |  |                |      |   |                   |   |        |  

7. Inventories, net

Inventories consist of the following (in thousands):



|                |  |                |        |              |   |       
|--------------- |  | -------------- | ------ | ------------ | - | ------
|                |  | October 3,2009 |        | June 27,2009
|Raw materials   |  | $              | 7,777  |              | $ | 8,351 
|Work in process |  |                | 6,378  |              |   | 6,590 
|Finished goods  |  |                | 18,001 |              |   | 20,046
|                |  |                |        |              |   |       
|                |  | $              | 32,156 |              | $ | 34,987
|                |  |                |        |              |   |       

The value of demonstration units included in finished goods was approximately $11.0
million and $11.3 million at October 3, 2009 and June 27, 2009, 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 to its existing customer base.The allowance for excess and obsolete inventory, included above, amounted to approximately $5.6 million and $5.8 million at October 3, 2009 and June 27, 2009, respectively.



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



8. Other Current Assets

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



|                           |  |                |        |              |   |       
|-------------------------- |  | -------------- | ------ | ------------ | - | ------
|                           |  | October 3,2009 |        | June 27,2009
|Deferred tax assets, net   |  | $              | 5,709  |              | $ | 6,399 
|Prepaid taxes              |  |                | 533    |              |   | 619   
|Prepaid deposits           |  |                | 608    |              |   | 729   
|Other receivables          |  |                | 977    |              |   | 776   
|Value-added tax receivable |  |                | 882    |              |   | 820   
|Other                      |  |                | 3,020  |              |   | 2,221 
|                           |  |                |        |              |   |       
|                           |  | $              | 11,729 |              | $ | 11,564
|                           |  |                |        |              |   |       

9. Intangible Assets and Other Non-current Assets

Intangible Assets

The following table reflects the gross carrying amount and accumulated amortization of the Companys amortizable intangible (in thousands):



|                                                  |  |                               |  |                |        |   |              |   |        |  
|------------------------------------------------- |  | ----------------------------- |  | -------------- | ------ | - | ------------ | - | ------ | -
|                                                  |  | OriginalWeightedAverage Lives |  | October 3,2009 |        |   | June 27,2009 |  
|Amortizable intangible assets:                    |  |                               |  |                |        |   |              |   |        |  
|Technology, manufacturing and distribution rights |  | 2.9 years                     |  | $              | 8,296  |   |              | $ | 8,296  |  
|Accumulated amortization                          |  |                               |  |                | (8,157 | ) |              |   | (8,147 | )
|                                                  |  |                               |  |                |        |   |              |   |        |  
|Net carrying amount                               |  |                               |  | $              | 139    |   |              | $ | 149    |  
|                                                  |  |                               |  |                |        |   |              |   |        |  
|Patents and other intangible assets               |  | 5.9 years                     |  |                | 1,592  |   |              |   | 1,592  |  
|Accumulated amortization                          |  |                               |  |                | (1,252 | ) |              |   | (1,239 | )
|                                                  |  |                               |  |                |        |   |              |   |        |  
|Net carrying amount                               |  |                               |  | $              | 340    |   |              | $ | 353    |  
|                                                  |  |                               |  |                |        |   |              |   |        |  
|Total Net carrying amount                         |  | 3.4 years                     |  |                | 479    |   |              |   | 502    |  
|                                                  |  |                               |  |                |        |   |              |   |        |  

Amortization expense for intangible assets, all with finite lives, was almost zero
and $0.1 million for the quarters ended October 3, 2009 and September 27, 2008, respectively. The cost of an amortizable intangible asset is amortized on a straight-line basis over the estimated economic life of the asset.

Other Non-Current Assets

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



|                                                                     |  |                |       |              |   |      
|-------------------------------------------------------------------- |  | -------------- | ----- | ------------ | - | -----
|                                                                     |  | October 3,2009 |       | June 27,2009
|Deferred tax assets, net, as adjusted (Note 12)                      |  | $              | 6,575 |              | $ | 5,646
|Deferred financing costs on convertible notes, as adjusted (Note 12) |  |                | 702   |              |   | 784  
|Other                                                                |  |                | 799   |              |   | 756  
|                                                                     |  |                |       |              |   |      
|                                                                     |  | $              | 8,076 |              | $ | 7,186
|                                                                     |  |                |       |              |   |      



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



10. Accrued Expenses and Other Current Liabilities

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

|                                                  |  |                |        |              |   |       
|------------------------------------------------- |  | -------------- | ------ | ------------ | - | ------
|                                                  |  | October 3,2009 |        | June 27,2009
|Compensation and benefits, including severance    |  | $              | 6,479  |              | $ | 6,479 
|Income taxes                                      |  |                |       |              |   | 135   
|Warranty                                          |  |                | 836    |              |   | 905   
|Deferred revenue, current portion (a)             |  |                | 1,339  |              |   | 1,366 
|Accrued interest on debt                          |  |                | 966    |              |   | 447   
|Retained liabilities from discontinued operations |  |                | 160    |              |   | 160   
|Capital leases                                    |  |                | 258    |              |   | 253   
|Professional fees                                 |  |                | 319    |              |   | 896   
|Other current liabilities                         |  |                | 1,859  |              |   | 2,342 
|                                                  |  |                |        |              |   |       
|                                                  |  | $              | 12,216 |              | $ | 12,983
|                                                  |  |                |        |              |   |       



|(a) | The long term portion of Deferred revenue is approximately $0.7 million for the period ended October 3, 2009 and June 27, 2009, respectively, and is
classified within Deferred revenues and other non-current liabilities on the Consolidated Balance Sheet.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11. Warranties

The following table is a reconciliation of the changes in the Companys aggregate product warranty liability (in
thousands):



|                                                 |  |                          |      |   |                        |   |       |                             |  |   |       |  
|------------------------------------------------ |  | ------------------------ | ---- | - | ---------------------- | - | ----- | --------------------------- |  | - | ----- | -
|                                                 |  | October 3,2009(14 weeks) |      |   | June 27,2009(52 weeks) |   |       | September 27,2008(13
weeks) | 
|Balance at beginning of period                   |  | $                        | 905  |   |                        | $ | 1,313 |                             |  | $ | 1,313 |  
|Accruals for warranties issued during the period |  |                          | 90   |   |                        |   | 538   |                             |  |   | 235   |  
|Warranty costs incurred during the period        |  |                          | (159 | ) |                        |   | (754  | )                           |  |   | (215  | )
|Change in accrual estimate                       |  |                          |     |   |                        |   | (192  | )                           |  |   |      |  
|                                                 |  |                          |      |   |                        |   |       |                             |  |   |       |  
|Balance at end of period                         |  | $                        | 836  |   |                        | $ | 905   |                             |  | $ | 1,333 |  
|                                                 |  |                          |      |   |                        |   |       |                             |  |   |       |  

12. Debt and Capital Leases

Credit Agreement

The Company has a $50.0 million senior, secured, four-year credit agreement which includes a $5.0 million swingline loan subfacility and a $5.0 million letter of credit subfacility. The Credit Agreement
will expire on July 15, 2011, unless, in the absence of any default it is extended by LeCroy to April 1, 2012, contingent on the waiver or extension of the first redemption date of the Companys convertible notes. As of
October 3, 2009, the Company had $20.0 million outstanding against the credit facility and zero outstanding against the letter of credit subfacility and the swingline loan subfacility.

