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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q

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

For the quarterly period ended March 31, 2007

OR

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

Commission File Number: 0-26634



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LeCROY CORPORATION

(Exact Name of
Registrant as Specified in Its Charter)

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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)



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

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

Large accelerated filer ̈Accelerated filer  x    Non-Accelerated filer ̈

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

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



|                                   |  |                           
|---------------------------------- |  | --------------------------
|CLASS                              |  | OUTSTANDING AT May 4, 2007
|Common stock, par value $.01 share |  | 12,252,679                



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LeCROY CORPORATION

FORM 10-Q

INDEX



|          |  |                                                                                                               |  |         
|--------- |  | ------------------------------------------------------------------------------------------------------------- |  | --------
|          |  |                                                                                                               |  | Page No.
|PART I    |  | FINANCIAL INFORMATION                                                                                         |  |         
|          |  |                                                                                                              
|Item 1.   |  | Financial Statements:                                                                                         |  |         
|          |  | Consolidated Balance Sheets (Unaudited) as of March 31, 2007 and June 30, 2006                                |  | 3       
|          |  | Consolidated Statements of Operations (Unaudited) for the Three and Nine Months ended March 31, 2007 and 2006 |  | 4       
|          |  | Consolidated Statements of Cash Flows (Unaudited) for the Nine Months ended March 31, 2007 and 2006           |  | 5       
|          |  | Notes to Consolidated Financial Statements (Unaudited)                                                        |  | 6       
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 23      
|Item 3.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                    |  | 35      
|Item 4.   |  | Controls and Procedures                                                                                       |  | 36      
|          |  |                                                                                                              
|PART II   |  | OTHER INFORMATION                                                                                             |  |         
|          |  |                                                                                                              
|Item 1.   |  | Legal Proceedings                                                                                             |  | 37      
|Item 1A.  |  | Risk Factors                                                                                                  |  | 37      
|Item 2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                   |  | 40      
|Item 6.   |  | Exhibits                                                                                                      |  | 41      
|          |  |                                                                                                              
|Signature |  |                                                                                                               |  | 44      

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



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PART I. FINANCIAL INFORMATION



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

LeCROY CORPORATION

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



|                                                                                                                                                          |  |                |         |               |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ------------- | - | ------- | -
|In thousands, except par value and share data                                                                                                             |  | March 31, 2007 |         | June 30, 2006 |  
|ASSETS                                                                                                                                                    |  |                |         |               |   |         |  
|                                                                                                                                                          |  |               
|Current assets:                                                                                                                                           |  |                |         |               |   |         |  
|Cash and cash equivalents                                                                                                                                 |  | $              | 10,694  |               | $ | 16,972  |  
|Accounts receivable, net of reserves of $746 and $458 at March 31, 2007 and June 30, 2006, respectively                                                   |  |                | 30,891  |               |   | 28,867  |  
|Inventories, net                                                                                                                                          |  |                | 37,270  |               |   | 34,041  |  
|Other current assets                                                                                                                                      |  |                | 11,148  |               |   | 13,237  |  
|                                                                                                                                                          |  |                |         |               |   |         |  
|Total current assets                                                                                                                                      |  |                | 90,003  |               |   | 93,117  |  
|                                                                                                                                                          |  |               
|Property and equipment, net                                                                                                                               |  |                | 21,507  |               |   | 20,359  |  
|Goodwill                                                                                                                                                  |  |                | 105,985 |               |   | 78,473  |  
|Other non-current assets                                                                                                                                  |  |                | 14,437  |               |   | 10,025  |  
|                                                                                                                                                          |  |                |         |               |   |         |  
|Total Assets                                                                                                                                              |  | $              | 231,932 |               | $ | 201,974 |  
|                                                                                                                                                          |  |                |         |               |   |         |  
|                                                                                                                                                          |  |               
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                      |  |                |         |               |   |         |  
|                                                                                                                                                          |  |               
|Current liabilities:                                                                                                                                      |  |                |         |               |   |         |  
|Accounts payable                                                                                                                                          |  | $              | 14,397  |               | $ | 19,282  |  
|Accrued expenses and other current liabilities                                                                                                            |  |                | 17,354  |               |   | 13,408  |  
|Short-term bank debt                                                                                                                                      |  |                |        |               |   | 3,500   |  
|Note payable  related party                                                                                                                              |  |                | 3,500   |               |   |        |  
|Current portion of long-term debt and capital leases                                                                                                      |  |                | 268     |               |   | 9,930   |  
|                                                                                                                                                          |  |                |         |               |   |         |  
|Total current liabilities                                                                                                                                 |  |                | 35,519  |               |   | 46,120  |  
|                                                                                                                                                          |  |               
|Long-term bank debt                                                                                                                                       |  |                | 9,410   |               |   | 24,700  |  
|Convertible notes                                                                                                                                         |  |                | 72,000  |               |   |        |  
|Deferred revenue and other non-current liabilities                                                                                                        |  |                | 1,478   |               |   | 1,451   |  
|                                                                                                                                                          |  |                |         |               |   |         |  
|Total liabilities                                                                                                                                         |  |                | 118,407 |               |   | 72,271  |  
|                                                                                                                                                          |  |               
|Commitments and contingencies                                                                                                                             |  |                |         |               |   |         |  
|                                                                                                                                                          |  |               
|Stockholders equity:                                                                                                                                     |  |                |         |               |   |         |  
|Preferred stock, $.01 par value (authorized 5,000,000 shares; none issued and outstanding as of March 31, 2007 and June 30,
2006)                         |  |                |        |               |   |        |  
|Common stock, $.01 par value (authorized 45,000,000 shares; 12,225,619 and 12,883,664 shares issued as of March 31, 2007 and
June 30, 2006, respectively) |  |                | 123     |               |   | 129     |  
|Additional paid-in capital                                                                                                                                |  |                | 107,415 |               |   | 114,447 |  
|Accumulated other comprehensive income                                                                                                                    |  |                | 1,276   |               |   | 1,292   |  
|Retained earnings                                                                                                                                         |  |                | 4,711   |               |   | 15,693  |  
|Treasury stock, at cost (0 and 142,283 shares at March 31, 2007 and June 30, 2006, respectively)                                                          |  |                |        |               |   | (1,858  | )
|                                                                                                                                                          |  |                |         |               |   |         |  
|Total stockholders equity                                                                                                                                |  |                | 113,525 |               |   | 129,703 |  
|                                                                                                                                                          |  |                |         |               |   |         |  
|Total liabilities and stockholders equity                                                                                                                |  | $              | 231,932 |               | $ | 201,974 |  
|                                                                                                                                                          |  |                |         |               |   |         |  



3



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|----------------------------------------- |  | --------------------------- | ------ | - | -------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                          |  | Three months endedMarch 31, |        |   | Nine months endedMarch 31, |  
|In thousands, except per share data       |  | 2007                        |        |   | 2006                       |   |        | 2007 |  |   | 2006    |  
|Revenues:                                 |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Test and measurement products             |  | $                           | 37,651 |   |                            | $ | 37,184 |      |  | $ | 109,207 |   |  | $ | 116,304 |  
|Service and other                         |  |                             | 1,691  |   |                            |   | 1,697  |      |  |   | 5,292   |   |  |   | 5,657   |  
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Total revenues                            |  |                             | 39,342 |   |                            |   | 38,881 |      |  |   | 114,499 |   |  |   | 121,961 |  
|                                          |  |                             |        |  
|Cost of revenues                          |  |                             | 18,524 |   |                            |   | 15,250 |      |  |   | 51,641  |   |  |   | 47,749  |  
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Gross profit                              |  |                             | 20,818 |   |                            |   | 23,631 |      |  |   | 62,858  |   |  |   | 74,212  |  
|                                          |  |                             |        |  
|Operating expenses:                       |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Selling, general and administrative       |  |                             | 15,065 |   |                            |   | 12,361 |      |  |   | 42,592  |   |  |   | 39,198  |  
|Legal settlements                         |  |                             |       |   |                            |   | 2,792  |      |  |   |        |   |  |   | 2,792   |  
|Research and development                  |  |                             | 8,080  |   |                            |   | 7,671  |      |  |   | 28,577  |   |  |   | 22,901  |  
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Total operating expenses                  |  |                             | 23,145 |   |                            |   | 22,824 |      |  |   | 71,169  |   |  |   | 64,891  |  
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Operating (loss) income                   |  |                             | (2,327 | ) |                            |   | 807    |      |  |   | (8,311  | ) |  |   | 9,321   |  
|                                          |  |                             |        |  
|Other (expense) income:                   |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Interest expense, net                     |  |                             | (1,128 | ) |                            |   | (524   | )    |  |   | (3,082  | ) |  |   | (1,708  | )
|Loss on extinguishment of debt            |  |                             | (551   | ) |                            |   |       |      |  |   | (997    | ) |  |   |        |  
|Other, net                                |  |                             | 2      |   |                            |   | 121    |      |  |   | (93     | ) |  |   | (86     | )
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Other expense, net                        |  |                             | (1,677 | ) |                            |   | (403   | )    |  |   | (4,172  | ) |  |   | (1,794  | )
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|(Loss) income before income taxes         |  |                             | (4,004 | ) |                            |   | 404    |      |  |   | (12,483 | ) |  |   | 7,527   |  
|(Benefit) provision for income taxes      |  |                             | (69    | ) |                            |   | 252    |      |  |   | (1,501  | ) |  |   | 2,965   |  
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Net (loss) income                         |  | $                           | (3,935 | ) |                            | $ | 152    |      |  | $ | (10,982 | ) |  | $ | 4,562   |  
|                                          |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Net (loss) income per common share :      |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Basic                                     |  | $                           | (0.34  | ) |                            | $ | 0.01   |      |  | $ | (0.94   | ) |  | $ | 0.37    |  
|Diluted                                   |  | $                           | (0.34  | ) |                            | $ | 0.01   |      |  | $ | (0.94   | ) |  | $ | 0.37    |  
|                                          |  |                             |        |  
|Weighted average number of common shares: |  |                             |        |   |                            |   |        |      |  |   |         |   |  |   |         |  
|Basic                                     |  |                             | 11,499 |   |                            |   | 12,275 |      |  |   | 11,736  |   |  |   | 12,191  |  
|Diluted                                   |  |                             | 11,499 |   |                            |   | 12,556 |      |  |   | 11,736  |   |  |   | 12,454  |  

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



4



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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                                              |  |                            |         |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                                              |  | Nine months endedMarch 31, |        
|In thousands                                                                                                  |  | 2007                       |         |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                         |  |                            |         |   |      |   |        |  
|Net (loss) income                                                                                             |  | $                          | (10,982 | ) |      | $ | 4,562  |  
|Adjustments to reconcile net (loss) income to net cash provided by operating activities:                      |  |                            |         |   |      |   |        |  
|Write-off of acquired in-process research and development                                                     |  |                            | 4,000   |   |      |   |       |  
|Depreciation and amortization                                                                                 |  |                            | 6,277   |   |      |   | 5,727  |  
|Share-based compensation                                                                                      |  |                            | 4,428   |   |      |   | 4,145  |  
|Amortization of deferred financing costs                                                                      |  |                            | 425     |   |      |   | 300    |  
|Deferred income taxes                                                                                         |  |                            | (707    | ) |      |   | 1,589  |  
|Loss on extinguishment of debt                                                                                |  |                            | 997     |   |      |   |       |  
|Loss on disposal of property and equipment, net                                                               |  |                            | 14      |   |      |   | 169    |  
|Write-off of inventory                                                                                        |  |                            | 1,804   |   |      |   | 361    |  
|Recognition of deferred license revenue                                                                       |  |                            |        |   |      |   | (665   | )
|Change in operating assets and liabilities, net of assets acquired and liabilities assumed in an acquisition: |  |                            |         |   |      |   |        |  
|Accounts receivable                                                                                           |  |                            | (1,036  | ) |      |   | (1,905 | )
|Inventories                                                                                                   |  |                            | (1,580  | ) |      |   | (5,783 | )
|Other current and non-current assets                                                                          |  |                            | (761    | ) |      |   | (3,024 | )
|Accounts payable, accrued expenses and other liabilities                                                      |  |                            | (3,041  | ) |      |   | 1,051  |  
|                                                                                                              |  |                            |         |   |      |   |        |  
|Net cash (used in) provided by operating activities                                                           |  |                            | (162    | ) |      |   | 6,527  |  
|                                                                                                              |  |                            |         |   |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                         |  |                            |         |   |      |   |        |  
|Purchase of property and equipment                                                                            |  |                            | (4,062  | ) |      |   | (2,776 | )
|Business acquisition costs, net of acquired cash                                                              |  |                            | (31,512 | ) |      |   |       |  
|Purchase of intangible assets                                                                                 |  |                            |        |   |      |   | (809   | )
|                                                                                                              |  |                            |         |   |      |   |        |  
|Net cash used in investing activities                                                                         |  |                            | (35,574 | ) |      |   | (3,585 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                         |  |                            |         |   |      |   |        |  
|Repayment of term loan                                                                                        |  |                            | (34,076 | ) |      |   | (8,078 | )
|Borrowings under revolving credit lines                                                                       |  |                            | 40,160  |   |      |   |       |  
|Repayments under revolving credit lines                                                                       |  |                            | (34,250 | ) |      |   |       |  
|Proceeds from issuance of convertible notes                                                                   |  |                            | 72,000  |   |      |   |       |  
|Payment of deferred financing costs                                                                           |  |                            | (3,684  | ) |      |   |       |  
|Purchase of treasury shares                                                                                   |  |                            | (10,508 | ) |      |   |       |  
|Repayment of borrowings on capitalized leases                                                                 |  |                            | (208    | ) |      |   | (359   | )
|Proceeds from employee stock purchase and option exercises                                                    |  |                            | 450     |   |      |   | 1,852  |  
|                                                                                                              |  |                            |         |   |      |   |        |  
|Net cash provided by (used in) financing activities                                                           |  |                            | 29,884  |   |      |   | (6,585 | )
|Effect of exchange rate changes on cash and cash equivalents                                                  |  |                            | (426    | ) |      |   | (5     | )
|                                                                                                              |  |                            |         |   |      |   |        |  
|Net (decrease) increase in cash and cash equivalents                                                          |  |                            | (6,278  | ) |      |   | (3,648 | )
|Cash and cash equivalents at beginning of the period                                                          |  |                            | 16,972  |   |      |   | 13,866 |  
|                                                                                                              |  |                            |         |   |      |   |        |  
|Cash and cash equivalents at end of the period                                                                |  | $                          | 10,694  |   |      | $ | 10,218 |  
|                                                                                                              |  |                            |         |   |      |   |        |  
|Supplemental Cash Flow Disclosure                                                                             |  |                            |         |   |      |   |        |  
|Cash paid during the period for:                                                                              |  |                            |         |   |      |   |        |  
|Interest                                                                                                      |  | $                          | 1,184   |   |      | $ | 1,988  |  
|Income taxes                                                                                                  |  |                            | 827     |   |      |   | 1,122  |  
|Non-cash investing and financing activities:                                                                  |  |                            |         |   |      |   |        |  
|Issuance of note payable to related party for business acquisition                                            |  | $                          | 3,500   |   |      |   |       |  
|Issuance of LeCroy stock options for business acquisition                                                     |  |                            | 450     |   |      |   |       |  
|Transaction costs for business acquisition, unpaid at March 31, 2007                                          |  |                            | 99      |   |      |   |       |  
|Transaction costs for deferred financing costs, unpaid at March 31, 2007                                      |  |                            | 72      |   |      |   |       |  

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



5



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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The accompanying interim Consolidated Financial Statements include all the accounts of LeCroy Corporation (the
Company or LeCroy) and its wholly-owned subsidiaries. These Consolidated Financial Statements are unaudited and should be read in conjunction with the audited Consolidated Financial Statements included in the Companys
Annual Report on Form 10-K for the fiscal year ended June 30, 2006. The accompanying Consolidated Balance Sheet as of June 30, 2006 has been derived from those audited Consolidated Financial Statements. Inter-company transactions and
balances have been eliminated in consolidation.

