UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended May 31, 2008oro

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


Commission File Number 0-22183



MEADE INSTRUMENTS CORP.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction
of incorporation or organization)

95-2988062(I.R.S. Employer
Identification No.)6001 Oak Canyon, Irvine, CA(Address of principal executive offices)

92618(Zip Code)(949) 451-1450(Registrant's telephone number, including area code)


Indicate
by check mark if 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
12 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 ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of
"large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.

Non-accelerated filer o

Large Accelerated filer o

Accelerated filer o

Smaller reporting company ý


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange
Act).    Yes o    No ý

As of July 11, 2008, there were 23,376,570 outstanding shares of the Registrant's common stock, par value $0.01 per share.



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MEADE INSTRUMENTS CORP.    REPORT ON FORM 10-Q FOR THE QUARTER ENDED    MAY 31, 2008

TABLE OF CONTENTS

Page No.PART IFINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets (Unaudited)May 31, 2008 and February 29, 2008

2Consolidated Statements of Operations (Unaudited)Three Months Ended May 31, 2008 and 2007

3Consolidated Statements of Cash Flows (Unaudited)Three Months Ended May 31, 2008 and 2007

4Notes to Consolidated Financial Statements (Unaudited)

5Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

14Item 3. Controls and Procedures

22PART IIOTHER INFORMATIONItem 1. Legal Proceedings

23Item 1A. Risk Factors

23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

23Item 3. Defaults Upon Senior Securities

23Item 4. Submission of Matters to a Vote of Security Holders

23Item 5. Other Information

23Item 6. Exhibits

23Signatures

24


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ITEM 1.    FINANCIAL STATEMENTS.

MEADE INSTRUMENTS CORP.        CONSOLIDATED BALANCE SHEETS(In Thousands, except per share data)(Unaudited)

May 31,
2008

February 29,
2008ASSETSCurrent assets:Cash

$
4,687

$
4,301Accounts receivable, less allowance for doubtful accounts of $581 at May 31, 2008 and $607 at February 29, 2008


7,996


8,424Inventories


18,076


22,659Prepaid expenses and other current assets


986


556Total current assets


31,745


35,940Goodwill


1,548


1,548Acquisition-related intangible assets, net


3,784


4,346Property and equipment, net


3,662


3,717Other assets, net


221


241$
40,960

$
45,792LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Bank lines of credit

$
681

$
5,877Accounts payable


5,954


6,650Accrued liabilities


4,782


5,770Income taxes payable


407


450Current portion of long-term debt and capital lease obligations


219


213Total current liabilities


12,043


18,960Long-term debt and capital lease obligations


694


936Deferred income taxes


1,243


1,258Deferred rent


138


42Commitments and contingenciesStockholders' equity:Common stock; $0.01 par value; 50,000 shares authorized; 23,376 and 23,316 shares issued and outstanding at May 31, 2008 and February 29, 2008,
respectively


233


233Additional paid-in capital


51,353


51,283Retained deficit


(27,071
)

(28,828
)Deferred stock compensation


(89
)

(93
)Accumulated other comprehensive income


3,013


2,70827,439


25,303Unearned ESOP shares


(597
)

(707
)Total stockholders' equity


26,842


24,596$
40,960

$
45,792


See
accompanying notes to consolidated financial statements

2

---





MEADE INSTRUMENTS CORP.        CONSOLIDATED STATEMENTS OF OPERATIONS(In Thousands, expect per share data)(Unaudited)

Three Months Ended
May 31,2008

2007Net sales

$
11,972

$
17,621Cost of sales


9,405


15,790Gross profit


2,567


1,831Selling expenses


1,936


2,251General and administrative expenses


2,847


2,838Gain on brand sales


(4,468
)

ESOP contribution expense


39


69Research and development expenses


283


448Operating income (loss)


1,930


(3,775
)Interest expense


88


94Income (loss) before income taxes


1,842


(3,869
)Provision for income taxes


85


335Net income (loss)