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

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 October 3,
2009, the Company was in compliance with its financial covenants.

Convertible Debt

On October 12, 2006, the Company sold and issued $72.0 million in convertible senior subordinated notes to qualified institutional
buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the Notes). The Notes bear interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and October 15. The
Notes are direct, unsecured, senior subordinated obligations of the Company and rank: (i) subordinate in right of payment to all of the Companys existing and future secured indebtedness; (ii) equal in right of payment with all of the
Companys existing and future senior unsecured indebtedness, and



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



(iii) senior in right of payment to all of the Companys existing and future subordinated indebtedness. In connection with the issuance and sale of the Notes, the Company entered into
an indenture dated as of October 12, 2006, with U.S. Bank National Association as trustee. The terms of the Notes are governed by the indenture.

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

Accounting for Convertible Debt Instruments

During the quarter ended October 3, 2009, LeCroy was required to adopt new accounting guidance which requires issuers of certain
types of convertible notes to separately account for the liability and equity components of such convertible notes in a manner that reflects the entitys nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.
Prior to adoption, the liability of the convertible notes was carried at its principal value and only the contractual interest expense was recognized in LeCroys Consolidated Statements of Operations. Because the new guidance requires
retrospective application, LeCroy was required to adjust all periods for which the convertible notes were outstanding prior to the date of adoption.

Upon adoption and effective as of the issuance date of the convertible notes, LeCroy recorded approximately $17.9 million of the principal amount to equity, representing a debt discount for the difference
between LeCroys estimated nonconvertible debt borrowing rate of 10.5% at the time and the 4.0% coupon rate of the convertible notes. This debt discount is amortized as interest expense over the contractual term of the notes using the effective
interest method. In addition, LeCroy allocated approximately $0.7 million of the issuance costs to the equity component of the convertible notes and approximately $2.3 million of the issuance costs to the debt component of the convertible notes. The
issuance costs were allocated pro rata based on the initial allocation of debt and equity components. The approximate $2.3 million of debt issuance costs allocated to the debt component is amortized as interest expense over the contractual term of
the convertible notes using the effective interest method, while the portion allocated to the equity component was charged to Additional paid-in capital at issuance date. The term of the convertible notes for amortization purposes is considered to
be five years, as that is the first period in which the redemption feature of the notes can be executed by either the Noteholders or LeCroy and therefore is considered the mandatory redemption date. As of October 3, 2009, approximately $0.7
million of unamortized fees related to the Notes was included in Other non-current assets on the Consolidated Balance Sheet.

The Company also retroactively applied the derecognition guidance. Upon repurchase, the fair value of the liability component immediately prior to extinguishment was measured first and the difference between the fair value of the aggregate
consideration paid and the fair value of the liability component was attributed to the reacquisition of the equity component. In the first quarter of fiscal 2010, the Company repurchased $1.0 million of the outstanding convertible notes for a gain
of approximately $0.4 million, net of issue cost write-off of approximately $0.1 million.



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



The carrying amount of the equity component of the convertible notes and the principal
amount, unamortized discount and net carrying amount of the liability component of the convertible notes as of October 3, 2009 and June 27, 2009 were as follows (in thousands):



|                                          |  |                |        |   |                           |   |        |  
|----------------------------------------- |  | -------------- | ------ | - | ------------------------- | - | ------ | -
|                                          |  | October 3,2009 |        |   | June 27,2009(As adjusted) |  
|Equity component of convertible notes     |  | $              | 8,761  |   |                           | $ | 8,849  |  
|Principal amount of convertible notes     |  | $              | 47,350 |   |                           | $ | 48,350 |  
|Unamortized discount of convertible notes |  |                | (5,521 | ) |                           |   | (6,277 | )
|                                          |  |                |        |   |                           |   |        |  
|Liability component of convertible notes  |  | $              | 41,829 |   |                           | $ | 42,073 |  

The effective interest rate, contractual interest expense and amortization of debt
discount for the convertible notes for the quarters ended October 3, 2009 (14 weeks) and September 27, 2008 (13 weeks) were as follows:



|                               |  |                |      |   |                                |   |      |  
|------------------------------ |  | -------------- | ---- | - | ------------------------------ | - | ---- | -
|                               |  | October 3,2009 |      |   | September 27,2008(As adjusted) |  
|Effective interest rate        |  |                | 10.5 | % |                                |   | 10.5 | %
|(in thousands):                |  |                |      |   |                                |   |      |  
|Interest expense - contractual |  | $              | 516  |   |                                | $ | 656  |  
|Amortization of debt discount  |  | $              | 605  |   |                                | $ | 751  |  
|                               |  |                |      |   |                                |   |      |  

Retrospective Adoption

The retrospective adoption of the new convertible debt accounting guidance resulted in the following adjustments to the Companys
Consolidated Balance Sheet as of June 27, 2009:



|                                                   |  |                       |          |   |             |   |        |            |  |   |          |  
|-------------------------------------------------- |  | --------------------- | -------- | - | ----------- | - | ------ | ---------- |  | - | -------- | -
|                                                   |  | As of June 27, 2009   |         
|(in thousands):                                    |  | As PreviouslyReported |          |   | Adjustments |   |        | AsAdjusted | 
|Current assets                                     |  | $                     | 78,173   |   |             |   |        |            |  | $ | 78,173   |  
|Property, plant and equipment, net                 |  |                       | 21,817   |   |             |   |        |            |  |   | 21,817   |  
|Intangible assets, net                             |  |                       | 502      |   |             |   |        |            |  |   | 502      |  
|Other non-current assets                           |  |                       | 9,545    |   |             |   | (2,359 | )(1)       |  |   | 7,186    |  
|                                                   |  |                       |          |   |             |   |        |            |  |   |          |  
|Total assets                                       |  | $                     | 110,037  |   |             | $ | (2,359 | )          |  | $ | 107,678  |  
|                                                   |  |                       |          |   |             |   |        |            |  |   |          |  
|                                                   |  |                       |         
|Current liabilities                                |  | $                     | 27,152   |   |             | $ |        |            |  | $ | 27,152   |  
|Long-term bank debt                                |  |                       | 17,500   |   |             |   |        |            |  |   | 17,500   |  
|Convertible notes, net of unamortized discount     |  |                       | 48,350   |   |             |   | (6,277 | )(2)       |  |   | 42,073   |  
|Deferred revenue and other non-current liabilities |  |                       | 3,635    |   |             |   |        |            |  |   | 3,635    |  
|                                                   |  |                       |          |   |             |   |        |            |  |   |          |  
|Total liabilities                                  |  |                       | 96,637   |   |             |   | (6,277 | )          |  |   | 90,360   |  
|                                                   |  |                       |         
|Commitments and contingencies                      |  |                       |          |   |             |   |        |            |  |   |          |  
|                                                   |  |                       |         
|Common stock                                       |  |                       | 129      |   |             |   |        |            |  |   | 129      |  
|Additional paid-in capital                         |  |                       | 117,055  |   |             |   | 8,849  | (3)        |  |   | 125,904  |  
|Accumulated other comprehensive income             |  |                       | 1,862    |   |             |   |        |            |  |   | 1,862    |  
|Accumulated deficit                                |  |                       | (102,548 | ) |             |   | (4,931 | )(4)       |  |   | (107,479 | )
|Treasury stock, at cost                            |  |                       | (3,098   | ) |             |   |        |            |  |   | (3,098   | )
|                                                   |  |                       |          |   |             |   |        |            |  |   |          |  
|Total stockholders equity                         |  |                       | 13,400   |   |             |   | 3,918  |            |  |   | 17,318   |  
|                                                   |  |                       |          |   |             |   |        |            |  |   |          |  
|Total liabilities and stockholders equity         |  | $                     | 110,037  |   |             | $ | (2,359 | )          |  | $ | 107,678  |  
|                                                   |  |                       |          |   |             |   |        |            |  |   |          |  



13



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



The retrospective adoption of the new convertible debt accounting guidance resulted in
the following adjustments to the Companys Consolidated Statements of Operations for the quarter ended September 27, 2008 (13 weeks):



|                                                                            |  |                                  |        |   |             |       |      |            |   |        |  
|--------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ----------- | ----- | ---- | ---------- | - | ------ | -
|                                                                            |  | Quarter ended September 27, 2008 |       
|(in thousands):                                                             |  | As PreviouslyReported            |        |   | Adjustments |       |      | AsAdjusted |  
|Total revenues                                                              |  | $                                | 40,724 |   |             |       |      |            | $ | 40,724 |  
|Costs and expenses                                                          |  |                                  | 38,076 |   |             |       |      |            |   | 38,076 |  
|                                                                            |  |                                  |        |   |             |       |      |            |   |        |  
|Operating income                                                            |  |                                  | 2,648  |   |             |      |      |            |   | 2,648  |  
|Gain on the extinguishment of convertible debt, net of issue cost write-off |  |                                  | 252    |   |             | 40    | (5)  |            |   | 292    |  
|Interest income                                                             |  |                                  | 35     |   |             |       |      |            |   | 35     |  
|Interest expense                                                            |  |                                  | (883   | ) |             | 29    | (6)  |            |   | (854   | )
|Amortization of debt discount on convertible notes                          |  |                                  |       |   |             | (751  | )(7) |            |   | (751   | )
|Other, net                                                                  |  |                                  | 256    |   |             |       |      |            |   | 256    |  
|                                                                            |  |                                  |        |   |             |       |      |            |   |        |  
|Income before income taxes                                                  |  |                                  | 2,308  |   |             | (682  | )    |            |   | 1,626  |  
|Provision for income taxes                                                  |  |                                  | 773    |   |             | (242  | )(8) |            |   | 531    |  
|                                                                            |  |                                  |        |   |             |       |      |            |   |        |  
|Net income                                                                  |  |                                  | 1,535  |   |             | (440  | )    |            |   | 1,095  |  
|                                                                            |  |                                  |        |   |             |       |      |            |   |        |  
|                                                                            |  |                                  |       
|Net income per share - basic                                                |  | $                                | 0.13   |   |             | (0.04 | )    |            | $ | 0.09   |  
|Net income per share - diluted                                              |  | $                                | 0.13   |   |             | (0.04 | )    |            | $ | 0.09   |  



|(1) | This amount represents the cumulative adjustments to debt issuance costs associated with the convertible notes and the cumulative impact on the net deferred tax asset
related to the amortization of the debt discount.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This amount represents the remaining unamortized debt discount on the convertible notes.
|--- | ----------------------------------------------------------------------------------------

|(3) | This amount represents the equity component of the convertible notes, net of tax adjustments, due to the amortization of the debt discount.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(4) | This amount represents the cumulative net income impact of the amortization of debt discount, the adjustment to the gain on the extinguishment of convertible debt, net
of issue cost write-off (see explanation (6) below) and the associated tax adjustments since inception of the convertible notes.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | This amount represents the adjustment to the gain on the extinguishments of debt, net of issue cost write-off in accordance with the derecognition guidance.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | This amount represents a decrease in interest expense associated with the debt issuance costs, as a portion was written-off to Additional paid-in capital at issue date
and a portion is written off at each extinguishment date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



|(7) | This amount represents the amortization of the debt discount.
|--- | -------------------------------------------------------------

|(8) | This amount represents the tax effect of the amortization of the debt discount, debt issuance costs and gain on extinguishment of debt, net of issue cost write-off.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

LeCroys retrospective adoption does not affect LeCroys balance of Cash and cash equivalents and as
a result did not change its Net cash flows from operating, investing or financing activities in its Consolidated Statement of Cash Flows for the quarter ended September 27, 2008.