The Companys Consolidated Financial Statements have been prepared in
accordance with U.S. Generally Accepted Accounting Principles (US GAAP), which require management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the Consolidated Financial Statements and the revenues and expenses reported during the period. The most significant of these estimates and assumptions relate to revenue recognition, net reserves on
accounts receivable, allowances for excess and obsolete inventory, valuation of deferred tax assets, valuation of long-lived and intangible assets, valuation of goodwill, estimation of warranty liabilities and share-based compensation. 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. Operating loss in the third quarter of fiscal 2007 also included a $1.6 million charge related to the evaluation of certain business process and staffing requirements prompted by the
Catalyst acquisition (see Note 5  Restructuring). Other (expense) income in the third quarter of fiscal 2007 also included a Loss on extinguishment of debt of approximately $0.6 million for the write-off of unamortized deferred financing fees
related to the bank revolver that was fully repaid during the third quarter of fiscal 2007. Interim period operating results may not be indicative of the operating results for a full year.

The Companys fiscal periods end on the Saturday closest to the end of the period, which resulted in reporting periods ended on
March 31, 2007, March 30, 2006 and July 1, 2006. For clarity of presentation, period-end references are stated as March 31 and June 30. Certain reclassifications were made to prior year Consolidated Financial Statements
to conform to the fiscal 2007 presentation.

2. Catalyst Acquisition

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

The Merger was recorded under the purchase method of accounting in accordance with Statement of Financial Accounting
Standards (SFAS) No. 141 (SFAS No. 141), Business Combinations, which requires that the total consideration be allocated to the assets acquired and liabilities assumed based on their fair values. On
October 2, 2006, the effective date of the Merger, all shares of common stock of Catalyst issued and outstanding immediately prior to the Merger were exchanged for approximately $26.7 million in cash immediately. In addition, pursuant to the
terms of the Merger Agreement, 10% of the stated consideration was placed into escrow for the twelve-month period following the closing of the Merger to secure certain indemnification obligations under the terms of the Merger Agreement.



6



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LeCroy paid cash of $31.5 million, including direct transaction costs of $2.5 million,
net of cash acquired of $1.0 million, using proceeds from the Revolver under the Prior Credit Agreement (Note 14  Long-term Debt and Capital Leases), issued a $3.5 million, 6% promissory note payable on January 2, 2008, to Nader
Salehomoum, the former sole shareholder of Catalyst and current employee of the Company and assumed the fair value of certain vested Catalyst stock options totaling $0.5 million. Approximately $99,000 of transaction costs had not yet been paid as of
March 31, 2007. The Merger consideration is summarized below (in thousands):



|                                           |  |   |       
|------------------------------------------ |  | - | ------
|Cash for shares and certain vested options |  | $ | 26,650
|Cash paid in escrow                        |  |   | 3,350 
|Note payable to former shareholder         |  |   | 3,500 
|Fair value of vested stock options assumed |  |   | 450   
|Transaction costs                          |  |   | 2,629 
|                                           |  |   |       
|Total purchase price                       |  | $ | 36,579
|                                           |  |   |       

In connection with the Merger, LeCroy assumed Catalysts Stock Option Plan.
On October 2, 2006, Catalyst stock option holders approved technical amendments to their stock option grants in anticipation of their assumption by LeCroy pursuant to the Merger including, without limitation, amendments reflecting that any
stock option or other award granted thereunder would be exercisable for LeCroy common stock. Pursuant to SFAS No. 123R, of the 136,826 assumed stock options granted by the Company in exchange for the stock options held by the employees of
Catalyst, the fair value of 36,858 vested options or approximately $450,000 was considered part of the purchase price for Catalyst and the fair value of 99,968 unvested options or approximately $1,196,000, will be charged to compensation expense in
operations as earned by employees over their remaining requisite service periods. The fair value was determined using the Black-Scholes option pricing model based on a stock price of $12.63 per share, which was the weighted average closing price for
the stock two days prior through two days subsequent to the closing date of the transaction.

The Company may also be
required to grant restricted stock to certain former Catalyst employees contingent on the continuation of employment and the percentage of the escrow paid to the former shareholders of Catalyst twelve months subsequent to the Merger. The maximum
value of the restricted shares that may be granted is approximately $0.2 million.

The fair value of tangible and
intangible assets acquired and liabilities assumed was established based upon the unaudited October 1, 2006 Balance Sheet of Catalyst, as well as certain assumptions made regarding fair values. The fair value of finished goods inventory is
based on estimated selling prices less direct costs to sell and a reasonable profit margin on the selling effort. The fair value of work in process inventory is based on estimated selling prices less cost to complete, direct costs to sell and a
reasonable profit margin on the cost to complete and selling effort. The fair value of the IPR&D, purchased technology, trade name, backlog and manufacturers representative relationships was determined by an independent appraisal firm. The
fair value of the IPR&D was based on the total estimated costs to develop the related technologies less the costs incurred to date for the projects, and the intangible asset values were based on estimates of future cash flows associated with
those assets. The purchased technology, backlog and manufacturers representative relationships related to this acquisition are being amortized over their estimated economic useful lives ranging from two to fifteen months. It was determined
that the Catalyst trade name has an indefinite life and therefore, the Company will test the carrying value of $700,000 annually for impairment.

The excess of the purchase price over the fair value of the net assets acquired has been allocated to goodwill. The principle factors that contributed to a purchase price that resulted in the recognition of goodwill
was the fair value of the going-concern element of the Catalyst business, which includes their technology position within emerging communication standards, as well as the expected synergies that will be achieved by combining both companies. The
goodwill is not deductible for tax purposes. The purchase price allocation as of October 2, 2006 is summarized below (in thousands):



|                                    |  |   |        |  
|----------------------------------- |  | - | ------ | -
|Cash                                |  | $ | 1,017  |  
|Accounts receivable                 |  |   | 738    |  
|Inventory                           |  |   | 4,269  |  
|Other assets                        |  |   | 206    |  
|In-process research and development |  |   | 4,000  |  
|Purchased intangibles               |  |   | 2,220  |  
|Goodwill                            |  |   | 27,512 |  
|Current liabilities assumed         |  |   | (1,095 | )
|Deferred tax liability              |  |   | (2,288 | )
|                                    |  |   |        |  
|Total purchase price                |  | $ | 36,579 |  
|                                    |  |   |        |  



7



---

The following table presents the details of the amortizable intangible assets acquired in
the Merger and their carrying values as of March 31, 2007 (in thousands):



|                                                      |  |                       |  |      |       |                         |   |     |  |   |    
|----------------------------------------------------- |  | --------------------- |  | ---- | ----- | ----------------------- | - | --- |  | - | ---
|                                                      |  | Weighted AverageLives |  | Cost |       | AccumulatedAmortization |   | Net
|Amortizable intangible assets:                        |  |                       |  |      |       |                         |   |     |  |   |    
|Purchased technology                                  |  | 0.9 years             |  | $    | 1,030 |                         | $ | 412 |  | $ | 618
|Purchased backlog                                     |  | 0.1 years             |  |      | 450   |                         |   | 450 |  |   |   
|Purchased manufacturers representative relationships |  | 0.0 years             |  |      | 40    |                         |   | 40  |  |   |   
|                                                      |  |                       |  |      |       |                         |   |     |  |   |    
|Total amortizable intangibles purchased               |  |                       |  | $    | 1,520 |                         | $ | 902 |  | $ | 618
|                                                      |  |                       |  |      |       |                         |   |     |  |   |    

Amortization expense for intangible assets acquired in the Merger was
approximately $0.2 million and $0.9 million for the three and nine months ended March 31, 2007, respectively, of the $0.9 million approximately $0.8 million was recorded in Cost of revenues and $40,000 was recorded in Selling, general and
administrative expense in the Consolidated Statements of Operations.

The amortization expense related to intangible assets
acquired in the Merger for the remainder of fiscal 2007 and 2008 is expected to be approximately $0.2 million and $0.4 million, respectively.

The $4.0 million related to IPR&D was written off subsequent to the acquisition in accordance with FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations
Accounted for by the Purchase Method. This charge is included in Research and development expense in the Consolidated Statement of Operations for the nine months ended March 31, 2007.

The Consolidated Statements of Operations includes the results of operations of Catalyst since October 2, 2006.

3. Share-Based Compensation

In the
first quarter of fiscal 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which requires that the costs resulting from all share-based payment transactions be
recognized in the financial statements at their fair values. The Company adopted SFAS 123R using the modified prospective application method under which the provisions of SFAS 123R apply to new awards and to awards modified, repurchased, or
cancelled after the adoption date. Additionally, compensation cost for the portion of the awards for which the requisite service has not been rendered that are outstanding as of the adoption date is recognized in the Consolidated Statement of
Operations over the remaining service period after the adoption date based on the awards original estimate of fair value.



8



---

On November 10, 2005, the FASB issued FASB Staff Position 123(R)-3 (FSP
123R-3), Transition Election Related to Accounting for the Tax Effects of Share-based Payment Awards, that provides an elective alternative transition method of calculating the pool of excess tax benefits available to absorb tax
deficiencies recognized subsequent to the adoption of SFAS 123R (the APIC Pool) to the method otherwise required by paragraph 81 of SFAS 123R. During the second quarter of fiscal 2007, the Company made the election to use the alternative
method, however, the alternative method does not have an impact on the Companys results of operations or financial condition due to the Companys net operating loss position.

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

The table
below presents the assumptions used to calculate the fair value of options granted during the three and nine months ended March 31, 2007 and 2006, including the assumed Catalyst options.



|                                               |  |                                  |  |                                  |  |                                 |  |                                
|---------------------------------------------- |  | -------------------------------- |  | -------------------------------- |  | ------------------------------- |  | -------------------------------
|                                               |  | Three MonthsEnded March 31, 2007 |  | Three MonthsEnded March 31, 2006 |  | Nine MonthsEnded March 31, 2007 |  | Nine MonthsEnded March 31, 2006
|Expected holding period (years)                |  | 5.0                              |  | 5.0                              |  | 3.6                             |  | 5.0                            
|Risk-free interest rate                        |  | 4.46%                            |  | 4.50%-4.78%                      |  | 4.58%-4.90%                     |  | 3.86% -4.78%                   
|Weighted average risk-free interest rate       |  | 4.46%                            |  | 4.65%                            |  | 4.64%                           |  | 4.29%                          
|Dividend yield                                 |  | 0.0%                             |  | 0.0%                             |  | 0.0%                            |  | 0.0%                           
|Expected volatility                            |  | 51.8%                            |  | 47.3%-49.3%                      |  | 32.0%-54.2%                     |  | 47.3% -64.9%                   
|Weighted average expected volatility           |  | 51.8%                            |  | 48.0%                            |  | 41.6%                           |  | 57.3%                          
|Fair value of options granted                  |  | $4.33                            |  | $6.95-$7.34                      |  | $4.33-$12.24                    |  | $6.95 -$8.43                   
|Weighted average fair value of options granted |  | $4.33                            |  | $7.11                            |  | $11.17                          |  | $7.82                          

The Company maintains stock incentive plans for selected employees. As of
March 31, 2007, there were 4,886,277 shares of the Companys common stock reserved for stock options, of which 2,059,153 were reserved for outstanding options. Except for certain options assumed in the Catalyst and CATC acquisitions, under
the terms of the stock incentive plans, stock options are granted at an option price not less than the market value at the date of grant. The vesting and exercise periods for each option is at the discretion of the Compensation Committee. The option
price for the Catalyst and CATC options assumed was the historical exercise price multiplied by the conversion ratio.

In
connection with the Merger, LeCroy assumed Catalysts Stock Option Plan. On October 2, 2006, Catalyst stock option holders approved technical amendments to their stock option grants in anticipation of their assumption by LeCroy pursuant to
the Merger including, without limitation, amendments reflecting that any stock option or other award granted thereunder would be exercisable for LeCroy common stock. Pursuant to SFAS No. 123R, of the 136,826 assumed stock options granted by the
Company in exchange for the stock options held by the employees of Catalyst, the fair value of 36,858 vested options or approximately $450,000 was considered part of the purchase price for Catalyst and the fair value of 99,968 unvested options or
approximately $1,196,000, will be charged to compensation expense in operations as earned by employees over their remaining requisite service periods.