$
1,757

$
(4,204
)Net income (loss) per sharebasic and diluted

$
0.08

$
(0.21
)Weighted average number of shares outstandingbasic and diluted


23,337


19,709


See
accompanying notes to consolidated financial statements

3

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MEADE INSTRUMENTS CORP.        CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)(Unaudited)

Three Months Ended
May 31,2008

2007Cash flows from operating activities:Net income (loss)

$
1,757

$
(4,204
)Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Gain on sale of brands


(4,468
)

Depreciation and amortization expense


308


310ESOP contribution


39


69Change in allowance for doubtful accounts


(30
)

(359
)Deferred income taxes


15


12Stock-based compensation


141


149Deferred rent amortization


96


(37
)Changes in assets and liabilities:(Increase) decrease in accounts receivable


529


(1,124
)Decrease in inventories


2,549


1,716Increase in prepaid expenses and other assets


(470
)

(678
)Decrease in accounts payable


(745
)

(103
)Decrease in accrued liabilities


(1,877
)

(308
)Increase in income taxes payable


43


119Net cash used in operating activities


(2,113
)

(4,438
)Cash flows from investing activities:Proceeds from brand sales


8,000


Capital expenditures


(86
)

(44
)Net cash provided by (used in) investing activities


7,914


(44
)Cash flows from financing activities:Net (repayments) borrowings under bank lines of credit


(5,196
)

2,670Payments on long-term bank notes


(266
)

(230
)Payments under capital lease obligations





(6
)Net cash (used in) provided by financing activities


(5,462
)

2,434Effect of exchange rate changes on cash


47


146Net increase (decrease) in cash


386


(1,902
)Cash at beginning of period


4,301


4,048Cash at end of period

$
4,687

$
2,146Non-cash investing and financing activities:Issuance of restricted stock

$


$
150Cash paid for taxes

$
280

$
188Cash paid for interest

$
79

$
83


See
accompanying notes to consolidated financial statements

4

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MEADE INSTRUMENTS CORP.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In Thousands, except per share data)(Unaudited)

A.    The Consolidated Financial Statements Have Been Prepared by the Company and are Unaudited.

In management's opinion, the information and amounts furnished in this report reflect all adjustments (consisting of normal recurring adjustments) considered
necessary for the fair statement of the financial position and results of operations for the interim periods presented. These financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the fiscal year ended February 29, 2008.

The
Company has experienced, and expects to continue to experience, substantial fluctuations in its sales, gross margins and profitability from quarter to quarter. Factors that influence
these fluctuations
include the volume and timing of orders received, changes in the mix of products sold, market acceptance of the Company's products, competitive pricing pressures, the Company's ability to meet demand
and delivery schedules and the timing and extent of research and development expenses, marketing expenses and product development expenses. In addition, a substantial portion of the Company's net
sales and operating income typically occur in the third quarter of the Company's fiscal year primarily due to disproportionately higher customer demand for less-expensive products during
the holiday season. The results of operations for the quarters ended May 31, 2008 and 2007, respectively, are not necessarily indicative of the operating results for the entire fiscal year.

B.    Liquidity

The Company incurred a net loss of $17.7 million in the fiscal year ended February 29, 2008 after incurring a net loss of $19.2 million in
the prior fiscal year. These losses were largely driven by decreases in revenues and gross margins. Revenue during the fiscal 2008 was negatively affected by the loss of a significant customer,
Discovery Channel Stores, which announced early in the year that it was closing its retail mall operations. Revenue in the 2007 fiscal year was negatively affected by a lack of supply of riflescopes.
In addition, the Company's largest competitor in the telescope market is owned by a China based manufacturer that can offer very competitively priced products. This competition has put particular
pressure on the Company's revenue and margins for high-end telescopes. Gross margins have decreased due to the reduced sales volume (not covering fixed manufacturing costs), and the
aggressive inventory rationalization and SKU reduction initiatives undertaken by management. Operating margins have also suffered due to costs related to facility closures and
non-recurring legal, audit and consulting fees related to stock options, litigation and severance in fiscal 2007.