The retrospective adoption resulted in the following adjustments to our Consolidated Statements of Stockholders Equity:



|                                                                                                                                                                                        |  |                           |         |   |                                       |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------------------------------- | - | -------- | -
|(in thousands)                                                                                                                                                                          |  | Additional Paid-InCapital |         |   | Retained Earnings(AccumulatedDeficit) |  
|Balance at June 30, 2007, as reported                                                                                                                                                   |  | $                         | 108,713 |   |                                       | $ | 2,486    |  
|Equity component of convertible notes                                                                                                                                                   |  |                           | 17,929  |   |                                       |   |          |  
|Equity component of debt issuance costs                                                                                                                                                 |  |                           | (748    | ) |                                       |   |          |  
|Amortization of debt discount                                                                                                                                                           |  |                           |         |   |                                       |   | (2,077   | )
|Amortization of debt issuance costs, net of reversal of previously recorded amortization of debt issuance costs                                                                         |  |                           |         |   |                                       |   | 97       |  
|Tax adjustments                                                                                                                                                                         |  |                           | (6,099  | ) |                                       |   | 703      |  
|                                                                                                                                                                                        |  |                           |         |   |                                       |   |          |  
|Balance at June 30, 2007, as adjusted                                                                                                                                                   |  |                           | 119,795 |   |                                       |   | 1,209    |  
|Fiscal 2008 equity activity, as reported                                                                                                                                                |  |                           | 4,980   |   |                                       |   | 1,616    |  
|Reacquisition of conversion option                                                                                                                                                      |  |                           | (739    | ) |                                       |   |          |  
|Amortization of debt discount                                                                                                                                                           |  |                           |         |   |                                       |   | (3,083   | )
|Amortization of debt issuance costs, net of reversal of previously recorded amortization of debt issuance costs                                                                         |  |                           |         |   |                                       |   | 203      |  
|Gain on extinguishment of convertible debt, net of issue cost write-off, net of reversal of previously recorded gain on
extinguishment of convertible debt, net of issue cost write-off |  |                           |         |   |                                       |   | (46      | )
|Tax adjustments                                                                                                                                                                         |  |                           | 262     |   |                                       |   | 1,039    |  
|                                                                                                                                                                                        |  |                           |         |   |                                       |   |          |  
|Balance at June 28, 2008, as adjusted                                                                                                                                                   |  |                           | 124,298 |   |                                       |   | 938      |  
|Fiscal 2009 equity activity, as reported                                                                                                                                                |  |                           | 3,362   |   |                                       |   | (106,650 | )
|Reacquisition of conversion option                                                                                                                                                      |  |                           | (2,722  | ) |                                       |   |          |  
|Amortization of debt discount                                                                                                                                                           |  |                           |         |   |                                       |   | (2,872   | )
|Amortization of debt issuance costs, net of reversal of previously recorded amortization of debt issuance costs                                                                         |  |                           |         |   |                                       |   | 111      |  
|Gain on extinguishment of convertible debt, net of issue cost write-off, net of reversal of previously recorded gain on
extinguishment of convertible debt, net of issue cost write-off |  |                           |         |   |                                       |   | 21       |  
|Tax adjustments                                                                                                                                                                         |  |                           | 966     |   |                                       |   | 973      |  
|                                                                                                                                                                                        |  |                           |         |   |                                       |   |          |  
|Balance at June 27, 2009, as adjusted                                                                                                                                                   |  | $                         | 125,904 |   |                                       | $ | (107,479 | )
|                                                                                                                                                                                        |  |                           |         |   |                                       |   |          |  

Upon the adoption of the new convertible debt accounting guidance and effective as of
the issuance date of the convertible notes, Lecroy recorded, as adjustments to additional paid-in capital, deferred taxes for the differences between the carrying value and tax basis that resulted from allocating approximately $17.9 million of the
principal amount of convertible notes and approximately $0.7 million of the associated issuance costs to equity. In subsequent periods, the Company recorded adjustments to the deferred taxes to reflect the tax effect of the amortization of the debt
discount, debt issuance costs and gains on the extinguishments of convertible notes, net of issue cost write-offs.



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



Other

During fiscal 2008, the Company acquired a software license under a capital lease agreement for approximately $0.7 million. The lease bears
interest at 7.75% with a three-year term. As of October 3, 2009, the Companys outstanding balance under this agreement was approximately $0.3 million, included in Accrued expenses and other current liabilities on the Consolidated Balance
Sheet.

The Companys Swiss subsidiary has an overdraft facility totaling 1.0 million Swiss francs for which
approximately 0.4 million Swiss francs are being held against supplier obligations, leaving an available balance of 0.6 million Swiss francs under this facility at October 3, 2009. The outstanding balance under this facility remains
unchanged from June 27, 2009.

13. Commitments and Contingencies

The Companys contractual obligations and commitments include obligations associated with employee severance agreements, supplier
agreements, operating leases, capital leases, revolving credit and convertible note obligations, as set forth in the Contractual Obligations and Other Commitments table in the Managements Discussion and Analysis of Financial Condition and
Results of Operations (MD&A). The Company expensed approximately $0.6 million related to operating leases as of October 3, 2009 and approximately $0.7 million as of September 27, 2008.

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

14. Net (Loss) Income Per Common Share (EPS)

The following is a presentation of the numerators and the denominators of the basic and diluted net (loss) income per common share computations for the quarters ended October 3, 2009 and
September 27, 2008:



|                                            |  |                          |        |   |                             |   |       
|------------------------------------------- |  | ------------------------ | ------ | - | --------------------------- | - | ------
|                                            |  | Quarter ended           
|                                            |  | October 3,2009(14 weeks) |        |   | September 27,2008(13
weeks)
|Numerator:                                  |  |                          |        |   |                             |   |       
|Net (loss) income, as adjusted (Note 12)    |  | $                        | (482   | ) |                             | $ | 1,095 
|                                            |  |                          |        |   |                             |   |       
|                                            |  |                         
|Denominator:                                |  |                          |        |   |                             |   |       
|Weighted average shares outstanding:        |  |                          |        |   |                             |   |       
|Basic                                       |  |                          | 12,265 |   |                             |   | 11,881
|Employee stock options and non-vested stock |  |                          |       |   |                             |   | 196   
|                                            |  |                          |        |   |                             |   |       
|Diluted                                     |  |                          | 12,265 |   |                             |   | 12,077
|                                            |  |                          |        |   |                             |   |       

The computations of diluted EPS for the quarters ended October 3, 2009 and
September 27, 2008 do not include approximately 2.1 million and 1.4 million, respectively, of stock options and non-vested stock, as the effect of their inclusion would have been anti-dilutive to EPS. Additionally, the convertible
notes had no impact on diluted EPS because the average share price during both quarters was below $14.55 per share, the initial conversion price, and accordingly, the convertible notes, if converted, would have required only cash at settlement.

15. Income Taxes

The effective income tax rate for the quarter ended October 3, 2009 was 4.6%, compared to an effective income tax rate of 32.7% for the quarter ended September 27, 2008. The effective tax rate for the quarter ended October 3,
2009 includes the write-off of a deferred tax asset related to equity-based compensation of approximately $0.1 million.