9



---

Stock option transactions for the three and nine months ended March 31, 2007 under all plans are as follows:



|                                              |  |                  |   |  |                                |       |                                                  |      |                                                       |   |      
|--------------------------------------------- |  | ---------------- | - |  | ------------------------------ | ----- | ------------------------------------------------ | ---- | ----------------------------------------------------- | - | -----
|                                              |  | Number of Shares |   |  | WeightedAverage Exercise Price |       | WeightedAverageRemainingContractualTerms (Years) |      | Aggregate Intrinsic Value as of March 31, 2007 ($000)
|Outstanding at June 30, 2006                  |  | 2,230,848        |   |  | $                              | 15.85 |                                                  |      |                                                       |   |      
|                                              |  |                  |   | 
|Granted                                       |  | 9,700            |   |  |                                | 12.85 |                                                  |      |                                                       |   |      
|Exercised                                     |  | (10,687          | ) |  |                                | 5.55  |                                                  |      |                                                       |   |      
|Expired                                       |  | (117,448         | ) |  |                                | 21.87 |                                                  |      |                                                       |   |      
|Forfeited                                     |  | (2,864           | ) |  |                                | 15.73 |                                                  |      |                                                       |   |      
|                                              |  |                  |   |  |                                |       |                                                  |      |                                                       |   |      
|Outstanding at September 30, 2006             |  | 2,109,549        |   |  |                                | 15.55 |                                                  | 4.80 |                                                       | $ | 3,200
|Granted                                       |  | 144,626          |   |  |                                | 1.26  |                                                  |      |                                                       |   |      
|Exercised                                     |  | (14,972          | ) |  |                                | 2.63  |                                                  |      |                                                       |   |      
|Expired                                       |  | (44,580          | ) |  |                                | 16.36 |                                                  |      |                                                       |   |      
|Forfeited                                     |  | (37,390          | ) |  |                                | 15.20 |                                                  |      |                                                       |   |      
|                                              |  |                  |   |  |                                |       |                                                  |      |                                                       |   |      
|Outstanding at December 31, 2006              |  | 2,157,233        |   |  |                                | 14.67 |                                                  | 4.86 |                                                       | $ | 2,641
|Granted                                       |  | 5,400            |   |  |                                | 8.65  |                                                  |      |                                                       |   |      
|Exercised                                     |  | (28,446          | ) |  |                                | 0.81  |                                                  |      |                                                       |   |      
|Expired                                       |  | (62,618          | ) |  |                                | 25.65 |                                                  |      |                                                       |   |      
|Forfeited                                     |  | (12,416          | ) |  |                                | 16.53 |                                                  |      |                                                       |   |      
|                                              |  |                  |   |  |                                |       |                                                  |      |                                                       |   |      
|Outstanding at March 31, 2007                 |  | 2,059,153        |   |  |                                | 14.50 |                                                  | 4.49 |                                                       | $ | 1,232
|                                              |  |                  |   |  |                                |       |                                                  |      |                                                       |   |      
|Vested and expected to vest at March 31, 2007 |  | 2,048,251        |   |  | $                              | 14.80 |                                                  | 4.44 |                                                       | $ | 1,232
|                                              |  |                  |   |  |                                |       |                                                  |      |                                                       |   |      
|Exercisable at March 31, 2007                 |  | 1,739,384        |   |  | $                              | 15.19 |                                                  | 3.92 |                                                       | $ | 498  
|                                              |  |                  |   |  |                                |       |                                                  |      |                                                       |   |      

The weighted-average grant-date fair value of the stock options granted during the
three months ended March 31, 2007 and 2006 was $4.33 and $7.11 per option, respectively. The weighted-average grant-date fair value of the stock options granted during the nine months ended March 31, 2007 and 2006 was $11.17 and $7.82 per
option, respectively. The total intrinsic value of stock options exercised during the three and nine months ended March 31, 2007 was $0.2 million and $0.4 million, respectively, as compared to $0.2 million and $0.5 million for the three and
nine months ended March 31, 2006, respectively. The fair value of stock options vested during the three and nine months ended March 31, 2007 was $0.2 million and $1.7 million, respectively, as compared to $0.7 million and $2.8 million for
the three and nine months ended March 31, 2006.

The following table summarizes information about stock options
outstanding at March 31, 2007:



|                            |  |                                       |  |                                      |       |                                                     |      |                  |           |                                 |   |      
|--------------------------- |  | ------------------------------------- |  | ------------------------------------ | ----- | --------------------------------------------------- | ---- | ---------------- | --------- | ------------------------------- | - | -----
|                            |  | Options Outstanding at March 31, 2007 |  | Options Exercisable atMarch 31, 2007
|Option Exercise Price Range |  | Number of Shares                      |  | Weighted Average Exercise Price      |       | Weighted Average Remaining Contractual
Life (years) |      | Number of Shares |           | Weighted Average Exercise Price
|$ 0.45 - $11.98             |  | 555,333                               |  | $                                    | 7.28  |                                                     | 5.47 |                  | 446,258   |                                 | $ | 8.61 
|$11.99 - $18.25             |  | 974,684                               |  |                                      | 14.78 |                                                     | 4.74 |                  | 773,023   |                                 |   | 14.67
|$18.26 - $23.64             |  | 507,122                               |  |                                      | 21.40 |                                                     | 2.96 |                  | 498,089   |                                 |   | 21.41
|$23.65 - $37.00             |  | 22,014                                |  |                                      | 25.73 |                                                     | 3.69 |                  | 22,014    |                                 |   | 25.73
|                            |  |                                       |  |                                      |       |                                                     |      |                  |           |                                 |   |      
|Total                       |  | 2,059,153                             |  |                                      | 14.50 |                                                     | 4.49 |                  | 1,739,384 |                                 |   | 15.19
|                            |  |                                       |  |                                      |       |                                                     |      |                  |           |                                 |   |      

Stock options and restricted stock awards available for grant under all plans were
998,383 shares and 1,667,986 shares at March 31, 2007 and June 30, 2006, respectively.



10



---

As of March 31, 2007, there was approximately $3.2 million of total unrecognized
compensation cost related to stock options granted under the plans. That cost is expected to be recognized over a remaining weighted-average period of 2.19 years.

Compensation expense for restricted stock (non-vested stock) is recognized ratably over the associated requisite service period, giving effect to estimated forfeitures. The fair value of new
grants is determined based on the closing price on the date of grant. During the nine months ended March 31, 2007 and 2006 there were 320,026 shares and 73,500 shares, respectively, of non-vested stock granted. The shares granted in fiscal 2007
were issued under the 2003 Plan, of which 68,655 shares were immediately vested, 20,000 shares have 3-year ratable vesting, 211,371 shares have 4-year ratable vesting and 20,000 fully vest after 5 years.

The following table summarizes transactions related to non-vested stock for the three and nine months ended March 31, 2007:



|                                       |  |                  |   |  |                                        |      
|-------------------------------------- |  | ---------------- | - |  | -------------------------------------- | -----
|                                       |  | Number of Shares |   |  | Weighted Average Grant Date Fair
Value
|Non-vested stock at June 30, 2006      |  | 528,075          |   |  | $                                      | 17.33
|                                       |  |                 
|Granted                                |  | 189,464          |   |  |                                        | 12.87
|Vested                                 |  | (57,680          | ) |  |                                        | 12.87
|Forfeited                              |  | (2,484           | ) |  |                                        | 13.05
|                                       |  |                  |   |  |                                        |      
|Non-vested stock at September 30, 2006 |  | 657,375          |   |  |                                        | 16.55
|                                       |  |                 
|Granted                                |  | 98,000           |   |  |                                        | 12.78
|Vested                                 |  | (46,667          | ) |  |                                        | 15.62
|Forfeited                              |  | (24,392          | ) |  |                                        | 14.24
|                                       |  |                  |   |  |                                        |      
|Non-vested stock at December 31, 2006  |  | 684,316          |   |  |                                        | 16.07
|                                       |  |                 
|Granted                                |  | 32,562           |   |  |                                        | 10.59
|Vested                                 |  | (500             | ) |  |                                        | 14.70
|Forfeited                              |  | (7,467           | ) |  |                                        | 12.85
|                                       |  |                  |   |  |                                        |      
|Non-vested stock at March 31, 2007     |  | 708,911          |   |  |                                        | 15.85
|                                       |  |                  |   |  |                                        |      

As of March 31, 2007, there was approximately $6.2 million of total
unrecognized compensation cost related to non-vested stock granted under the plans. That cost is expected to be recognized over a remaining weighted-average period of 2.42 years.

The Company has an Employee Stock Purchase Plan (ESPP) with a look-back option that allows employees to purchase shares of
common stock at 85% of the market value at the lower of either the date of enrollment or the date of purchase. Payment for the ESPP is a fixed amount, set at the beginning of the period, made through payroll withholding over the enrollment period
which is six months. The number of shares the participant can acquire is variable based on the fixed amount withheld and the applicable fair value. SFAS No. 123R requires an ESPP with a purchase price discount of greater than 5% and a look-back
option to be compensatory. The fair value of the put and call features of the estimated shares to be purchased are estimated at the beginning of the purchase period using a Black-Scholes option pricing model. Expected
volatilities are calculated based on the historical six-month volatility of the Companys stock. The expected holding period is equal to the six-month enrollment period. The risk-free interest rate for periods within the contractual life of the
share is based on the interest rate of a six-month U.S. Treasury note in effect on the first day of the enrollment period. The fair value of the shares is liability classified until the end of the six-month period at which time the fair value is
re-calculated as of the end of the period and compared to the estimate. The lower amount is then equity classified and any over accrual reversed. As of March 31, 2007 and June 30, 2006, there was $143,739 and $42,000, respectively, of
liability classified share-based compensation expense included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.



11



---

Total share-based compensation expense recorded in the Consolidated Statement of
Operations for the three months ended March 31, 2007 and 2006 is $1.3 million and $1.3 million, respectively, and $4.4 million and $4.1 million for the nine months ended March 31, 2007 and 2006, respectively.

4. Revenue Recognition

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

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

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

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

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



12



---

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

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

Beginning in fiscal 2001 with the
adoption of the SECs Staff Accounting Bulletin (SAB) No. 101 (SAB 101), Revenue Recognition in Financial Statements, (superseded by SAB 104), certain previously recognized license fee revenue was
deferred and recognized in future periods over the terms of the agreements. The adoption of SAB 101 was recorded as of the beginning of fiscal 2001 and resulted in a non-cash charge for the cumulative effect of an accounting change of $4.4 million,
net of a tax benefit of $2.7 million. The deferred revenue was being amortized into revenue over 5.5 years, the remaining terms of the license agreements. The Company recognized license fee revenue of zero and $17,000 for the three months ended
March 31, 2007 and 2006, respectively, and zero and $0.7 million for the nine months ended March 31, 2007 and 2006, respectively. Such license fees were included in Service and other revenue in the Consolidated Statements of Operations. As
of March 31, 2007, there was no remaining deferred license fee balance from the adoption of SAB 101.

5. Restructuring

In the third quarter of fiscal 2007, prompted by the acquisition of Catalyst, the Company evaluated certain business processes and
staffing requirements. As a result, the Company recorded severance and related expenses, of approximately $1.6 million, of which approximately $0.3 million was expensed to Cost of revenues, $1.2 million was expensed to Selling, general and
administrative and $0.1 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of 33 employees or 7.2% of the workforce as compared to June 30, 2006. As of March 31, 2007,
approximately $0.2 million has been paid in cash and approximately $1.4 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance and other related amounts under this plan are estimated to be paid
by the end of the first quarter of fiscal 2009.

In the second quarter of fiscal 2007, as a result of a change in the
Companys organization stemming from the Catalyst acquisition, the Company recorded severance and related expenses of approximately $0.4 million, of which approximately $0.1 million was expensed to Selling, general and administrative and $0.3
million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of eleven employees or 2.4% of the workforce as compared to June 30, 2006. As of March 31, 2007, approximately $0.3 million
has been paid in cash and approximately $0.1 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance and other related amounts under this plan will paid by the end of fiscal 2007.

In the fourth quarter of fiscal 2006, the Company realigned some of its business processes and, as a result, incurred severance and
related expenses of approximately $0.4 million, of which approximately $0.1 million was charged to Cost of revenues, $0.2 million was expensed to Selling, general and administrative and $0.1 million was expensed to Research and development. The
implementation of this plan resulted in headcount reductions of sixteen employees or 3.5% of the workforce as compared to June 30, 2005. As of March 31, 2007 all $0.4 million of severance has been paid which included approximately $0.2
million in the first nine months of fiscal 2007.



13



---

6. Derivatives

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

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

Interest Rate Swap

As required by the terms of the Companys Prior Credit Agreement (See Note 14  Long-term Debt and Capital Leases), on January 27, 2005 the Company entered into a Master Agreement for an interest rate swap with
Manufacturers & Traders Trust Co. (M&T Bank), the purpose of which was to protect against rising interest rates during the term of the Credit Agreement.

On October 16, 2006 in conjunction with the repayment of the term loan (See Note 14  Long-term Debt and Capital Leases), the
Company terminated its interest rate swap with M&T Bank. The net interest income earned on the swap was zero and $35,000 for the three months ended March 31, 2007 and 2006, respectively, and approximately $0.3 million and $21,000 for the
nine months ended March 31, 2007 and 2006, respectively.

As of March 31, 2007, the Company has the following
derivative instruments:

Forward foreign exchange contracts

The Company and its subsidiaries enter into short-term forward exchange agreements to purchase foreign currencies at set rates in the future. These foreign currency forward exchange agreements
are used to limit exposure to fluctuations in foreign currency exchange rates on assets and liabilities denominated in currencies other than the subsidiaries functional currency. The Company records these short-term forward exchange agreements
on the balance sheet at fair value and changes in the fair value are recognized currently in the Consolidated Statement of Operations.

The net (losses)/gains resulting from changes in the fair value of these derivatives and on transactions denominated in other than their functional currencies were net losses of approximately $(0.1) million and $(0.2)
million for the three and nine months ended March 31, 2007, respectively, as compared to net gains of $0.1 million and net losses of ($0.1) million for the three and nine months ended March 31, 2006. These amounts are included in Other,
net in the Consolidated Statement of Operations. At March 31, 2007 and June 30, 2006, the notional amounts of the Companys open foreign exchange forward contracts, all with maturities of less than six months, were approximately $10.9
million and $14.6 million, respectively.

7. Comprehensive (Loss) Income

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



|                                         |  |                             |        |                            |      |   |      |  |   |         |   |  |   |      
|---------------------------------------- |  | --------------------------- | ------ | -------------------------- | ---- | - | ---- |  | - | ------- | - |  | - | -----
|                                         |  | Three months endedMarch 31, |        | Nine months endedMarch 31,
|                                         |  | 2007                        |        |                            | 2006 |   | 2007 |  |   | 2006   
|Net (loss) income .                      |  | $                           | (3,935 | )                          |      | $ | 152  |  | $ | (10,982 | ) |  | $ | 4,562
|Foreign currency translation (loss)/gain |  |                             | 11     |                            |      |   | 172  |  |   | (17     | ) |  |   | 12   
|                                         |  |                             |        |                            |      |   |      |  |   |         |   |  |   |      
|Comprehensive (loss) income              |  | $                           | (3,924 | )                          |      | $ | 324  |  | $ | (10,999 | ) |  | $ | 4,574
|                                         |  |                             |        |                            |      |   |      |  |   |         |   |  |   |      



14



---

8. Accounts Receivable, net

The Company has an agreement with one of its customers, who is also a vendor, which provides the Company with the legal right to offset outstanding accounts receivable balances against
outstanding accounts payable balances. At March 31, 2007 and June 30, 2006, the Company netted approximately $94,000 and $25,000, respectively, of accounts receivable against accounts payable on the Consolidated Balance Sheets related to
this agreement.

9. Inventories, net

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



|                |  |                |        |               |   |       
|--------------- |  | -------------- | ------ | ------------- | - | ------
|                |  | March 31, 2007 |        | June 30, 2006
|Raw materials   |  | $              | 8,137  |               | $ | 7,726 
|Work in process |  |                | 6,971  |               |   | 6,933 
|Finished goods  |  |                | 22,162 |               |   | 19,382
|                |  |                |        |               |   |       
|                |  | $              | 37,270 |               | $ | 34,041
|                |  |                |        |               |   |       

The value of demonstration units included in finished goods was $14.6 million and
$10.9 million at March 31, 2007 and June 30, 2006, respectively. The Companys demonstration units are held for sale and are sold regularly in the ordinary course of business through its normal sales distribution channels and existing
customer base.