During
fiscal 2009, the Company sold three sports optics brands for gross cash proceeds of $15 million. The cash generated from the sale of these brands completely repaid the
Company's domestic credit facility balance. The Company plans to implement a restructuring plan that includes headcount reductions, facility consolidation, and reductions in corporate overhead and
manufacturing costs. Cash flow projections developed by management indicate the Company believes that it will have sufficient liquidity and capital resources to support current operations through
fiscal 2009; however, such sufficiency cannot be assured. Further, the Company continues to depend on operating cash flow and availability under its bank lines of credit to provide
short-term liquidity. The Company's U.S. credit facility expires in September 2009, is collateralized by substantially all of the domestic assets of the Company and its domestic
subsidiaries and contains certain financial covenants including, but not limited to, minimum EBITDA levels, minimum tangible net worth targets, minimum fixed charge coverage ratios and certain limits
on capital expenditures. In addition, the opinion of our independent

5

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auditors
dated June 13, 2008 expresses significant doubt about the Company's ability to continue as a going concern which triggered an automatic default under the terms of the Company's bank
line of credit. The Company cured this default through the Sixteenth Amendment to the Amended and Restated Credit Agreement. This amendment waived the Company's non-compliance with and
made the following key changes to the credit agreement: (1) reduced the revolver line amount from $15 million currently to $12 million at November 30, 2008 and
$10 million at December 31, 2008; (2) decreased certain amounts of collateral to be used in the borrowing base calculations; and (3) set minimum EBITDA, tangible net worth
and capital expenditure requirements measured on a monthly basis and set minimum fixed charge coverage ratio covenants.

From
time to time in recent history the Company has not been in compliance with certain of the restrictive covenants. While the Company has historically been able to obtain amendments
and/or waivers from its lender, there is no guarantee that the Company will be in compliance with the restrictive covenants in the future, and in the event of noncompliance, there is no guarantee that
the Company will be able to obtain an amendment or waiver. If no amendment or waiver is obtained, the Company may be in default under the provisions of the credit facility and the Company's lender may
accelerate repayment. In this event, the Company may need to raise funds to repay its lender and there can be no assurance that such funds will be available.

During
the third quarter of fiscal 2008, the Company announced that the Board of Directors had formed a special committee that has engaged an investment bank to assist the Company in
exploring strategic alternatives. Subsequent to fiscal 2008, the Company announced that it had sold its Simmons, Weaver and Redfield sport optics brands for gross proceeds of $15 million.
However, the review of strategic alternatives is continuing. Such alternatives may involve a financial restructuring of the Company's capital structure or potentially the sale of all or a portion of
the Company. At this time there can be no assurance that the Company will be able to execute on any strategic alternatives.

C.    Gain on Brand Sales and Subsequent Event

On April 17, 2008 the Company sold its Weaver brand and associated inventory to Ammunition Accessories, Inc., a subsidiary of Alliant
Techsystems Inc., for cash proceeds of $5.0 million. On April 18, 2008, the Company sold its Redfield brand to Leupold & Stevens, Inc. for cash proceeds of
$3.0 million. The net gain on these brand sales was approximately $4.5 million.

On
June 12, 2008, a subsidiary of Meade Instruments Corp. (the "Company") entered into an agreement and sold its Simmons brand and associated inventory to Bushnell for gross cash
proceeds of $7.25 million. In connection with this sale, on June 12, 2008, the Company and certain of its subsidiaries entered into the Fifteenth Amendment to the Amended and Restated
Credit Agreement dated as of October 25, 2002 (the "Fifteenth Amendment") with Bank of America, N.A. (the "Lender"). The Fifteenth Amendment released the Lender's lien on the assets divested
and reduced the Company's credit facility from $20 million to $15 million.

D.    Stock Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of Statement of Financial Accounting Standards 123R, ("SFAS 123R") Share-Based Payment, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS 123R,
share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee's requisite service period (generally
the vesting period of the equity grant). Share-based compensation expenses, included in general and administrative expenses in the Company's consolidated statement of operations for the three months
ended May 31, 2008 and 2007, were approximately $0.1 million and $0.1 million,

6

---



respectively.
Due to deferred tax valuation allowances provided, no net benefit was recorded against the share-based compensation charged.