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



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



At October 3, 2009, the Companys net domestic deferred tax assets amounted to
approximately $13.1 million. Management has considered the realizability of the deferred tax assets and has concluded that a domestic valuation allowance of approximately $1.4 million should be recorded, mainly related to certain state investment
tax credit carryforwards that are not anticipated to be realized. Although management determined that a valuation allowance was not required with respect to most of the net domestic deferred tax assets, recovery is primarily dependent on achieving
the forecast of future operating income, as well as prudent tax planning strategies. Based upon the projections, the domestic net operating loss carryforwards and federal tax credit carryforwards would be fully utilized before expiration.

The Company operates in multiple taxing jurisdictions, both within the United States and outside of the United States, and
faces audits from various tax authorities regarding the deductibility of certain expenses, intercompany transactions, as well as other matters. At October 3, 2009, the total amount of liability for unrecognized tax benefits related to federal,
state and foreign taxes and accrued interest was approximately $10.9 million of which approximately $2.0 million was reflected as a non-current liability and approximately $8.9 million was reflected as a reduction of gross deferred tax assets, all
of which would impact the effective tax rate, if recognized.

The Company believes it is reasonably possible that
approximately $0.5 million of net unrecognized tax benefits will be recognized during the next twelve months and impact the Companys effective tax rate. However, actual results could differ from those currently anticipated.

The Company recognizes interest and, if applicable, penalties which could be assessed related to unrecognized tax benefits in income tax
expense. As of October 3, 2009, the total amount of accrued interest and penalties, before federal and, if applicable, state effect, was approximately $0.1 million.

The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. For federal income tax purposes, fiscal 2006 through 2009 tax years remain open for
examination by the tax authorities under the normal three year statute of limitations. For state tax purposes, (principally California and New York) fiscal 2005 through 2009 tax years remain open for examination by the tax authorities under a four
year statute of limitations.

16. Segment and Geographic Revenue

The Company operates in a single-reportable segment in the Test and measurement market, in which it develops, manufactures, sells and
licenses high-performance oscilloscopes, serial data analyzers and global communication protocol test solutions. These products are used by design engineers and researchers to measure and analyze complex electronic signals in order to develop high
performance systems, to validate electronic designs and to improve time to market. Revenue from the sale of the Companys products, which are similar in nature, is reflected as Test and measurement product revenue in the Consolidated Statements
of Operations.



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



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



|                   |  |                          |        |                             |   |       
|------------------ |  | ------------------------ | ------ | --------------------------- | - | ------
|                   |  | Quarter Ended           
|                   |  | October 3,2009(14 weeks) |        | September 27,2008(13
weeks)
|North America      |  | $                        | 13,229 |                             | $ | 11,501
|Europe/Middle East |  |                          | 7,957  |                             |   | 15,451
|Japan              |  |                          | 971    |                             |   | 2,815 
|Asia/Pacific       |  |                          | 5,844  |                             |   | 10,957
|                   |  |                          |        |                             |   |       
|Total revenues     |  | $                        | 28,001 |                             | $ | 40,724
|                   |  |                          |        |                             |   |       

Total assets by geographic area are as follows:



|                                     |  |                |         |              |   |        
|------------------------------------ |  | -------------- | ------- | ------------ | - | -------
|                                     |  | October 3,2009 |         | June 27,2009
|North America, as adjusted (Note 12) |  | $              | 88,775  |              | $ | 91,597 
|Europe/Middle East                   |  |                | 11,146  |              |   | 11,169 
|Japan                                |  |                | 1,877   |              |   | 1,541  
|Asia/Pacific                         |  |                | 3,790   |              |   | 3,371  
|                                     |  |                |         |              |   |        
|Total assets, as adjusted (Note 12)  |  | $              | 105,588 |              | $ | 107,678
|                                     |  |                |         |              |   |        

Total Property, plant and equipment, net by geographic area are as follows:



|                        |  |                |        |              |   |       
|----------------------- |  | -------------- | ------ | ------------ | - | ------
|                        |  | October 3,2009 |        | June 27,2009
|North America           |  | $              | 20,318 |              | $ | 20,795
|Europe/Middle East      |  |                | 606    |              |   | 644   
|Japan                   |  |                | 270    |              |   | 217   
|Asia/Pacific            |  |                | 253    |              |   | 161   
|                        |  |                |        |              |   |       
|Total long-lived assets |  | $              | 21,447 |              | $ | 21,817
|                        |  |                |        |              |   |       

17. New Accounting Pronouncements

Recent pronouncements adopted

In September 2006, FASB issued new accounting guidance on fair value measurements, effective beginning in fiscal 2009. This guidance establishes a framework for measuring fair value and requires enhanced
disclosures about fair value measurements. The FASB deferred the effective date until the beginning of the Companys 2010 fiscal year, as it relates to fair value measurement requirements for non-financial assets and liabilities that are not
remeasured at fair value on a recurring basis. This includes fair value calculated in impairment assessments of long-lived assets. The Company adopted the new guidance as it relates to non-financial assets and liabilities and it did not have any
impact on the Companys consolidated financial position and results of operations at the date of adoption, although it may impact the way that fair value for non-financial assets and liabilities is determined in future periods.



18



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



In May 2008, the FASB issued a staff position on new accounting for convertible debt
instruments that may be settled in cash upon conversion (including partial cash settlement). The staff position requires cash settled convertible debt to be separated into debt and equity components at issuance and a value to be assigned to each.
The value assigned to the debt component will be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the cash proceeds and this estimated fair value will be recorded as a debt
discount, with an offset to equity, and will be amortized to interest expense, using the effective interest method, over the life of the convertible notes. The guidance was effective for financial statements issued for fiscal years beginning after
December 15, 2008 and for interim periods within those years and required retrospective application. The Company adopted the staff position in fiscal 2010 and has retrospectively applied it to prior periods (See Note 12  Debt and
Capital Leases for additional information).

In April 2009, the FASB issued a staff position requiring fair value
disclosures in both interim as well as annual financial statements in order to provide more timely information about the effects of current market conditions on financial instruments. The guidance was effective for interim reporting periods ending
after June 15, 2009. The Company adopted the enhanced disclosures required in the first quarter of fiscal 2010 and adoption did not have any impact on the Companys consolidated financial position or results of operations.

In June 2009, the FASB Accounting Standards Codification (Codification) was issued. The Codification is the source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. The Codification does not change U.S. GAAP; instead, it introduces a new structure that is organized in an easily accessible, user-friendly online research
system. The Codification, which changes the referencing of financial standards, becomes effective for interim and annual periods ending on or after September 15, 2009. The implementation of the Codification did not have any impact on The
Companys consolidated financial position or results of operations.