10. Other Current Assets

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



|                                              |  |                |        |               |   |       
|--------------------------------------------- |  | -------------- | ------ | ------------- | - | ------
|                                              |  | March 31, 2007 |        | June 30, 2006
|Deferred tax assets, net                      |  | $              | 4,900  |               | $ | 8,200 
|Prepaid other taxes                           |  |                | 715    |               |   | 762   
|Other receivables                             |  |                | 1,291  |               |   | 488   
|Deferred financing costs on convertible notes |  |                | 554    |               |   |      
|Value-added tax receivable                    |  |                | 953    |               |   | 433   
|Other                                         |  |                | 2,735  |               |   | 3,354 
|                                              |  |                |        |               |   |       
|                                              |  | $              | 11,148 |               | $ | 13,237
|                                              |  |                |        |               |   |       

11. Goodwill and Other Non-current Assets

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



|                                              |  |                |         |               |   |       
|--------------------------------------------- |  | -------------- | ------- | ------------- | - | ------
|                                              |  | March 31, 2007 |         | June 30, 2006
|Goodwill                                      |  | $              | 105,985 |               | $ | 78,473
|                                              |  |                |         |               |   |       
|Intangibles, net                              |  | $              | 3,800   |               | $ | 4,022 
|Deferred tax assets, net                      |  |                | 7,223   |               |   | 3,964 
|Deferred financing costs on convertible notes |  |                | 2,213   |               |   |      
|Other non-current assets                      |  |                | 1,201   |               |   | 2,039 
|                                              |  |                |         |               |   |       
|                                              |  | $              | 14,437  |               | $ | 10,025
|                                              |  |                |         |               |   |       



15



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Under SFAS No. 142, Goodwill and Other Intangible Assets, (SFAS
142) goodwill is not amortized but reviewed for impairment annually or more frequently if certain indicators arise. The Company completed the annual impairment test required under SFAS 142 during the fourth quarter of fiscal 2006 and
determined that there was no impairment to the recorded goodwill balances. No impairment indicators arose during the first nine months of fiscal 2007. The increase in Goodwill is attributable to the Catalyst acquisition (See Note 2  Catalyst
Acquisition).

Purchased intangibles acquired in the Catalyst acquisition totaled $2.2 million of which $1.5 million
related to amortizable intangible assets with finite lives and $0.7 million related to the Catalyst trade name, which is included in Intangibles, net. It was determined that the Catalyst tradename has an indefinite life and therefore, the Company
will test the trademark annually for impairment.

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



|                                                  |  |                                 |  |                |        |   |               |   |        |  
|------------------------------------------------- |  | ------------------------------- |  | -------------- | ------ | - | ------------- | - | ------ | -
|                                                  |  | Original Weighted Average Lives |  | March 31, 2007 |        |   | June 30, 2006 |  
|Amortizable intangible assets:                    |  |                                 |  |                |        |   |               |   |        |  
|Technology, manufacturing and distribution rights |  | 2.9 years                       |  | $              | 8,545  |   |               | $ | 7,025  |  
|Patents and other intangible assets               |  | 5.9 years                       |  |                | 1,593  |   |               |   | 1,593  |  
|Accumulated amortization                          |  |                                 |  |                | (7,038 | ) |               |   | (4,596 | )
|                                                  |  |                                 |  |                |        |   |               |   |        |  
|Net carrying amount                               |  |                                 |  | $              | 3,100  |   |               | $ | 4,022  |  
|                                                  |  |                                 |  |                |        |   |               |   |        |  

Amortization expense for intangible assets, with finite lives, was $1.2 million
and $2.4 million for the three and nine months ended March 31, 2007, respectively, as compared to $0.5 million and $2.0 million for the three and nine months ended March 31, 2006, respectively. The cost of an amortizable intangible asset
is amortized on a straight-line basis over the estimated economic life of the asset. Management estimates intangible assets amortization expense on a straight-line basis will approximate $0.5 million for the remainder of fiscal 2007 and $1.4
million, $0.5 million, $0.1 million and $0.6 million for fiscal 2008, 2009, 2010 and 2011 and beyond, respectively.

12. Accrued Expenses and Other
Current Liabilities

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



|                                                  |  |                |        |               |   |       
|------------------------------------------------- |  | -------------- | ------ | ------------- | - | ------
|                                                  |  | March 31, 2007 |        | June 30, 2006
|Compensation and benefits, including severance    |  | $              | 7,251  |               | $ | 5,450 
|Income taxes                                      |  |                | 2,455  |               |   | 2,718 
|Warranty                                          |  |                | 1,165  |               |   | 1,005 
|Deferred revenue, current portion                 |  |                | 861    |               |   | 1,144 
|Accrued interest on convertible notes             |  |                | 1,454  |               |   |      
|Retained liabilities from discontinued operations |  |                | 160    |               |   | 160   
|Other current liabilities                         |  |                | 4,008  |               |   | 2,931 
|                                                  |  |                |        |               |   |       
|                                                  |  | $              | 17,354 |               | $ | 13,408
|                                                  |  |                |        |               |   |       



16



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13. Warranties

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

The following table is a reconciliation of the changes in the Companys aggregate product warranty liability during the three and
nine months ended March 31, 2007 and 2006 (in thousands):



|                                                       |  |                             |       |   |                            |   |      |      |  |   |       |   |  |   |        |  
|------------------------------------------------------ |  | --------------------------- | ----- | - | -------------------------- | - | ---- | ---- |  | - | ----- | - |  | - | ------ | -
|                                                       |  | Three months endedMarch 31, |       |   | Nine months endedMarch 31, |  
|                                                       |  | 2007                        |       |   | 2006                       |   |      | 2007 |  |   | 2006  |  
|Balance at beginning of period                         |  | $                           | 1,107 |   |                            | $ | 932  |      |  | $ | 1,005 |   |  | $ | 971    |  
|Accruals for warranties entered into during the period |  |                             | 310   |   |                            |   | 366  |      |  |   | 617   |   |  |   | 1,013  |  
|Warranty liability assumed in the Merger               |  |                             |      |   |                            |   |     |      |  |   | 150   |   |  |   |       |  
|Warranty costs incurred during the period              |  |                             | (252  | ) |                            |   | (377 | )    |  |   | (607  | ) |  |   | (1,063 | )
|                                                       |  |                             |       |   |                            |   |      |      |  |   |       |   |  |   |        |  
|Balance at end of period                               |  | $                           | 1,165 |   |                            | $ | 921  |      |  | $ | 1,165 |   |  | $ | 921    |  
|                                                       |  |                             |       |   |                            |   |      |      |  |   |       |   |  |   |        |  

During fiscal 2006, management determined that certain amounts previously reported
as warranty costs were services expense that had been misclassified. This caused an overstatement of the related warranty accruals in the table above. The warranty accrual and cost activity for the March 31, 2006 period presented above has been
revised to properly reflect only warranty expense. These revisions had no impact on the Companys beginning or ending warranty liability balance, financial position or Cost of revenue for any of the periods presented.

In connection with an agreement to license the Companys MAUI Instrument Operating System technology entered into by the Company
during the third quarter of fiscal 2003, the Company agreed to indemnify the licensee against losses arising from any third party claim against the licensee to the extent such claim arose directly out of the infringement of a U.S. or Japanese patent
by any LeCroy software components delivered under the license agreement. As of March 31, 2007, there have been no claims under such indemnification provisions.

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

14. Long-term Debt and Capital
Leases

On March 30, 2007, LeCroy Corporation entered into a $40,000,000 senior, secured, four-year credit
agreement with the lenders listed therein and Manufacturers and Traders Trust Company, as administrative agent for such lenders (the New Credit Agreement), which replaced LeCroys existing credit facility that was entered into on
October 29, 2004 and subsequently amended. Manufacturers and Traders Trust Company is acting as sole lead arranger and sole book runner in connection with syndicating the credit facility. The terms of the New Credit Agreement provide LeCroy
with a $40,000,000 revolving credit facility (Revolver), which includes a $5,000,000 swingline loan subfacility and a $5,000,000 letter of credit subfacility. The performance by LeCroy of its obligations under the New Credit Agreement is
secured by all of the assets of LeCroy and its domestic subsidiaries, and is guaranteed by LeCroys domestic subsidiaries. As of March 31, 2007, the Company has borrowed $9.4 million against the Revolver and nothing against the letter of
credit subfacility or the swingline loan subfacility.



17



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The proceeds of the borrowings under the New Credit Agreement have been used to pay the
outstanding balance under LeCroys previous credit facility (the Prior Credit Agreement) and for general corporate purposes, including the financing of working capital requirements and capital expenditures.

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

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

Under the New Credit Agreement, the Company is required to comply with certain financial covenants, measured quarterly, including a
minimum interest coverage ratio, minimum total net worth, maximum leverage ratio, minimum fixed charge coverage ratio and limitations on capital expenditures. As of March 31, 2007, the Company was in compliance with its financial covenants
under the New Credit Agreement.

The New Credit Agreement will expire on July 15, 2011, unless extended by LeCroy to
April 1, 2012, contingent on the repurchase of the Companys convertible notes.

The Company incurred
approximately $514,000 of deferred financing costs in connection with entering into the New Credit Agreement, which were deferred and are being amortized, on a straight line basis, over the term of the New Credit Agreement. At March 31, 2007,
approximately $134,000 of deferred financing costs were included in Other current assets, and approximately $380,000 were included in Other non-current assets on the Consolidated Balance Sheets.

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

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



18



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

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

The Company received net proceeds from the sale of the Notes of
approximately $69.0 million. Immediately thereafter, the net proceeds from the sale were used to repay the outstanding term debt balance of approximately $31.9 million under its Prior Credit Agreement, repurchase of 850,000 shares of
Company common stock at a cost of approximately $9.9 million and to repay approximately $20.8 million of revolving debt under its Prior Credit Agreement that was drawn down to fund the acquisition of Catalyst. During the quarter ended March 31,
2007, the Company retired approximately 1.0 million shares of its treasury stock. These shares are authorized but unissued.

The Company incurred approximately $3.0 million of transaction fees in connection with issuing the Notes, which have been deferred and are being amortized over the term of the Notes using the effective interest method. The term of the Notes
for amortization purposes is considered to be five years in accordance with SAB Topic 3-C, Redeemable Preferred Stock, as that is the first period in which the convertible feature of the Notes can be executed by either the Noteholders or
LeCroy and therefore is considered the mandatory redemption date. At March 31, 2007, of the total $2.7 million unamortized fees related to the Notes, $0.5 million was included in Other current assets, and $2.2 million was included in Other
non-current assets on the Consolidated Balance Sheet.

In addition to the above U.S.-based credit facilities, the Company
maintains certain short-term foreign credit facilities, principally with two Japanese banks totaling 150.0 million yen (approximately $1.3 million as of March 31, 2007). No amounts were outstanding under these facilities as of
March 31, 2007 and June 30, 2006. The Companys Swiss subsidiary, also has an overdraft facility totaling 1.0 million Swiss francs (approximately $0.8 million as of March 31, 2007). As of March 31, 2007 and
June 30, 2006, approximately 0.4 million Swiss francs were held against supplier obligations leaving an available balance of 0.6 million Swiss francs under this credit facility. These obligations to suppliers, such as rent and
utilities, are payable under the credit facility only in the event that the Company is unable to meet its financial obligations to those suppliers.

The Company had a five year $2.0 million capital lease line of credit to fund certain capital expenditures that bore interest at an annual rate of 12.2% on outstanding borrowings. The capital lease line of credit was
terminated in the second quarter of fiscal 2007. As of March 31, 2007 and June 30, 2006, the Company had zero and $0.1 million, respectively, outstanding under this line of credit.

During fiscal 2005, the Company entered into vendor supplied capital lease agreements for technology rights of $1.3 million. These leases
bear interest at 4.5% to 4.88% with three-year terms. At March 31, 2007, the Companys outstanding balance under these agreements was $0.3 million all of which was included within Current portion of long-term debt and capital leases in the
Consolidated Balance Sheet. Under these capital lease obligations, payments, including interest, are $0.2 million for the remainder of fiscal 2007 and $0.1 million for fiscal year 2008.



19



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15. Commitments and Contingencies

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

16. Earnings per Common Share

The following is a presentation of the numerators and the denominators of the
basic and diluted net (loss) income per common share computations for the three and nine months ended March 31, 2007 and 2006:



|                                     |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|------------------------------------ |  | --------------------------- | ------ | -------------------------- | ---- | - | ------ |  | - | ------- | - |  | - | ------
|                                     |  | Three months endedMarch 31, |        | Nine months endedMarch 31,
|                                     |  | 2007                        |        |                            | 2006 |   | 2007   |  |   | 2006   
|Numerator:                           |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|Net (loss) income                    |  | $                           | (3,935 | )                          |      | $ | 152    |  | $ | (10,982 | ) |  | $ | 4,562 
|                                     |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|Denominator:                         |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|Weighted average shares outstanding: |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|Basic                                |  |                             | 11,499 |                            |      |   | 12,275 |  |   | 11,736  |   |  |   | 12,191
|Employee stock options and other     |  |                             |       |                            |      |   | 281    |  |   |        |   |  |   | 263   
|                                     |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|Diluted                              |  |                             | 11,499 |                            |      |   | 12,556 |  |   | 11,736  |   |  |   | 12,454
|                                     |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       

The computations of diluted net loss per common share for the three and nine
months ended March 31, 2007 do not include approximately 2.1 million and 2.4 million shares, respectively, related to stock options, restricted stock and warrants to purchase common stock as the effect of their inclusion would have
been anti-dilutive to earnings per share. The computation of diluted net income per common share for the three and nine months ended March 31, 2006 does not include approximately 1.9 million shares related to stock options, restricted
stock and warrants to purchase common stock as the effect of their inclusion would have been anti-dilutive to earnings per share. For the three and nine months ended March 31, 2007, the Notes had no impact on diluted EPS because the average
share price during the three and nine months ended March 31, 2007 was below $14.55 per share (the initial conversion price), and accordingly, the Notes, if converted, would have required only cash at settlement.

17. Income Taxes

The effective
income tax benefit rate for the three and nine months ended March 31, 2007 was 1.7% and 12.0% respectively, compared to an effective income tax provision rates of 62.4% and 39.4% for the three and nine months ended March 31, 2006,
respectively. The effective income tax benefit rates for the three and nine months ended March 31, 2007 of 1.7% and 12.0%, respectively, differ from our annual effective tax rates of 29.3%, principally due to discrete tax items for purchased
IPR&D charges associated with the Catalyst acquisition, and an increase of $1.0 million to the valuation allowance for deferred tax assets. The IPR&D charges are nondeductible for tax purposes, and the increase to the valuation allowance
relates to a change in judgment regarding the realizability of certain state investment tax credits.

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. The tax impact of the nondeductible IPR&D charges associated with the Catalyst
acquisition was recognized in the three months ended December 31, 2006, as this was a discrete item for the second quarter. The tax impact of the $1.0 million increase to the valuation allowance was recognized in the three months ended
March 31, 2007, as this was a discrete item for the third quarter.