The
Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the expected
option term, forfeiture rate, the expected volatility of the Company's stock over the option's expected term, the risk-free interest rate over the option's expected term, and the Company's
expected annual dividend yield. The Company believes that the valuation technique and the approach utilized to develop underlying assumptions are appropriate in calculating the fair values of the
Company's stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

The
Company did not grant stock options during the three months ended May 31, 2008. The fair value of the Company's stock options granted in the three months ended May 31,
2007 was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

Expected life(1)


3.1Expected volatility(2)


58
%Risk-free interest rate(3)


4.7
%Expected dividends


None


---

As
of May 31, 2008, there was approximately $1.4 million of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a
weighted-average period of approximately 4 years. At February 29, 2008, there was approximately $1.5 million of unrecognized compensation costs related to unvested stock options.

E.    Bank and other debt

The Company continues to depend on operating cash flow and availability under its bank lines of credit to provide short-term liquidity. Availability
under the U.S. revolving loan (which is subject to a borrowing base with standard advance rates against eligible accounts receivable and inventories) at May 31, 2008 was approximately
$4.4 million. The credit facility expires in September 2009, is collateralized by substantially all of the domestic assets of the Company and its domestic subsidiaries and contains certain
financial covenants including, but not limited to, minimum EBITDA levels, minimum tangible net worth targets, minimum fixed charge coverage ratios and certain limits on capital expenditures. Amounts
outstanding under the U.S. revolving loan bear interest at the bank's base rate (or LIBOR rate) plus applicable margins (7% at May 31, 2008).

The
Company received an audit opinion from its independent public accountants in its fiscal 2008 Form 10-K as of June 13, 2008 that there is substantial doubt
about the Company's ability to continue as a going concern. The receipt of this opinion resulted in a technical default under the terms of the Company's credit facility. On July 15, 2008, the
Company entered into the Sixteenth Amendment to the Amended and Restated Credit Agreement dated as of October 25, 2002 (the "Sixteenth Amendment") among Bank of America, N.A. (the "Lender").
The Sixteenth Amendment made the following key changes to the credit agreement: (1) reduced the revolver line amount from $15 million currently to

7

---



$12 million
at November 30, 2008 and $10 million at December 31, 2008; (2) decreased certain amounts of collateral to be used in the borrowing base calculations; and
(3) set minimum EBITDA, tangible net worth and capital expenditure requirements measured on a monthly basis and set minimum fixed charge coverage ratio covenants. Under the Sixteenth Amendment,
the Lender also waived the Company's non-compliance with the covenants under the credit agreement as of the Company's fiscal 2008 year-end and brought the Company into
compliance with all covenants.

Amounts
outstanding under the Company's various bank and other debt instruments are as follows:

May 31, 2008

February 29, 2008U.S. bank revolving line of credit

$
681

$
5,877European bank revolving line of credit





Total bank revolving lines of credit

$
681

$
5,877European term loans

$
908

$
1,142Capital lease obligations


5


7Total debt and capital lease obligations


913


1,149Less current portion


(219
)

(213
)Total long-term debt and capital lease obligations

$
694

$
936


F.     Composition of Certain Balance Sheet Accounts

The composition of inventories, net of reserves, is as follows:

May 31, 2008

February 29, 2008Raw materials

$
4,208

$
3,418Work-in-process


2,013


2,335Finished goods


11,855


16,906$
18,076

$
22,659


The
composition of goodwill and acquisition-related intangible assets is as follows:

May 31, 2008

February 29, 2008Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated AmortizationGoodwill

$
1,548

$


$
1,548

$
Acquisition-related intangible assets:Brand names

$
1,576




$
2,041


Customer relationships


1,200


(553
)

1,390


(695
)Trademarks


1,938


(1,586
)

1,938


(1,571
)Completed technologies


1,620


(411
)

1,620


(377
)Other


56


(56
)

56


(56
)Total acquisition-related intangible assets


6,390


(2,606
)

7,045


(2,699
)Total goodwill and acquisition-related intangible assets

$
7,938

$
(2,606
)
$
8,593

$
(2,699
)


8

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As
of May 31, 2008, the Company completed its sale of the Redfield and Weaver brands. As a result, acquisition-related intangible assets related to brand names and customer
relationships were reduced by $0.5 million.