In December 2007, the FASB issued new guidance on
business combinations. It established the principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at the acquisition date fair value. Further, it required that acquisition-related costs be expensed as incurred, restructuring costs be expensed in periods subsequent to the acquisition date and changes in accounting for
deferred income tax asset valuation allowances and acquired income tax uncertainties after the measurement period be included in income tax expense. Additionally, disclosure requirements were established to enable users of the financial statements
to evaluate the nature and financial effects of the business combination. The new accounting guidance applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008, with the exception of adjustments made to valuation allowances on deferred taxes and acquired tax contingencies. The Company will apply the provisions under the new guidance to future adjustments made to
valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions that closed prior to the beginning of the Companys 2010 fiscal year. At October 3, 2009, approximately $2.5 million of unrecognized tax
benefits are related to a prior acquisition and would impact the effective tax rate, if recognized.

Recent
pronouncement not yet adopted

In October 2009, the FASB issued amendments to the accounting and disclosure for revenue
recognition. These amendments, effective for fiscal years beginning on or after June 15, 2010, modify the criteria for recognizing revenue in multiple element arrangements and the scope of what constitutes a non-software deliverable. Early
adoption is permitted. The Company is currently assessing the impact on its consolidated financial position and results of operations.

18.
Subsequent Events

Management has evaluated events and transactions subsequent to October 3, 2009 through
November 12, 2009, which is the date the financial statements were issued and has determined that no additional disclosures are required.



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##### Table of Contents

LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



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

This Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in
conjunction with the audited Consolidated Financial Statements, Notes and MD&A included in our Annual Report filed on Form 10-K for the fiscal year ended June 27, 2009. Our discussion and analysis is an integral part of understanding our
financial results. Also refer to Basis of Presentation and Use of Estimates in the Notes to the Consolidated Financial Statements.

Our Critical Accounting Policies and Estimates

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

The accounting policies that we believe are the most critical to understanding and
evaluating our reported financial results include: revenue recognition; reserves on accounts receivable; allowance for excess and obsolete inventory; uncertain tax positions; valuation of deferred tax assets; valuation of long-lived assets;
share-based compensation expense; estimation of warranty liabilities and the separation of convertible notes between debt and equity.

Fiscal Year

Our fiscal years end on the Saturday closest to June 30, resulting in an extra week of
results every five or six years and reporting periods ended on October 3, 2009, September 27, 2008 and June 27, 2009. Fiscal 2010 is a fifty-three week year and, as a result, the first quarter of fiscal 2010 was a 14-week period
compared with a 13-week period for the first quarter of fiscal 2009.

Business Realignment Initiatives

In the first quarter of fiscal 2010, as a result of a further effort to streamline expenses internationally, we
recorded severance of approximately $0.1 million, which was expensed to Selling, general and administrative (SG&A). This resulted from headcount reductions of four employees or approximately 1.0% of the workforce as compared to
June 27, 2009.

Our Business Risks

Our results of operations and financial position are affected by a variety of factors. 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 Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace industries.

Recent Accounting Pronouncements

See Note 17 New Accounting
Pronouncements for additional information on recent pronouncements adopted and not yet adopted. Currently we have not adopted the new accounting guidance on revenue recognition effective for fiscal years beginning on or after June 15,
2010, with early adoption permitted.



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In May 2008, the FASB issued a staff position on new accounting for convertible debt
instruments that may be settled in cash upon conversion (including partial cash settlement). The staff position requires cash settled convertible debt to be separated into debt and equity components at issuance and a value to be assigned to each.
The value assigned to the debt component will be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the cash proceeds and this estimated fair value will be recorded as a debt
discount, with an offset to equity, and will be amortized to interest expense, using the effective interest method, over the life of the convertible notes. The guidance was effective for financial statements issued for fiscal years beginning after
December 15, 2008 and for interim periods within those years and required retrospective application. We adopted the staff position in fiscal 2010 and have retrospectively applied it to prior periods. See Note 12  Debt and Capital
Leases for additional information.

Consolidated Results of Operations

The following table indicates the percentage of total revenues represented by each item in the Companys Consolidated Statements of
Operations for the quarter ended October 3, 2009 and September 27, 2008.



|                                                                        |  |                |    |  |                                |  
|----------------------------------------------------------------------- |  | -------------- | -- |  | ------------------------------ | -
|                                                                        |  | Quarter ended  |   
|(Unaudited)                                                             |  | October 3,2009 |    |  | September 27,2008(as
adjusted) |  
|Revenues:                                                               |  |                |    |  |                                |  
|Test and measurement products                                           |  | 92.2           | %  |  | 94.4                           | %
|Service and other                                                       |  | 7.8            |    |  | 5.6                            |  
|                                                                        |  |                |    |  |                                |  
|Total revenues                                                          |  | 100.0          |    |  | 100.0                          |  
|Cost of revenues                                                        |  | 44.0           |    |  | 43.4                           |  
|                                                                        |  |                |    |  |                                |  
|Gross profit                                                            |  | 56.0           |    |  | 56.6                           |  
|                                                                        |  |               
|Operating expenses:                                                     |  |                |    |  |                                |  
|Selling, general and administrative                                     |  | 31.8           |    |  | 30.9                           |  
|Research and development                                                |  | 21.9           |    |  | 19.2                           |  
|                                                                        |  |                |    |  |                                |  
|Total operating expenses                                                |  | 53.7           |    |  | 50.1                           |  
|                                                                        |  |               
|Operating income                                                        |  | 2.3            |    |  | 6.5                            |  
|                                                                        |  |               
|Other income (expense):                                                 |  |                |    |  |                                |  
|Gain on extinguishment of convertible debt, net of issue cost write-off |  | 1.3            |    |  | 0.7                            |  
|Interest income                                                         |  |               |    |  | 0.1                            |  
|Interest expense                                                        |  | (2.7           | )  |  | (2.1                           | )
|Amortization of debt discount on convertible notes                      |  | (2.2           | )  |  | (1.8                           | )
|Other, net                                                              |  | (0.5           | )  |  | 0.6                            |  
|                                                                        |  |                |    |  |                                |  
|Other expense, net                                                      |  | (4.1           | )  |  | (2.5                           | )
|                                                                        |  |               
|(Loss) income before income taxes                                       |  | (1.8           | )  |  | 4.0                            |  
|(Benefit) provision for income taxes                                    |  | (0.1           | )  |  | 1.3                            |  
|                                                                        |  |                |    |  |                                |  
|Net (loss) income                                                       |  | (1.7           | )% |  | 2.7                            | %
|                                                                        |  |                |    |  |                                |  



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##### Table of Contents

Comparison of the Quarter Ended October 3, 2009 and September 27, 2008

Total revenues were approximately $28.0 million for the quarter ended October 3, 2009, compared to approximately
$40.7 million for the prior period quarter, representing a decrease of approximately 31.2%, or $12.7 million, primarily as a result of a measurable decline in sales of Test and measurement products, driven by the worldwide economic downturn, as well
as a minor negative foreign currency impact, slightly offset by an additional week of sales in the first quarter of 2010 which was a 14 week quarter versus a 13 week quarter in fiscal 2009. Foreign currency fluctuations decreased total revenues by
approximately $0.4 million in the first quarter of fiscal 2010 as compared to the same period last year. Our sales were impacted by our customers reducing staffing levels and therefore their need for capital equipment, as well as postponing
spending, mostly for our mid-range oscilloscopes and protocol analyzers.