20



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18. Segment and Geographic Revenue

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

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



|                   |  |                             |        |                            |   |        |  |      |         |  |   |        
|------------------ |  | --------------------------- | ------ | -------------------------- | - | ------ |  | ---- | ------- |  | - | -------
|                   |  | Three Months EndedMarch 31, |        | Nine Months EndedMarch 31,
|                   |  | 2007                        |        | 2006                       |   | 2007   |  | 2006
|North America      |  | $                           | 13,676 |                            | $ | 12,429 |  | $    | 37,625  |  | $ | 40,820 
|Europe/Middle East |  |                             | 12,393 |                            |   | 11,840 |  |      | 39,277  |  |   | 36,834 
|Japan              |  |                             | 3,592  |                            |   | 6,229  |  |      | 15,233  |  |   | 16,817 
|Asia/Pacific       |  |                             | 9,681  |                            |   | 8,383  |  |      | 22,364  |  |   | 27,490 
|                   |  |                             |        |                            |   |        |  |      |         |  |   |        
|Total Revenues     |  | $                           | 39,342 |                            | $ | 38,881 |  | $    | 114,499 |  | $ | 121,961
|                   |  |                             |        |                            |   |        |  |      |         |  |   |        

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



|                   |  |                |         |               |   |        
|------------------ |  | -------------- | ------- | ------------- | - | -------
|                   |  | March 31, 2007 |         | June 30, 2006
|North America      |  | $              | 211,361 |               | $ | 180,070
|Europe/Middle East |  |                | 12,372  |               |   | 12,053 
|Japan              |  |                | 3,588   |               |   | 5,360  
|Asia/Pacific       |  |                | 4,611   |               |   | 4,491  
|                   |  |                |         |               |   |        
|Total assets       |  | $              | 231,932 |               | $ | 201,974
|                   |  |                |         |               |   |        

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



|                        |  |                |         |               |   |        
|----------------------- |  | -------------- | ------- | ------------- | - | -------
|                        |  | March 31, 2007 |         | June 30, 2006
|North America           |  | $              | 133,478 |               | $ | 103,473
|Europe/Middle East      |  |                | 554     |               |   | 581    
|Japan                   |  |                | 304     |               |   | 400    
|Asia/Pacific            |  |                | 370     |               |   | 439    
|                        |  |                |         |               |   |        
|Total long-lived assets |  | $              | 134,706 |               | $ | 104,893
|                        |  |                |         |               |   |        

---

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



21



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19. New Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, (SFAS 154) which was effective for LeCroy for reporting changes in accounting
principles and for correction of errors beginning in fiscal year 2007. SFAS 154 requires a change in accounting principle to be applied retrospectively to prior periods financial statements, unless explicit transition provisions are provided
for in new accounting pronouncements or existing pronouncements that are in the transition phase when SFAS 154 becomes effective. There has been no impact on the Companys financial statements from the adoption of SFAS 154 in fiscal 2007.

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

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN 48), which prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. Management is currently
evaluating the effect that adoption of this interpretation will have on the Companys consolidated financial position and results of operations.

In September 2006 the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced
disclosures about fair value measurements. SFAS 157 requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy as defined in the standard. Additionally, companies are required to provide enhanced
disclosure regarding financial instruments in one of the categories, including a reconciliation of the beginning and ending balances separately for each major category of assets and liabilities. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the effect that adoption of this interpretation will have on the Companys consolidated financial
position and results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current year Financial Statements (SAB 108), which provides interpretive guidance on the consideration of the
effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 is effective as of the end of the Companys 2007 fiscal year, allowing a one-time transitional cumulative effect
adjustment to beginning retained earnings as of July 1, 2006 for errors that were not previously deemed material, but are material under the guidance in SAB 108. The Company is currently evaluating the impact of adopting SAB 108 on the
Companys consolidated financial statements.

In December 2006, the FASB issued FASB Staff Position EITF 00-19-2,
Accounting for Registration Payment Arrangements (FSP EITF 00-19-2). FSP EITF 00-19-2 specifies that registration payment arrangements should play no part in determining the initial classification and subsequent accounting
for the securities they relate to. FSP EITF 00-19-2 requires the contingent obligation in a registration payment arrangement to be separately analyzed under FASB Statement No. 5, Accounting for Contingencies and FASB Interpretation No.
14, Reasonable Estimations of the Amount of a Loss. If payment in a registration payment arrangement is probable and can be reasonably estimated, a liability should be recorded. FSP EITF 00-19-2 is effective for fiscal years beginning
after December 15, 2006. Management is currently evaluating the effect that adoption of this FSP will have on the on the Companys consolidated financial position and results of operations.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48
(FSP-FIN 48-1). FSP-FIN 48-1 further clarifies if it is appropriate for an entity to recognize a previously unrecognized tax benefit when the only change since the initial determination was that benefit should not be recognized is the
completion of an



22



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examination or audit by a taxing authority. FSP-FIN 48-1 provides the determination of whether the position is effectively settled should be taken on a case
by case basis, however, positions may be grouped by tax year and considered effectively settled. Management is currently evaluating the effect that adoption of this position in conjunction with adopting FIN 48 will have on the Companys
consolidated financial position and results of operations.

20. Subsequent Events

Effective as of April 26, 2007, LeCroy, in accordance with its original $40.0 million senior, secured, credit agreement with the
lenders listed therein and Manufacturers and Traders Trust Company, as administrative agent for such lenders (the New Credit Agreement), entered into a First Modification and Lender Joinder Agreement (Joinder Agreement). This
Joinder Agreement increased the Companys credit limit to $50.0 million and added North Fork Bank to the New Credit Agreement. In addition to their $10.0 million revolving commitment under the amendment, North Fork Bank accepted an assignment
of $5.0 million of the lending obligations from Manufacturers and Traders Trust Company.



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

Overview

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

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

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

We employ a direct sales model utilizing a highly skilled global sales force where it makes
economic sense to do so. We supplement our direct sales force, particularly in Europe, with a combination of manufacturers representatives and distributors. We divide the world into four areas  North America, Europe/Middle East, Japan
and Asia/Pacific. In North America we sell our products directly in the United States and we have recently engaged in manufacturers representative relationships to provide greater market penetration in the low-end product markets. In
Europe/Middle East, we sell our products directly in Switzerland, Germany, Italy, France, the United Kingdom and Sweden. In Japan, we sell our products directly and indirectly through a single channel partner. In Asia/Pacific, we sell our products
directly in South Korea, Singapore and five regions in China.



23



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

Generally, we transact revenues and pay our operating expenses in the local
currencies of the countries in which we have a direct distribution presence or other operations, with limited exceptions, most notably in China where our sales and operating expenses are denominated in U.S. dollars. In Europe/Middle East, we
transact business in Euros, Swiss francs, British pounds, Swedish krona and U.S. dollars. In Japan, we transact business in Japanese yen. In South Korea, we transact business in Korean won and in Singapore, we transact business in both U.S. dollars
and Singapore dollars. For a discussion of our foreign currency exchange rate exposure, see Item 3 entitled Quantitative and Qualitative Disclosure About Market Risk below.

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

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

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

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

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

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

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

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



24



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In furtherance of our drive to meet our customers changing demands, we also look
outside our organization for opportunities to expand our markets. Accordingly, in March 2006, we completed purchase and settlement agreements with Iwatsu Electric Corporation that included the rights to a new low-end product line,
ViewGo, re-engineered and launched as the WaveJet Family of products, as well as unrelated intellectual property designs and a 10-year non-compete agreement. In October 2006, the Company acquired Catalyst Enterprises, Inc.
(Catalyst), a manufacturer of data bus analysis and emulation tools for advanced serial data communications. This strengthens the Companys position in protocol solutions.

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

Restructuring

In the third quarter of fiscal 2007, prompted by the acquisition of Catalyst, we evaluated certain business processes and staffing requirements. As a result, we recorded severance and related expenses, of
approximately $1.6 million, of which approximately $0.3 million was expensed to Cost of revenue, $1.2 million was expensed to Selling, general and administrative and $0.1 million was expensed to Research and development. The implementation of this
plan resulted in headcount reductions of 33 employees or 7.2% of the workforce as compared to June 30, 2006. As of March 31, 2007, approximately $0.2 million has been paid in cash and approximately $1.4 million remains in Accrued expenses
and other current liabilities on the Consolidated Balance Sheet. Severance and other related amounts under this plan are estimated to be paid by the end of the first quarter of fiscal 2009.

In the second quarter of fiscal 2007, as a result of a change in our organization stemming from the Catalyst acquisition, the Company
recorded severance and related expenses of approximately $0.4 million, of which approximately $0.1 million was expensed to Selling, general and administrative and $0.3 million was expensed to Research and development. The implementation of this plan
resulted in headcount reductions of eleven employees or 2.4% of the workforce as compared to June 30, 2006. As of March 31, 2007, approximately $0.3 million has been paid in cash and approximately $0.1 million remains in Accrued expenses
and other current liabilities on the Consolidated Balance Sheet. Severance and other related amounts under this plan will paid by the end of fiscal 2007.

In the fourth quarter of fiscal 2006, we realigned certain of our business processes and as a result, incurred expenses of approximately $0.4 million of which approximately $0.1 million was charged to Cost of
revenues, $0.2 million was expensed to Selling, general and administrative and $0.1 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of sixteen employees or 3.5% of the workforce as
compared to June 30, 2005. As of March 31, 2007, all $0.4 million of severance has been paid which includes approximately $0.2 million in the first nine months of fiscal 2007.

Critical Accounting Policies

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



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This management discussion and analysis of financial condition and results of operations
should be read in conjunction with the audited Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2006, which include a description of our accounting policies. Our
critical accounting policies which involve significant judgment by LeCroys management, as described in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2006, include revenue recognition, net reserves on
accounts receivable, allowance for excess and obsolete inventory, valuation of deferred tax assets, valuation of long-lived and intangible assets, valuation of goodwill, estimation of warranty liabilities and share-based compensation.

There have been no changes to our critical accounting policies since June 30, 2006.

Consolidated Results of Operations

The following table indicates the percentage of
total revenues represented by each item in the Companys Consolidated Statements of Operations for the three and nine months ended March 31, 2007 and 2006.



|                                     |  |                             |    |  |                            |   |  |       |    |  |       |  
|------------------------------------ |  | --------------------------- | -- |  | -------------------------- | - |  | ----- | -- |  | ----- | -
|                                     |  | Three months endedMarch 31, |    |  | Nine months endedMarch 31, |  
|(Unaudited)                          |  | 2007                        |    |  | 2006                       |   |  | 2007  |    |  | 2006  |  
|Revenues:                            |  |                             |    |  |                            |   |  |       |    |  |       |  
|Test and measurement products        |  | 95.7                        | %  |  | 95.6                       | % |  | 95.4  | %  |  | 95.4  | %
|Service and other                    |  | 4.3                         |    |  | 4.4                        |   |  | 4.6   |    |  | 4.6   |  
|                                     |  |                             |    |  |                            |   |  |       |    |  |       |  
|Total revenues                       |  | 100.0                       |    |  | 100.0                      |   |  | 100.0 |    |  | 100.0 |  
|Cost of revenues                     |  | 47.1                        |    |  | 39.2                       |   |  | 45.1  |    |  | 39.2  |  
|                                     |  |                             |    |  |                            |   |  |       |    |  |       |  
|Gross profit                         |  | 52.9                        |    |  | 60.8                       |   |  | 54.9  |    |  | 60.8  |  
|Operating expenses:                  |  |                             |    |  |                            |   |  |       |    |  |       |  
|Selling, general and administrative  |  | 38.3                        |    |  | 31.8                       |   |  | 37.2  |    |  | 32.1  |  
|Legal settlements                    |  |                            |    |  | 7.2                        |   |  |      |    |  | 2.3   |  
|Research and development             |  | 20.5                        |    |  | 19.7                       |   |  | 25.0  |    |  | 18.8  |  
|                                     |  |                             |    |  |                            |   |  |       |    |  |       |  
|Total operating expenses             |  | 58.8                        |    |  | 58.7                       |   |  | 62.2  |    |  | 53.2  |  
|Operating (loss) income              |  | (5.9                        | )  |  | 2.1                        |   |  | (7.3  | )  |  | 7.6   |  
|Interest expense, net                |  | (2.8                        | )  |  | (1.3                       | ) |  | (2.7  | )  |  | (1.3  | )
|Loss on extinguishment of debt       |  | (1.4                        | )  |  |                           |   |  | (0.8  | )  |  |      |  
|Other, net                           |  |                            |    |  | 0.2                        |   |  | (0.1  | )  |  | (0.1  | )
|                                     |  |                             |    |  |                            |   |  |       |    |  |       |  
|Other (expense), net                 |  | (4.2                        | )  |  | (1.1                       | ) |  | (3.6  | )  |  | (1.4  | )
|(Loss) income before income taxes    |  | (10.1                       | )  |  | 1.0                        |   |  | (10.9 | )  |  | 6.2   |  
|(Benefit) provision for income taxes |  | (0.1                        | )  |  | 0.6                        |   |  | (1.3  | )  |  | 2.5   |  
|                                     |  |                             |    |  |                            |   |  |       |    |  |       |  
|Net (loss) income                    |  | (10.0                       | )% |  | 0.4                        | % |  | (9.6  | )% |  | 3.7   | %
|                                     |  |                             |    |  |                            |   |  |       |    |  |       |  

Comparison of the Three-Month Periods Ended March 31, 2007 and 2006

Total revenues were $39.3 million for the quarter ended March 31, 2007, compared to $38.9 million for the comparable prior year
period, representing an increase of 1.2%, or approximately $0.5 million, primarily as a result of increased sales of Test and measurement products. The increase in Test and measurement products was mainly due to the incremental Catalyst contribution
which was approximately 6.5% of revenues for the quarter ended March 31, 2007. Foreign currency fluctuations increased total revenues by $0.9 million in the third quarter of fiscal 2007 as compared to the same period last year. These increases
were offset by a $2.6 million decrease in Japan, where we began our transition to a new sales channel.



26



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Service and other revenues primarily consist of service revenues and license and
maintenance fees. Service and other revenues were $1.7 million for the quarters ended March 31, 2007 and 2006.

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



|                   |  |                                          |        |      |   |       
|------------------ |  | ---------------------------------------- | ------ | ---- | - | ------
|                   |  | Three months ended March 31, (unaudited)
|                   |  | 2007                                     |        | 2006
|                   |  | (In thousands)                          
|North America      |  | $                                        | 13,676 |      | $ | 12,429
|Europe/Middle East |  |                                          | 12,393 |      |   | 11,840
|Japan              |  |                                          | 3,592  |      |   | 6,229 
|Asia/Pacific       |  |                                          | 9,681  |      |   | 8,383 
|                   |  |                                          |        |      |   |       
|Total revenues     |  | $                                        | 39,342 |      | $ | 38,881
|                   |  |                                          |        |      |   |       



|                   |  |                                         |   |  |       |  
|------------------ |  | --------------------------------------- | - |  | ----- | -
|                   |  | Three months ended March 31,(unaudited) |  
|                   |  | 2007                                    |   |  | 2006  |  
|North America      |  | 34.8                                    | % |  | 32.0  | %
|Europe/Middle East |  | 31.5                                    |   |  | 30.5  |  
|Japan              |  | 9.1                                     |   |  | 16.0  |  
|Asia/Pacific       |  | 24.6                                    |   |  | 21.5  |  
|                   |  |                                         |   |  |       |  
|Total revenues     |  | 100.0                                   | % |  | 100.0 | %
|                   |  |                                         |   |  |       |  

For the three months ended March 31, 2007 geographic revenues were higher in
all regions except Japan. This increase was primarily due to gains in North America related to the Catalyst acquisition offset by Japan, where the Companys mid- and low-end products have not penetrated the market fully, and there has been
lower than expected demand from our next generation products and serial data protocol solutions.

Gross profit for the
quarter ended March 31, 2007 was $20.8 million, or 52.9% gross margin, compared to $23.6 million, or 60.8% gross margin, for the comparable prior year period. The lower gross margin in the third quarter of fiscal 2007 was primarily attributable
to $1.8 million of costs associated with operational streamlining and the elimination of a product line and the implementation of the restructuring plan during the third quarter of fiscal 2007.

Selling, general and administrative (SG&A) expense was $15.1 million for the quarter ended March 31, 2007 compared
to $12.4 million for the quarter ended March 31, 2006, representing an increase of 21.9% or $2.7 million. As a percentage of total revenues, SG&A expense increased from 31.8% in the third quarter of fiscal 2006 to 38.3% in the third quarter
of fiscal 2007, $1.2 million related to the implementation of the restructuring plan during the third quarter of fiscal 2007 and the balance primarily a result of SG&A costs related to Catalyst.

Legal settlement expenses of $2.8 million, for the quarter ended March 31, 2006, is related to the settlement of a dispute with
Iwatsu pertaining to the ownership rights of certain intellectual property and other assets relating to Iwatsus ViewGo product line. (See Note 21 to the in the Consolidated Financial Statements on Form 10-K for the fiscal year
ended June 30, 2006 for more information.)

Research and development (R&D) expense was $8.1 million
for the quarter ended March 31, 2007, compared to $7.7 million for the comparable prior year period, an increase of 5.3% or $0.4 million, mainly due to $0.1 million of restructuring charges and the R&D costs related to Catalyst. As a
percentage of total revenues, R&D expense increased from 19.7% in the third quarter of fiscal 2006 to 20.5% in the third quarter of fiscal 2007.



27



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Other (expense), net, which consists primarily of net interest income and expense and
foreign exchange gains and losses, was an expense of ($1.7) million in the third quarter of fiscal 2007 compared to ($0.4) million for the third quarter of fiscal 2006. Net interest expense was approximately ($1.1) million for the quarter ended
March 31, 2007 as compared to ($0.5) million for the comparable prior year period. In addition, there were foreign exchange losses of ($0.1) million in the third quarter of 2007 as compared to foreign exchange gains of $0.1 million for the
comparable prior year period. The increase in net interest expense is primarily due to the higher average debt balance outstanding as a result of the $72.0 million convertible note issued during the second quarter of fiscal 2007. Additionally,
($0.6) million was recorded as Loss on extinguishment of debt was related to the write-off of deferred finance charges associated with the revolver that was terminated during the third quarter of fiscal 2007.

The effective income tax benefit rate for the three months ended March 31, 2007 was 1.7% compared to an effective income tax
provision rate of 62.4% for the three months ended March 31, 2006. The effective income tax benefit rate for the three months ended March 31, 2007 of 1.7%, differs from our annual effective tax rate of 29.3%, principally due to discrete
tax items for purchased IPR&D charges associated with the Catalyst acquisition, and an increase of $1.0 million to the valuation allowance for deferred tax assets. The IPR&D charges are nondeductible for tax purposes, and the increase to the
valuation allowance relates to a change in judgment regarding the realizability of certain state investment tax credits. The annual effective tax rate of 29.3% differs from the first quarter and second quarter rates of 34.6% and 32.0%, respectively,
principally due to changes in projections of the Companys pre-tax income for the year.

The Company calculates income
tax expense based upon an annual effective tax rate forecast, including estimates and assumptions that could change during the year, as adjusted for discrete tax charges and benefits in the period in which they occur. 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. The tax impact of the
nondeductible IPR&D charges associated with the Catalyst acquisition was recognized in the three months ended December 31, 2006, as this was a discrete item for the second quarter. The tax impact of the $1.0 million increase to the
valuation allowance was recognized in the three months ended March 31, 2007, as this was a discrete item for the third quarter.

Comparison of the
Nine-Month Periods Ended March 31, 2007 and 2006

Total revenues were $114.5 million for the nine months ended
March 31, 2007, compared to $122.0 million for the comparable prior year period, representing a decrease of 6.1%, or approximately $7.5 million, primarily as a result of decreased sales of Test and measurement products. This decrease in revenue
was partially offset by revenue derived from the Catalyst acquisition which mitigated the impact by 5.3%. Foreign currency fluctuations increased total revenues by $2.3 million in the first nine months of fiscal 2007 as compared to the same period
last year. The decrease in Test and measurement products was mainly due to a reduction in shipments to our disk drive customers as a result of decreased demand and the average selling prices in our high-end products which have been impacted by
competitive pressure in the marketplace. Additionally, mid- and low-end products have not penetrated the market fully, and there has been lower than expected demand from our next generation products and serial data protocol solutions.

Service and other revenues primarily consist of service revenues and license and maintenance fees. Service and other revenues were $5.3
million for the nine months ended March 31, 2007, representing a decrease of 6.5% or approximately $0.4 million, compared to $5.7 million for the comparable prior year period. The decrease was primarily the result of a reduction in the amount
recognized of previously deferred revenue from the adoption of the SECs Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements, as of the beginning of fiscal 2001. The nine months
ended March 31, 2007 included no revenue from previously deferred revenue compared to $0.7 million in the comparable prior year period, since it was fully amortized as of March 31, 2006.



28



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



|                   |  |                                         |         |      |   |        
|------------------ |  | --------------------------------------- | ------- | ---- | - | -------
|                   |  | Nine months ended March 31, (unaudited)
|                   |  | 2007                                    |         | 2006
|                   |  | (In thousands)                         
|North America      |  | $                                       | 37,625  |      | $ | 40,820 
|Europe/Middle East |  |                                         | 39,277  |      |   | 36,834 
|Japan              |  |                                         | 15,233  |      |   | 16,817 
|Asia/Pacific       |  |                                         | 22,364  |      |   | 27,490 
|                   |  |                                         |         |      |   |        
|Total revenues     |  | $                                       | 114,499 |      | $ | 121,961
|                   |  |                                         |         |      |   |        



|                   |  |                                        |   |  |       |  
|------------------ |  | -------------------------------------- | - |  | ----- | -
|                   |  | Nine months ended March 31,(unaudited) |  
|                   |  | 2007                                   |   |  | 2006  |  
|North America      |  | 32.9                                   | % |  | 33.5  | %
|Europe/Middle East |  | 34.3                                   |   |  | 30.2  |  
|Japan              |  | 13.3                                   |   |  | 13.8  |  
|Asia/Pacific       |  | 19.5                                   |   |  | 22.5  |  
|                   |  |                                        |   |  |       |  
|Total revenues     |  | 100.0                                  | % |  | 100.0 | %
|                   |  |                                        |   |  |       |  

For the nine months ended March 31, 2007 our geographic revenues were lower
mainly in North America, Japan and Asia/Pacific. This decrease was mainly attributable to a slower than anticipated ramp up of sales via our indirect selling channel of our mid- to low-end product line, as well as a decrease in the average selling
prices in the high-end product line. Europe/Middle East was the exception where our operations have incorporated our diverse product lines through indirect and direct channels more effectively.

Gross profit for the nine months ended March 31, 2007 was $62.9 million, or 54.9% gross margin, compared to $74.2 million, or 60.8%
gross margin, for the comparable prior year period. The lower gross margin was primarily attributable to $1.5 million of higher costs associated with the sell through of inventory acquired in the Catalyst acquisition than is expected from the cost
to manufacture the products post-acquisition, $1.8 million of costs associated with operational streamlining and the elimination of a product line, $0.3 million relating to the implementation of a restructuring plan and the balance primarily due to
the impact of lower average selling prices on our high end products.

Selling, general and administrative
(SG&A) expense was $42.6 million for the nine months ended March 31, 2007 compared to $39.2 million for the nine months ended March 31, 2006, representing an increase of 8.7% or $3.4 million. As a percentage of total
revenues, SG&A expense increased from 32.1% in the nine months ended March 31, 2006 to 37.2% in the nine months ended March 31, 2007, primarily as a result of the $1.2 million charge for the implementation of the restructuring plan
during the third quarter of fiscal 2007, SG&A costs related to Catalyst and as a result of decreased revenue in fiscal 2007.

Legal settlement expenses of $2.8 million, for the nine months ended March 31, 2006, is related to the settlement of a dispute with Iwatsu pertaining to the ownership rights of certain intellectual property and other assets relating to
Iwatsus ViewGo product line. (See Note 21 to the Consolidated Financial Statements on Form 10-K for the fiscal year ended June 30, 2006 for more information.)

Research and development (R&D) expense was $28.6 million for the nine months ended March 31, 2007, compared to $22.9
million for the comparable prior year period, an increase of 24.8% or $5.7 million. The increase was mainly due to a $4.0 million charge for acquired in-process research and development related to Catalyst, recorded in the second quarter of fiscal
2007, R&D costs related to Catalyst and $0.4 million of restructuring charges recorded in the second and third quarters. Additionally, expenses incurred for prototype materials and supplies used for several product launches in the beginning of
the year contributed to the overall increase. As a percentage of total revenues, R&D expense increased from 18.8% in the nine months ended March 31, 2006 to 25.0% in the nine months ended March 31, 2007, primarily attributable to the
decreased revenue in fiscal 2007.



29



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Other (expense), net, which consists primarily of net interest income and expense and
foreign exchange gains and losses, was an expense of ($4.2) million in the nine months ended March 31, 2007 compared to ($1.8) million for the nine months ended March 31, 2006. Net interest expense was approximately ($3.1) million for the
nine months ended March 31, 2007 as compared to ($1.7) million for the comparable prior year period. In addition, there was a foreign exchange loss of ($0.2) million in the nine months ended March 31, 2007 compared to a foreign exchange
loss of ($0.1) million in the comparable prior year period. The change in net interest expense is primarily due to the higher average debt balance outstanding as a result of the issuance of $72.0 million in convertible notes during the second
quarter of fiscal 2007 offset in part by a low interest rate on the Notes than on borrowings under the Credit Agreement and due to additional interest in fiscal 2007 of $0.3 million related to the interest rate swap associated with the term loan.
The Loss on extinguishment of debt of $1.0 million relates to the write-off of deferred financing costs associated with the repayment of the term loan and revolver under the old credit agreement.

The effective income tax benefit rate for the nine months ended March 31, 2007 was 12.0% compared to an effective income tax
provision rate of 39.4% for the nine months ended March 31, 2006. The effective income tax benefit rate for the nine months ended March 31, 2007 of 12.0%, differs from our annual effective tax rate of 29.3%, principally due to discrete tax
items for purchased IPR&D charges associated with the Catalyst acquisition, and an increase to the valuation allowance for deferred tax assets. The IPR&D charges are nondeductible for tax purposes, and the increase to the valuation allowance
relates to a change in judgment regarding the realizability of certain state investment tax credits. The annual effective tax rate of 29.3% differs from the first quarter and second quarter rates of 34.6% and 32.0%, respectively, principally due to
changes in projections of the Companys pre-tax income for the year.

The Company calculates income tax expense based
upon an annual effective tax rate forecast, including estimates and assumptions that could change during the year, as adjusted for discrete tax charges and benefits in the period in which they occur. 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. The tax impact of the nondeductible IPR&D
charges associated with the Catalyst acquisition was recognized in the three months ended December 31, 2006, as this was a discrete item for the second quarter. The tax impact of the $1.0 million increase to the valuation allowance was
recognized in the three months ended March 31, 2007, as this was a discrete item for the third quarter.

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2007 were $10.7 million compared to $17.0 million at June 30, 2006.

The Company used $0.2 million of net cash from operating activities in the nine months ended March 31, 2007 compared
to providing $6.5 million in the same period last year. The $6.6 million decrease from prior period represents primarily the decrease in net income, partially offset by an improvement in working capital items.

Net cash used in investing activities was ($35.6) million in the nine months ended March 31, 2007 compared to ($3.6) million in the
same period in fiscal 2006. The $32.0 million increase was primarily due to the $31.5 million net cash paid in connection with the Catalyst acquisition.

Net cash provided by financing activities was $29.8 million in the nine months ended March 31, 2007 compared to net cash used of ($6.6) million in the same period in fiscal 2006. The $36.4 million increase was
mainly due to the issuance of the convertible notes of $72.0 million (see below for more information on the convertible notes), and borrowings under the revolving credit lines of $40.2 million partially offset by net repayments of the term loan of
$34.1 million, repayments under the revolving credit lines of $34.3 million and an additional $10.5 million of cash to paid for the purchase common stock in conjunction with the Companys treasury stock buy back program.



30



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On March 30, 2007, LeCroy Corporation entered into a $40,000,000 senior, secured,
four-year credit agreement with the lenders listed therein and Manufacturers and Traders Trust Company, as administrative agent for such lenders (the New Credit Agreement), which replaced LeCroys existing credit facility that was
entered into on October 29, 2004 and subsequently amended. Manufacturers and Traders Trust Company is acting as sole lead arranger and sole book runner in connection with syndicating the credit facility. The terms of the New Credit Agreement
provide LeCroy with a $40,000,000 revolving credit facility (Revolver), which includes a $5,000,000 swingline loan subfacility and a $5,000,000 letter of credit subfacility. The performance by LeCroy of its obligations under the New
Credit Agreement is secured by all of the assets of LeCroy and its domestic subsidiaries, and is guaranteed by LeCroys domestic subsidiaries. As of March 31, 2007, the Company has borrowed $9.4 million against the Revolver and nothing
against the letter of credit subfacility or the swingline loan subfacility.

The proceeds of the borrowings under the New
Credit Agreement were used to pay the outstanding balance under LeCroys Prior Credit Agreement and will be used for general corporate purposes, including the financing of working capital requirements, capital expenditures and potential
acquisitions.

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

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

Under the New Credit Agreement, the Company is required to comply with certain financial covenants, measured
quarterly, including a minimum interest coverage ratio, minimum total net worth, maximum leverage ratio, minimum fixed charge coverage ratio and limitations on capital expenditures. As of March 31, 2007, the Company was in compliance with its
financial covenants under the New Credit Agreement.

The New Credit Agreement will expire on July 15, 2011, unless
extended by LeCroy to April 1, 2012, contingent on the repurchase of the Companys convertible notes.