Service and other revenues primarily consist of
service revenues and maintenance fees. Service and other revenues were approximately $2.2 million for the quarter ended October 3, 2009, representing a decrease of approximately 4.4% or $0.1 million, compared to approximately $2.3 million in
the prior period quarter. The decrease was the result of a decline in upgrade purchases furthered by the economic downturn, as customers delayed or cancelled servicing of their products, as well as a minor negative foreign currency impact, slightly
offset by an additional week of sales in the first quarter of 2010 which was a 14 week quarter versus a 13 week quarter in fiscal 2009 and revenue earned from a research and development arrangement.



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##### Table of Contents

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

|                   |  |                          |        |            |       |   |                             |   |            |  |       |  
|------------------ |  | ------------------------ | ------ | ---------- | ----- | - | --------------------------- | - | ---------- |  | ----- | -
|                   |  | October 3,2009(14 weeks) |        |            |       |   | September 27,2008(13 weeks) |   |            | 
|                   |  | ($000)                   |        | percentage |       |   | ($000)                      |   | percentage | 
|North America      |  | $                        | 13,229 |            | 47.2  | % |                             | $ | 11,501     |  | 28.2  | %
|Europe/Middle East |  |                          | 7,957  |            | 28.4  |   |                             |   | 15,451     |  | 38.0  |  
|Japan              |  |                          | 971    |            | 3.5   |   |                             |   | 2,815      |  | 6.9   |  
|Asia/Pacific       |  |                          | 5,844  |            | 20.9  |   |                             |   | 10,957     |  | 26.9  |  
|                   |  |                          |        |            |       |   |                             |   |            |  |       |  
|Total revenues     |  | $                        | 28,001 |            | 100.0 | % |                             | $ | 40,724     |  | 100.0 | %
|                   |  |                          |        |            |       |   |                             |   |            |  |       |  

For the quarter ended October 3, 2009, the geographic revenues were lower in
terms of dollars and percentages in all regions, except North America, due to the worldwide economic downturn and negative foreign currency impact, even considering the additional week of sales in the first quarter of 2010 as compared to the first
quarter of 2009. Gains in North America were driven by strong results from our high bandwidth oscilloscopes, an increase of approximately $2.3 million over the prior period quarter, partially offset by the economic downturn.

Gross profit for the quarter ended October 3, 2009 was approximately $15.7 million, or 56.0% gross margin, compared to approximately
$23.0 million, or 56.6% gross margin, for the prior period quarter. The lower gross margin dollars in the first quarter of fiscal 2010 was primarily attributable to the decreased demand for our Test and measurement products. On a percentage basis,
our gross margins are materially the same as the prior period quarter, despite the lower sales volume.

Selling, general and
administrative (SG&A) expense was approximately $8.9 million for the quarter ended October 3, 2009 compared to approximately $12.6 million for the quarter ended September 27, 2008, representing a decrease of approximately
29.2% or $3.7 million. The decrease was mainly attributable to our extensive cost-reduction program that began in the second quarter of fiscal 2009 which included reductions in workforce, compensation and other employee benefits, slightly offset by
an additional week of compensation expenses in fiscal 2010 which represented a 14 week quarter compared to a 13 week quarter in fiscal 2009. The first quarter of fiscal 2010 included approximately $0.1 million in business realignment charges,
representing severance related expenses within our international operations, compared to no business realignment charges in the prior period quarter. As a percentage of total revenues, SG&A expense increased slightly over the prior period
quarter.

Research and development (R&D) expense was approximately $6.1 million for the quarter ended
October 3, 2009, compared to approximately $7.8 million for the prior period quarter, a decrease of approximately 21.6% or $1.7 million. The decrease resulted from our extensive cost-reduction program that began in the second quarter of fiscal
2009, slightly offset by an additional week of compensation expense in fiscal 2010 which represented a 14 week quarter compared to a 13 week quarter in fiscal 2009. As a percentage of total revenues, R&D expense increased from approximately
19.2% in the first quarter of fiscal 2009 to approximately 21.9% in the first quarter of fiscal 2010 primarily as a result of a lower sales base in fiscal 2010.

Other expense, net, which consists primarily of gains on the extinguishment of our convertible debt, net of issue cost write-off, interest income and expense, foreign exchange gains and losses and
amortization of debt discount on convertible notes was approximately $1.2 million in the first quarter of fiscal 2010 compared to approximately $1.0 million for the first quarter of fiscal 2009. Net interest expense was approximately $0.8 million
for both quarters. There was a foreign exchange loss of approximately $0.1 million in the first quarter of fiscal 2010 compared to a foreign exchange gain of approximately $0.3 million in the first quarter of fiscal 2009, resulting from the changes
in our foreign exchange forward contracts and on transactions denominated in other than our functional currencies. Further, both quarters included an approximate $0.3 million gain on extinguishment of convertible debt, net of issue cost write-off
resulting from our repurchase of the convertible notes. In the first quarter of fiscal 2010, we repurchased $1.0 million of our convertible notes as compared to approximately $2.6 million in the prior period quarter. Due to the adoption of new
accounting guidance related to our convertible notes, we recorded approximately $0.6 million of non-cash amortization expense in the first quarter of fiscal 2010 compared to approximately $0.8 million of non-cash amortization expense in the first
quarter of fiscal 2009, due to the accretion of the debt discount decreasing over time and with convertible note repurchases. See Note 12 Debt and Capital Leases for further details related to the retrospective adoption.

Our effective income tax rate for the quarter ended October 3, 2009 was 4.8%, compared to an effective income tax rate of 33.5% for the
quarter ended September 27, 2008. Our effective tax rate for the quarter ended October 3, 2009 includes the write-off of a deferred tax asset related to equity-based compensation of approximately $0.1 million.