The
Company incurred approximately $514,000 of deferred financing costs in connection with entering into the New Credit Agreement, which were deferred and are being amortized, on a straight line basis, over the term of the New Credit Agreement. At
March 31, 2007, approximately $134,000 of deferred financing costs were included in Other current assets, and approximately $380,000 were included in Other non-current assets on the Consolidated Balance Sheets.

Effective as of April 26, 2007, LeCroy, in accordance its original $40.0 million senior, secured, credit agreement with the lenders
listed therein and Manufacturers and Traders Trust Company, as administrative agent for such lenders (the Credit Agreement), entered into a First Modification and Lender Joinder Agreement (Joinder Agreement). This Joinder
Agreement increased the Companys credit limit to $50.0 million and added North Fork Bank to the Credit Agreement. In addition to their $10.0 million revolving commitment under the amendment, North Fork Bank accepted an assignment of $5.0
million of the lending obligations from Manufacturers and Traders Trust Company.



31



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

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

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

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

In October 2006, in conjunction with our issuance of the Notes
the Company repaid approximately $31.9 million and $20.8 million due as term debt and as revolving debt, respectively, under the Prior Credit Agreement. The term debt was fully repaid during the second fiscal quarter of 2007.

In addition to the above U.S.-based credit facilities, we maintain certain short-term foreign credit facilities, principally with two
Japanese banks totaling 150.0 million yen (approximately $1.3 million as of March 31, 2007). No amounts were outstanding under these facilities as of March 31, 2007. Our Swiss subsidiary, also has an overdraft facility totaling
1.0 million Swiss francs (approximately $0.8 million as of March 31, 2007). As of March 31, 2007 and June 30, 2006, approximately 0.4 million Swiss francs were held against supplier obligations leaving an available balance
of 0.6 million Swiss francs under this credit facility. These obligations to suppliers, such as rent and utilities, are payable under the credit facility only in the event that we are unable to meet our financial obligations to those suppliers.

On May 25, 2006, the Board of Directors approved the adoption of a share purchase plan authorizing the Company to
purchase up to 2 million shares, for an aggregate amount not to exceed $25.0 million, of its common stock for the treasury. Purchases under this buyback program may be made from time to time on the open market and in privately negotiated
transactions, including pursuant to the terms of a 10b5-1 plan. A 10b5-1 plan allows a company to purchase shares during a blackout period, provided the company communicates its share purchase instructions to the broker prior to the blackout period,
pursuant to written plan that may not be changed. The timing of these purchases is dependent upon several factors, including market conditions, the market price of the Companys common stock, the effect of the share dilution on earnings,
available cash and any other potential risks we may encounter. The share repurchase plan may be discontinued at any time at our discretion. As of March 31, 2007, we have spent $12.4 million to purchase 1,038,283 shares under this buyback
program.



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

Off-Balance Sheet Arrangements

Our 4% notes payable are convertible into shares of our common stock at a conversion price of $14.55 per share and pose a reasonable
likelihood of potential significant dilution. The maximum potential dilutive effect of conversion of the 4% notes is 4.9 million shares. Notes payable are discussed in greater detail in Liquidity and Capital Resources above and in the notes to our
consolidated financial statements.

Contractual Obligations and Other Commitments

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



|                             |  |                                             |        |                  |   |           |  |           |       |                   |   |        |  |   |   
|---------------------------- |  | ------------------------------------------- | ------ | ---------------- | - | --------- |  | --------- | ----- | ----------------- | - | ------ |  | - | --
|                             |  | Payments due by Period as of March 31, 2007
|                             |  | Total                                       |        | Less than 1 Year |   | 1-3 Years |  | 3-5 Years |       | More than 5 Years
|(In thousands)               |  |                                             |        |                  |   |           |  |           |       |                  
|Capital lease obligations    |  | $                                           | 268    |                  | $ | 268       |  | $         |      |                   | $ |       |  | $ |  
|Severance                    |  |                                             | 1,446  |                  |   | 1,197     |  |           | 249   |                   |   |       |  |   |  
|Supplier agreements          |  |                                             | 2,179  |                  |   | 2,179     |  |           |      |                   |   |       |  |   |  
|Operating lease obligations  |  |                                             | 3,929  |                  |   | 2,029     |  |           | 1,706 |                   |   | 151    |  |   | 43
|Note payable                 |  |                                             | 3,500  |                  |   | 3,500     |  |           |      |                   |   |       |  |   |  
|Revolving credit obligations |  |                                             | 9,410  |                  |   |          |  |           |      |                   |   | 9,410  |  |   |  
|Convertible notes            |  |                                             | 72,000 |                  |   |          |  |           |      |                   |   | 72,000 |  |   |  
|                             |  |                                             |        |                  |   |           |  |           |       |                   |   |        |  |   |   
|Total                        |  | $                                           | 92,732 |                  | $ | 9,173     |  | $         | 1,955 |                   | $ | 81,561 |  | $ | 43
|                             |  |                                             |        |                  |   |           |  |           |       |                   |   |        |  |   |   

Recent Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, (SFAS 154) which was effective for LeCroy for reporting changes in accounting
principles and for correction of errors beginning in fiscal year 2007. SFAS 154 requires a change in accounting principle to be applied retrospectively to prior periods financial statements, unless explicit transition provisions are provided
for in new accounting pronouncements or existing pronouncements that are in the transition phase when SFAS 154 becomes effective. There has been no impact on the Companys financial statements from the adoption of SFAS 154 in fiscal 2007.

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



33



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In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN 48), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 will be effective for fiscal years beginning after December 15, 2006. Management is currently evaluating the effect that adoption of this interpretation will have on the
Companys consolidated financial position and results of operations.

In September 2006 the FASB issued SFAS
No. 157, Fair Value Measurements, (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS 157 requires companies to
disclose the fair value of their financial instruments according to a fair value hierarchy as defined in the standard. Additionally, companies are required to provide enhanced disclosure regarding financial instruments in one of the categories,
including a reconciliation of the beginning and ending balances separately for each major category of assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. Management is currently evaluating the effect that adoption of this interpretation will have on the Companys consolidated financial position and results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current year Financial Statements (SAB 108), which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. SAB 108 is effective as of the end of the Companys 2007 fiscal year, allowing a one-time transitional cumulative effect adjustment to beginning retained earnings as of
July 1, 2006 for errors that were not previously deemed material, but are material under the guidance in SAB 108. The Company is currently evaluating the impact of adopting SAB 108 on the Companys consolidated financial statements.

In December 2006, the FASB issued FASB Staff Position EITF 00-19-2, Accounting for Registration Payment
Arrangements (FSP EITF 00-19-2). FSP EITF 00-19-2 specifies that registration payment arrangements should play no part in determining the initial classification and subsequent accounting for the securities they relate to. FSP EITF
00-19-2 requires the contingent obligation in a registration payment arrangement to be separately analyzed under FASB Statement No. 5, Accounting for Contingencies and FASB Interpretation No. 14, Reasonable Estimations of the
Amount of a Loss. If payment in a registration payment arrangement is probable and can be reasonably estimated, a liability should be recorded. FSP EITF 00-19-2 is effective for fiscal years beginning after December 15, 2006. Management is
currently evaluating the effect that adoption of this FSP will have on the on the Companys consolidated financial position and results of operations.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (FSP-FIN 48-1). FSP-FIN 48-1 further clarifies
if it is appropriate for an entity to recognize a previously unrecognized tax benefit when the only change since the initial determination was that benefit should not be recognized is the completion of an examination or audit by a taxing authority.
FSP-FIN 48-1 provides the determination of whether the position is effectively settled should be taken on a case by case basis, however, positions may be grouped by tax year and considered effectively settled. Management is currently evaluating the
effect that adoption of this position in conjunction with adopting FIN 48 will have on the Companys consolidated financial position and results of operations.

Forward-Looking Information

Certain statements in this report, other than purely
historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identified by the words believe, project, expect, anticipate,
estimate, intend, strategy, plan, may, should, will, would, will be, will continue, will likely result, and similar
expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of
these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our 2006 Annual Report on Form 10-K under the heading Risks Related to Our
Business, as well as those risk factors a set forth in Part II, Item IA herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.



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

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

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

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

The net losses resulting from changes in the fair value of these derivatives and on transactions denominated in other than their functional currencies were approximately ($0.1) million and ($0.2)
million for the three and nine months ended March 31, 2007, respectively. For the three and nine months ended March 31, 2006, there were net gains/(losses) of $0.1 million and ($0.1) million, respectively. At March 31, 2007 and
June 30, 2006, the notional amounts of the Companys open foreign exchange forward contracts, all with maturities of less than six months, were approximately $10.9 million and $14.6 million, respectively.

We performed a sensitivity analysis for the first nine months of fiscal 2007 assuming a hypothetical 10% adverse change in foreign
currency exchange rates on our foreign exchange forward contracts and our assets or liabilities denominated in other than their functional currencies. In managements opinion, a 10% adverse change in foreign currency exchange rates would have
an immaterial effect on these instruments and therefore, on our consolidated results of operations, financial position and cash flows.

On October 15, 2006, the Company completed the sale of $72.0 million of 4.00% convertible senior notes (the Notes) due October 15, 2026. The Notes will pay interest semiannually through maturity
and will be convertible at an initial conversion rate of 68.7285 shares of common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of approximately $14.55 per share of the Companys common stock. The
conversion rate will be subject to adjustment upon the occurrence of specified events. Upon conversion of the Notes, holders will receive cash up to the principal amount of each note, and any excess conversion value will be delivered in cash or
shares of LeCroys common stock, at the Companys option. As of March 31, 2007, the market value of the convertible notes was $65.2 million.

We are exposed to adverse changes in interest rates primarily due to our investment in cash and cash equivalents, as well amounts outstanding under our $40.0 million revolver. Market risk is estimated as the potential
change in fair value resulting from a hypothetical 1% adverse change in interest rates, which would have been immaterial to our results of operations, financial position or cash flows for the three and nine months ended March 31, 2007.
Borrowings under the revolving line of credit have variable rates and the carrying amount is considered by management to be a reasonable estimate of its fair value. See Note 14  Long Term Debt and Capital Leases, for specifics related to our
credit facility.



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

Evaluation of Disclosure Controls and
Procedures

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

Changes in Internal Controls Over Financial Reporting

There have been no changes in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2007 that have
materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Other

The Company plans to exclude the acquired Catalyst business from the fiscal 2007 evaluation of the effectiveness of internal control over
financial reporting as the Catalyst business utilizes separate information and accounting systems and processes.



36



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LeCROY CORPORATION

PART II. OTHER INFORMATION



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

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



|I
TEM 1A. | RISK FACTORS
|--------- | ------------

Other than with
respect to the risk factors below, there have been no material changes from the risk factors disclosed in the Risk Factors section of the Companys Annual Report on Form 10-K for the year ended June 30, 2006.

Our business practices in international markets subjects us to the requirements of additional regulation. If we, or any of our employees, are found
to have violated these regulations, we could be subject to significant fines and other penalties.

We manufacture
our products in the United States, and sell our products and purchase parts, components and sub-assemblies in a number of foreign countries. Our international activities subject us to United States export control restrictions and various significant
international, federal, state and local regulations, including but not limited to health and safety, product content, labor and import/export regulations. In certain cases, we may not be permitted to export products without obtaining an export
license. U.S. export laws also prohibit the export of our products to a number of countries deemed by the United States to be hostile. The export of our high-performance oscilloscopes from the United States, which accounts for a material portion of
our internationally derived revenue, is also subject to regulation under the Treaty for Nuclear Non-Proliferation.

However, only a small portion of those oscilloscopes are sold in countries where the treaty restricts the end-user. These restrictions may make foreign competitors facing less stringent controls on their products more competitive in the
global market. We cannot be certain that the U.S. government will approve any pending or future export license requests. In addition, the list of products and countries for which export approval is required, and the regulatory policies with respect
thereto, could be revised. Our international sales and, because approximately two-thirds of our revenue is derived from sales outside the United States, our sales in general, could be materially harmed by our inability to obtain required licenses or
by the costs of compliance.

The regulations related to our international sales are complex, change frequently and have
tended to become more stringent over time. We may be required to incur significant expenses to comply with these regulations or to remedy violations of these regulations. Any failure by us to comply with applicable government regulations could also
result in cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold into
regulated industries, we must comply with additional regulations in marketing our products.

Catalyst outsources a portion of its
research and development activities to a third party in a foreign jurisdiction; the failure of this third party to adequately protect Catalysts proprietary rights in the technologies developed for us by this third party or a change in the laws
of its jurisdiction may result in the loss of those proprietary rights.

Catalyst currently outsources a portion of
its research and development activities to a third party engineering firm located in the United Arab Emirates. Catalyst does not have any long-term contractual commitment from this engineering firm to continue to provide such services. The
discontinuance of such services on short notice or any significant cost increases in the services they provide could harm our results of operations and slow our introduction of new products. In addition, the failure of this engineering firm to
adequately protect Catalysts proprietary rights in the technologies developed by this firm, including the failure to comply with the intellectual property laws of the United Arab Emirates, may result in the loss of some or all of the
proprietary rights in such technologies. In addition, any changes in the laws of the United Arab Emirates could also result in the loss of some or all of the proprietary rights in technologies developed in that country. It may also be more difficult
to obtain a judgment enforcing our intellectual property rights in the United Arab Emirates than it may be in the United States.



37



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We have significantly increased our leverage as a result of the sale of the Notes.

In connection with the sale of the Notes, we have incurred new indebtedness of $72.0 million. The degree to which
we are leveraged could, among other things:



| |  |  | make it difficult for us to make payments on the Notes;
| | - |  | -------------------------------------------------------



| |  |  | make it difficult for us to obtain financing for working capital, acquisitions or other purposes on favorable terms, if at all;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | make us more vulnerable to industry downturns and competitive pressures; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to changes in, our business.
| | - |  | -------------------------------------------------------------------------------

Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to financial, business
and other factors affecting our operations, many of which are beyond our control.

We may be unable to repay, repurchase or redeem
the Notes.

At maturity, the entire outstanding principal amount of the Notes will become due and payable by us.
Upon a designated event, as defined in the indenture, or on each of October 15, 2011, October 15, 2016 and October 15, 2021, or upon conversion, the holders may require the Company to repurchase all or a portion of the Notes at a
repurchase price of 100% of the principal amount of the Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the date of the repurchase of the Notes. We cannot assure the note holders that we will have enough
funds or be able to arrange for additional financing to pay the principal at maturity or to repurchase the Notes upon a designated event or that our then-existing debt agreements will permit us to repay the principal amount at maturity or repurchase
notes.

Our failure to repay the Notes at maturity or to repurchase tendered notes upon a designated event or on each of
October 15, 2011, October 15, 2016 and October 15, 2021, would constitute an event of default under the indenture that governs the Notes and may also constitute an event of default under any other indenture or other agreement
governing then-existing indebtedness, which could prevent us from repurchasing the Notes. If a designated event occurred and accelerated our other indebtedness, we cannot assure you that we would have sufficient financial resources, or be able to
arrange for additional financing, to repay the principal amount at maturity or pay the repurchase price for the Notes and amounts due under any other indebtedness. The change in control feature of the Notes could make it more difficult for a third
party to acquire us, even if such an acquisition would be beneficial to the note holders and our stockholders. Our obligation to offer to repurchase the Notes upon a designated event would not necessarily afford protection in the event of a highly
leveraged transaction, reorganization, merger or similar transaction involving us.