We calculate income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions that could change
during the year. The differences between the effective tax rate and the U.S. federal statutory rate of 35% principally result from our geographical distribution of taxable income, and differences between the book and tax treatment of certain items.



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Liquidity and Capital Resources

Cash and cash equivalents at October 3, 2009 were approximately $9.3 million compared to approximately $6.4 million at June 27,
2009.

Net cash provided by operating activities was approximately $2.8 million in the quarter ended October 3, 2009,
compared to net cash used in operating activities of approximately $0.6 million in the same period last year. The net cash provided by operating activities in fiscal 2010 was attributable to working capital contributions of approximately $0.9
million. Fiscal 2010 net loss of approximately $0.5 million was offset by non-cash depreciation and amortization of approximately $1.3 million, share-based compensation of approximately $0.9 million and debt related amortization of approximately
$0.7 million. The net cash used in operating activities in fiscal 2009 was due to working capital requirements of approximately $4.4 million, partially offset by net income of approximately $1.1 million, non-cash depreciation and amortization of
approximately $1.6 million and share-based compensation of approximately $0.9 million.

Net cash used in investing activities
was attributable to the purchase of property, plant and equipment of approximately $0.7 million in the quarter ended October 3, 2009, compared to approximately $1.2 million in the same period last year. This decrease was due to less
discretionary capital spending under our cost-reduction program.

Net cash provided by financing activities was approximately
$0.7 million in the quarter ended October 3, 2009, compared to net cash used in financing activities of approximately $0.5 million in the quarter ended September 27, 2008. Net cash provided by financing activities was attributable to
borrowings of $2.5 million under our line of credit partially offset by approximately $1.8 million for the repurchase of convertible notes (cash payment for principal which includes a cash outflow for the fiscal 2009 year-end repurchase). Net cash
used in financing activities in fiscal 2009 was primarily due to the repurchase of convertible notes of approximately $2.8 million (cash payments for principal) and the purchase of treasury shares for approximately $0.1 million, partially offset by
borrowing of approximately $2.5 million under our line of credit.

We believe that our cash and cash equivalents on hand, cash
flow expected to be generated by our operations and availability under our revolving credit line will be sufficient to fund our operations, working capital, share repurchases and capital expenditure requirements for the foreseeable future and
provide funds for potential acquisition opportunities. We believe that the repayment of debt maturing in fiscal 2012 will be done through a combination of cash generated from operations and working capital, and will also include possible future
financing sources such as: (i) new secured bank debt; (ii) the sale or monetization of certain assets; (iii) new unsecured debt; and (vi) issuance of equity and/or equity-like securities.

Contractual Obligations and Other Commitments

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



|                                        |  |                                              |        |                 |   |           |  |           |        |                  |   |       |  |   |  
|--------------------------------------- |  | -------------------------------------------- | ------ | --------------- | - | --------- |  | --------- | ------ | ---------------- | - | ----- |  | - | -
|                                        |  | Payments due by Period as of October 3, 2009
|                                        |  | Total                                        |        | Less than1 Year |   | 1-3 Years |  | 3-5 Years |        | More than 5Years
|Severance                               |  | $                                            | 1,054  |                 |   | 899       |  |           | 155    |                  |   |      |  |   | 
|Supplier agreements                     |  |                                              | 413    |                 |   | 413       |  |           |       |                  |   |      |  |   | 
|Operating lease obligations             |  |                                              | 5,869  |                 |   | 2,086     |  |           | 2,558  |                  |   | 1,225 |  |   | 
|Vendor supplied capital lease agreement |  |                                              | 258    |                 |   | 258       |  |           |       |                  |   |      |  |   | 
|Convertible notes (1)                   |  |                                              | 47,350 |                 |   |          |  |           | 47,350 |                  |   |      |  |   | 
|Revolving credit obligation (2)         |  |                                              | 20,000 |                 |   |           |  |           | 20,000 |                  |   |       |  |   |  
|                                        |  |                                              |        |                 |   |           |  |           |        |                  |   |       |  |   |  
|Total (3)                               |  | $                                            | 74,944 |                 | $ | 3,656     |  | $         | 70,063 |                  | $ | 1,225 |  | $ | 
|                                        |  |                                              |        |                 |   |           |  |           |        |                  |   |       |  |   |  



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

|(2) | The revolving credit facility expires on July 15, 2011, unless, in the absence of any default, extended by us to April 15, 2012, contingent on the waiver or
extension of the first redemption date of our Convertible notes.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The Contractual Obligations and Other Commitments does not include any reserves for income taxes because we are unable to reasonably predict the ultimate amount or
timing of settlement of our reserves.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Forward-Looking Information

We discuss expectations regarding our future performance in our annual and quarterly reports, press releases, and other written and oral
statements. These forward-looking statements are based on currently available information, business plans and projections about future events and trends. They are inherently uncertain, and investors must recognize that events could turn
out to be significantly different from our expectations. When used in this Form 10-Q, the words anticipate, believe, estimate, will, plan, intend, expect and similar
expressions identify forward-looking statements. Except as required by federal securities law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. When evaluating
our business, the Risk Factors included in Item 1A. of our Annual Report filed on Form 10-K for the fiscal year ended June 27, 2009 should be considered in conjunction with all other information included in our filings.



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

There have been no material changes in market risk since the filing of the Companys Annual Report on Form 10-K for the fiscal year ended June 27, 2009.



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

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls Over Financial Reporting

There have been no changes in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the quarter ended October 3, 2009 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.



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##### Table of Contents

LeCROY CORPORATION

PART II. OTHER INFORMATION



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

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



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

There have
been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended June 27, 2009.

The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may
materially and adversely affect our business, financial condition or operating results.



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##### Table of Contents

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

The following
exhibits are filed herewith.



|              |  |                                                                                                                    |  |               
|------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | --------------
|ExhibitNumber |  | Description                                                                                                        |  | Filed Herewith
|              |  |                                                                                                                   
|31.1          |  | Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |  | x             
|              |  |                                                                                                                   
|31.2          |  | Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |  | x             
|              |  |                                                                                                                   
|32.1          |  | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.                                   |  | x             
|              |  |                                                                                                                   
|32.2          |  | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.                                   |  | x             



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SIGNATURE

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



|                        |  |                                                                    
|----------------------- |  | -------------------------------------------------------------------
|Date: November 12, 2009 |  | LeCROY CORPORATION                                                 
|                        | 
|                        |  | /S/    SEAN B.
OCONNOR                                            
|                        |  | Sean B. OConnor                                                   
|                        |  | Vice President and Chief Financial Officer, Secretary and Treasurer



28