Conversion of the Notes will dilute the ownership
interest of existing stockholders, including stockholders who had previously converted their Notes.

The conversion
of the Notes into shares of our common stock, to the extent we choose not to deliver all cash for the conversion value in excess of the principal amount, will dilute the ownership interests of existing stockholders. Any sales in the public market of
the common stock issuable upon conversion of the Notes could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants due to this dilution or facilitate
trading strategies involving the Notes and our common stock.



38



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Anti-takeover provisions under our charter documents, stockholder rights plan, and Delaware law
could delay or prevent a change of control and could also limit the market price of our stock.

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



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



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



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



| |  |  | require advance written notice of stockholder proposals and director nominations.
| | - |  | ---------------------------------------------------------------------------------

Under our stockholder rights plan, if a person or group acquires, in the future, 15% or more of our common stock or announces a tender
offer or exchange offer, the consummation of which would result in the beneficial ownership by a person or group of 15% or more of our common stock, then holders of our common stock, other than the acquirers, are entitled to purchase our common
stock at a 50% discount to the then-current share price.

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

We have a credit facility that contains financial covenants, and the failure to comply with these covenants could harm our financial condition because our credit facility may be unavailable to us.

We have a $50.0 million credit facility with Manufacturers and Traders Trust Company, a New York Banking
Corporation and the other lenders party thereto. The credit facility consists of a $50.0 million revolving loan. We are subject to financial covenants under this credit facility, including interest coverage ratio, minimum consolidated net worth,
senior leverage ratio and fixed charge coverage ratio requirements. Failure to comply with the financial covenants under our credit facility would cause us to be in default under the facility, which could result in the acceleration of the
indebtedness under the credit facility. The acceleration of our indebtedness under the credit facility would adversely affect our business, results of operations, liquidity and financial condition. The acceleration of our indebtedness under the
credit facility would also likely cause an acceleration of the indebtedness due under our Notes.

We may not be able to obtain the
capital we need to maintain or grow our business.

Our ability to execute our long-term strategy may depend to a
significant degree on our ability to obtain long-term debt and equity capital. We have no commitments for additional borrowings at this time, other than $50.0 million available under our new revolver with Manufacturers and Traders Trust
Company, a New York Banking Corporation and the other lenders party thereto, which is subject to certain conditions. We cannot determine the precise amount and timing of our funding needs at this time. We may be unable to obtain future additional
financing on terms acceptable to us, or at all. If we fail to comply with certain covenants relating to our indebtedness, we may need to refinance our indebtedness or repay it. We also may need to refinance our indebtedness at maturity. We may not
be able to obtain additional capital on favorable terms to refinance our indebtedness, or at all.



39



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



| |  |  | our results of operations;
| | - |  | --------------------------



| |  |  | general economic conditions and conditions in our industry;
| | - |  | -----------------------------------------------------------



| |  |  | the perception in the capital markets of our business;
| | - |  | ------------------------------------------------------



| |  |  | our ratio of debt to equity;
| | - |  | ----------------------------



| |  |  | our financial condition;
| | - |  | ------------------------



| |  |  | our business prospects; and
| | - |  | ---------------------------



| |  |  | changes in interest rates.
| | - |  | --------------------------

In addition, certain covenants relating to our $50.0 million credit facility impose limitations on additional indebtedness. If we are unable to obtain sufficient capital in the future, we may have to curtail our
capital expenditures and reduce research and development expenditures. Any such actions could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have never declared or paid any cash dividends on our common stock. For the foreseeable future, it is expected
that earnings, if any, generated from our operations will be used to finance the growth of our business, and that no dividends will be paid to holders of the common stock. As a result, the success of an investment in our common stock will depend
upon any future appreciation in its value. There is no guarantee our common stock will appreciate in value.



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

Issuer Repurchases of Equity Securities

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

There were no share repurchases by LeCroy during the third quarter of fiscal 2007.



40



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|I
TEM 6. | EXHIBITS
|-------- | --------

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



|              |  |                                                                                                                                                                                                                                                                      
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                          
|2.1           |  | Agreement and Plan of Merger, dated as of September 1, 2004, among the Registrant, Cobalt Acquisition Corporation and Computer Access Technology Corporation, filed as
Exhibit 2.1 to Form 8-K dated September 2, 2004, incorporated herein by reference.            
|2.2           |  | Agreement and Plan of Merger dated as of September 29, 2006, among the Registrant, 2006 Franklin Congress Corporation, Catalyst Enterprises, Inc., and Nader Salehomoum,
filed as Exhibit 2.1 to Form 8-K filed on October 3, 2006, incorporated herein by reference.
|3.1           |  | Certificate of Incorporation of the Registrant as of July 24, 1995, filed as Exhibit 3.1 to Form S-1 Registration Statement No. 33-95620, incorporated herein by
reference.                                                                                          
|3.2           |  | Amendment to the Certificate of Designation of the Series A Convertible Redeemable Preferred Stock as of April 9, 2001, filed as Exhibit 10.37 to Form 10-Q for the
quarterly period ended March 31, 2001, incorporated herein by reference.                         
|3.3           |  | By-Laws of the Registrant, as amended, dated August 16, 2000, filed as Exhibit 3.3 to Form 10-Q for the quarterly period ended September 30, 2000, incorporated herein by
reference.                                                                                 
|4.1           |  | Purchase Agreement dated October 5, 2006, between LeCroy Corporation and Cowen and Company, LLC, filed as Exhibit 4.1 to Form 8-K filed on October 12, 2006, incorporated
herein by reference.                                                                       
|4.2           |  | Registration Rights Agreement dated October 12, 2006, between LeCroy Corporation and Cowan and Company, LLC, filed as Exhibit 4.2 to Form 8-K filed on October 12, 2006,
incorporated herein by reference.                                                           
|4.3           |  | Indenture dated October 12, 2006, between LeCroy Corporation, as issuer, and U.S. Bank National Association, as trustee, filed as Exhibit 4.3 to Form 8-K filed on October
12, 2006, incorporated herein by reference.                                               
|10.1          |  | Credit Agreement, dated as of October 29, 2004, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.14
to Form 8-K filed on November 2, 2004, incorporated herein by reference.                   
|10.2          |  | LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan filed as Exhibit 10.1 to Form S-1 Registration Statement No. 33-95620, incorporated herein by
reference.*                                                                                          
|10.3          |  | Amendment to LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan, filed as Exhibit 10.33 to Form 10-Q for the quarterly period ended September 30, 2000,
incorporated herein by reference.*                                                            
|10.4          |  | LeCroy Corporation 1995 Non-Employee Director Stock Option Plan filed as Exhibit 10.2 to Form S-1 Registration Statement No. 33-95620, incorporated herein by
reference.*                                                                                            
|10.5          |  | LeCroy Corporation 1995 Employee Stock Purchase Plan, filed as Exhibit 10.3 to Form S-1 Registration Statement No. 33-95620, incorporated herein by
reference.*                                                                                                      
|10.6          |  | LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, incorporated by reference to Appendix A to the Companys Definitive Proxy Statement filed on
September 18, 1998.                                                                                    
|10.7          |  | Amendment to the LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, dated August 16, 2000, filed as Exhibit 10.34 to Form 10-Q for the quarterly period ended
September 30, 2000, incorporated herein by reference.*                                   
|10.8          |  | Amendment to the LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, dated October 25, 2000, filed as Exhibit 10.35 to Form 10-Q for the quarterly period
ended September 30, 2000, incorporated herein by reference.*                                  
|10.9          |  | LeCroy Corporations 2003 Stock Incentive Plan, incorporated by reference to Appendix A to the Companys Definitive Proxy Statement filed on September 26,
2003.*                                                                                                    



41



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|      |  |                                                                                                                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Form of Restricted Stock Purchase Agreement, filed as Exhibit 10.41 to Form 10-K for the fiscal year ended June 30, 2002, incorporated herein by
reference.*                                                                                                          
|10.11 |  | LeCroy Corporation Amended and Restated 1995 Employee Stock Purchase Plan, incorporated by reference to Appendix B to the Registrants Definitive Proxy Statement
filed on September 26, 2003.*                                                                       
|10.12 |  | LeCroy Corporations 2004 Employment Inducement Stock Plan, filed as Exhibit 10.5 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                                           
|10.13 |  | Computer Access Technology Corporation Special 2000 Stock Option Plan, filed as Exhibit 10.7 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                                
|10.14 |  | Amendments to Computer Access Technology Corporation 2000 Special Stock Option Plan, filed as Exhibit 10.11 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                 
|10.15 |  | Amendment to LeCroy Corporation (CATC) Special 2000 Stock Option Plan, filed as Exhibit 10.2 to Form 8-K filed on November 19, 2004, incorporated herein by
reference.*                                                                                               
|10.16 |  | Computer Access Technology Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.8 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                                     
|10.17 |  | Amendments to Computer Access Technology Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.12 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                      
|10.18 |  | Amendment to LeCroy Corporation (CATC) 2000 Stock Incentive Plan, filed as Exhibit 10.3 to Form 8-K filed on November 19, 2004, incorporated herein by
reference.*                                                                                                    
|10.19 |  | Computer Access Technology Corporation 1994 Stock Option Plan, filed as Exhibit 10.9 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                                        
|10.20 |  | Amendments to Computer Access Technology Corporation 1994 Stock Option Plan, filed as Exhibit 10.13 to Form 8-K filed on November 2, 2004, incorporated herein by
reference.*                                                                                         
|10.21 |  | Amendment to LeCroy Corporation (CATC) 1994 Stock Option Plan, filed as Exhibit 10.4 to Form 8-K filed on November 19, 2004, incorporated herein by
reference.*                                                                                                       
|10.22 |  | Employee Agreement Regarding Inventions, Confidentiality and Non-Competition, dated as of March 28, 1995, between the Registrant and Walter O. LeCroy, Jr., filed as
Exhibit 10.13 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*
|10.23 |  | Form of Indemnification Agreement, between the Registrant and each of its executive officers and directors filed as Exhibit 10.29 to Form S-1 Registration Statement No.
33-95620, incorporated herein by reference.*                                                 
|10.24 |  | Employment Agreement, dated August 13, 2001, between the Registrant and R. Scott Bausback, filed as Exhibit 10.38 to Form 10-Q for the quarterly period ended December 31,
2001, incorporated herein by reference.*                                                   
|10.25 |  | Separation Agreement, dated August 19, 2004, between the Registrant and R. Scott Bausback, filed as Exhibit 10.50 to Form 10-K for the fiscal year ended June 30, 2004,
incorporated herein by reference.*                                                            
|10.26 |  | Employment Agreement, dated January 1, 2002, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.40 to Form 10-Q for the quarterly period ended March 31,
2003, incorporated herein by reference.*                                                     
|10.27 |  | Amendment No. 1 to Employment Agreement, dated December 16, 2002, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.43 to Form 10-Q for the quarterly
period ended March 31, 2003, incorporated herein by reference.*                                
|10.28 |  | Separation Agreement, dated August 19, 2004, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.49 to Form 10-K for the fiscal year ended June 30, 2004,
incorporated herein by reference.*                                                           
|10.29 |  | Form of Separation Agreement between the Registrant and certain of its executive officers, filed as Exhibit 10.51 to Form 10-K for the fiscal year ended June 30, 2004,
incorporated herein by reference.*                                                            
|10.30 |  | Employment Agreement, dated September 1, 2004 and effective October 29, 2004, between the Registrant and Carmine Napolitano, filed as Exhibit 10.1 to Form 8-K filed on
November 2, 2004, incorporated herein by reference.*                                          
|10.31 |  | Amendment No. 1 to Employment Agreement, dated September 30, 2004 and effective October 29, 2004, between the Registrant and Carmine Napolitano, filed as Exhibit 10.2 to
Form 8-K filed on November 2, 2004, incorporated herein by reference.*                      
|10.32 |  | Services Agreement, dated August 31, 2004, between Computer Access Technology Corporation and Dan Wilnai, filed as Exhibit 10.3 to Form 8-K filed on November 2, 2004,
incorporated herein by reference.*                                                             



42



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|      |  |                                                                                                                                                                                                                                                                                          
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.33 |  | Employment Agreement, dated August 31, 2004, between Computer Access Technology Corporation and Peretz Tzarnotsky, filed as Exhibit 10.4 to Form 8-K filed on
November 2, 2004, incorporated herein by reference.*                                                                       
|10.34 |  | Amendment No. 2 to Credit Agreement, dated as of May 9, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as
Exhibit 10.40 to Form 10-Q filed on May 10, 2006, incorporated herein by reference.                            
|10.35 |  | Amendment No. 3 to Credit Agreement, dated as of September 26, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent,
filed as Exhibit 10.36 to Form 10-Q filed on November 9, 2006, incorporated herein by reference.                 
|10.36 |  | Amendment No. 4 to Credit Agreement, dated as of September 28, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent,
filed as Exhibit 10.37 to Form 10-Q filed on November 9, 2006, incorporated herein by reference.                 
|10.37 |  | Amendment No. 5 to Credit Agreement, dated as of December 29, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent,
filed as Exhibit 10.1 to Form 8-K filed on December 29, 2006, incorporated herein by reference.*.                 
|10.38 |  | Catalyst Enterprises, Inc. 2005 Stock Option Plan, filed as Exhibit 10.1 to Form 8-K filed on December 22, 2006, incorporated herein by reference.*                                                                                                                                      
|10.39 |  | Amendments to Catalyst Enterprises, Inc. 2005 Stock Option Plan filed as Exhibit 10.2 to Form 8-K filed on December 22, 2006, incorporated herein by
reference.*                                                                                                                         
|10.40 |  | Credit Agreement, dated as of March 30, 2007, among the Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed
as Exhibit 10.1 to Form 8-K filed on April 4, 2007, incorporated herein by reference.                         
|10.41 |  | First Modification and Lender Joinder Agreement, dated as of April 26, 2007, among Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as
Administrative Agent, filed as Exhibit 10.1 to Form 8-K filed on May 2, 2007, incorporated herein by reference.
|10.42 |  | Assignment and Acceptance, dated as of April 26, 20007, between Manufacturers and Traders Trust Company and North Fork Bank, filed as Exhibit 10.2 to Form 8-K filed on May
2, 2007, incorporated herein by reference.                                                                   
|31.1  |  | Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                                                                                                                                                                       
|31.2  |  | Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                                                                                                                                                                       
|32.1  |  | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                         
|32.2  |  | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                         

---

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



43



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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.



|                   |  |                                                                                     
|------------------ |  | ------------------------------------------------------------------------------------
|                   |  | LeCROY CORPORATION                                                                  
|                   | 
|                   |  | /s/ Sean B. OConnor                                                                
|Date: May 10, 2007 |  | Sean B. OConnor Vice President and Chief Financial Officer, Secretary and Treasurer



44