The
changes in the carrying amount of goodwill and acquisition-related intangible assets for the period ended May 31, 2008 and the year ended February 29, 2008,
respectively, are as follows:

Non-amortizing intangible assets

Amortizing intangible assetsBalance, net, February 29, 2008

$
3,589

$
2,305Sale of brand names


(465
)

(13
)Amortization





(84
)Balance, net, May 31, 2008

$
3,124

$
2,208


Amortization
of trademarks, customer relationships and completed technologies over the next five fiscal years is estimated as follows:

Fiscal Year

Amortizing intangible assets2009

$
3242010


3202011


3202012


3202013


320Thereafter


604Total

$
2,208


The
composition of property and equipment is as follows:

May 31, 2008

February 29, 2008Buildings

$
3,508

$
3,508Molds and dies


7,016


6,648Machinery and equipment


4,411


4,354Furniture and fixtures


3,621


3,612Autos and trucks


246


246Leasehold improvements


1,507


1,50020,309


20,168Less accumulated depreciation and amortization


(16,647
)

(16,451
)$
3,662

$
3,717


G.    Commitments and Contingencies

The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of such litigation will not have a
material adverse effect on the financial position, results of operations or cash flows of the Company.

H.    Loss Per Share

Basic loss per share amounts exclude the dilutive effect of potential shares of common stock. Basic (loss) per share is based upon the weighted-average number of
shares of common stock outstanding,

9

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which
excludes unallocated ESOP shares. Diluted (loss) per share is based upon the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding for each
period presented. Potential shares of common stock include outstanding stock options and restricted stock, which may be included in the weighted average number of shares of common stock under the
treasury stock method.

The
total number of options and restricted shares outstanding were as follows:

May 31, 2008

February 29, 2008Stock options outstanding


2,078


2,155Restricted shares outstanding


45


93


A
reconciliation of the basic weighted average number of shares outstanding and the diluted weighted average number of shares outstanding follows:

Three Months Ended
May 31,2008

2007Basic weighted average number of shares


23,337


19,709Dilutive potential shares of common stock





Diluted weighted average number of shares outstanding


23,337


19,709Number of options excluded from the calculation of weighted average shares because the exercise prices were greater than the average market price of the Company's common
stock


2,078


2,743Potential shares of common stock excluded from the calculation of weighted average shares





162


Weighted
average shares for the three month period ended May 31, 2008 and 2007, exclude the aggregate dilutive effect of potential shares of common stock related to stock options
and restricted stock, because the Company incurred a loss and the effect would be anti-dilutive. Options with exercise prices greater than the average market price during the periods
presented are excluded from the calculation of weighted average shares outstanding because the effect would be anti-dilutive.

I.     Comprehensive Income (Loss)

Comprehensive loss is defined as a change in the equity of a business enterprise during a period from transactions and other events and circumstances from
non-owner sources and, at May 31, 2008 and 2007, includes foreign currency translation adjustments and adjustments to the fair value of highly effective derivative instruments. For
the three months ended May 31, 2008 and 2007, the Company had other comprehensive income (loss) as follows:

Three Months Ended
May 31,2008

2007Net income (loss)

$
1,757

$
(4,204
)Currency translation adjustments


268


126Change in fair value of foreign currency forward contracts, net of tax


37


17Total other comprehensive income (loss)

$
2,062

$
(4,061
)


10

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J.     Product Warranties

The Company provides reserves for the estimated cost of product warranty-related claims at the time of sale, and periodically adjusts the provision to reflect
actual experience related to its standard product warranty programs and its extended warranty programs. The amount of warranty liability accrued reflects management's best estimate of the expected
future cost of honoring Company obligations under its warranty plans. Additionally, from time to time, specific warranty accruals may be made if unforeseen technical problems arise. Meade and Bresser
branded products, principally telescopes and binoculars, are generally covered by a two-year limited warranty. Most of the Coronado products have limited five-year warranties.
Included in the warranty accrual as of May 31, 2008, is $0.5 million related to one of the company's former sport optics brands that was sold in April 2008 and for which the Company
agreed to retain certain warranty liabilities. Changes in the warranty liability, which is included as a component of accrued liabilities on the accompanying Consolidated Balance Sheets, were as
follows:

Three Months Ended
May 31,2008

2007Beginning balance

$
1,504

$
1,184Warranty accrual


658


595Labor and material usage


(495
)

(407
)Ending balance

$
1,667

$
1,372


K.    Derivative Instruments and Hedging Activities

The Company, at times, utilizes derivative financial instruments to manage its currency exchange rate and interest rate risks. The Company does not enter into
these arrangements for trading or speculation purposes. The Company's German subsidiary purchases inventory from Asian suppliers in U.S. dollars. A forward exchange contract is typically entered into
when the U.S. dollar amount of the inventory purchase is firm. Given our foreign exchange position, a change in foreign exchange rates upon which these foreign exchange contracts are based would
result in exchange gains and losses.

May 31, 2008

February 29, 2008Notional amount

Fair Value

Notional amount

Fair ValueForward currency contracts

$
3,000

$
37








At
May 31, 2008, the fair value of forward currency contracts is recorded in accrued liabilities on the accompanying consolidated balance sheets. Changes in the fair value of the
cash flow forward currency contracts have been recorded as a component of accumulated other comprehensive loss, net of tax, as these items have been designated and qualify as cash flow hedges. Due to
continuing taxable losses, the Company has provided an allowance against all tax benefits generated during the quarter. Therefore, the change in the fair value of the cash flow forward currency
contracts is presented in the accompanying consolidated financial statements with no net tax benefit. The settlement dates on the forward currency contracts vary based on the underlying instruments
through November 30, 2008.

L.    Income Taxes

During the year ended February 29, 2008, the company recorded a full valuation allowance against its deferred tax assets. The Company determined, in
accordance with SFAS No. 109,Accounting for Income Taxes, that there was sufficient uncertainty surrounding the future realization of its
deferred tax assets to warrant the recording of a full valuation allowance. The valuation allowance was recorded

11

---



based
upon the Company's determination that there was insufficient objective evidence, at the time, to recognize those assets for financial reporting purposes. For the periods ended May 31,
2008, the Company has not changed its assessment regarding the recoverability of its deferred tax assets. Ultimate realization of the benefit of the deferred tax assets is dependent upon the Company
generating sufficient taxable income in future periods, including periods prior to the expiration of certain underlying tax credits.

The
Company adopted the provisions of FIN 48 on March 1, 2007. As a result of the implementation of FIN 48, the Company recognized no material increase in the
liability for unrecognized income tax benefits.

As
of February 29, 2008 and as of May 31, 2008, unrecognized tax benefits, all of which affect the effective tax rate if recognized, were $0.2 million and
$0.1 million, respectively. The reduction in unrecognized tax benefits is a result of expiration of the statute of limitations for various Federal and state filings. Aside from this change,
management does not anticipate that there will be a material change in the balance of unrecognized tax benefits within the next 12 months.

The
Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As May 31, 2008, accrued interest related to uncertain tax positions was
less than $42,000, accrued penalty was less than $13,000.

M.   New Accounting Pronouncements

In April 2008, the FASB issued FASB Staff Position No. FAS 142-3,"Determination of the Useful Life of Intangible
Assets"("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142, "Goodwill and Other Intangible Assets"and requires enhanced
disclosures relating to: (a) the entity's accounting policy on the treatment of costs incurred to renew or extend the term of a recognized intangible asset; (b) in the period of
acquisition or renewal, the weighted-average period prior to the next renewal or extension (both explicit and implicit), by major intangible asset class and (c) for an entity that capitalizes
renewal or extension costs, the total amount of costs incurred in the period to renew or extend the term of a recognized intangible asset for each period for which a statement of financial position is
presented, by major intangible asset class. FSP 142-3 must be applied prospectively to all intangible
assets acquired as of and subsequent to fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company is currently
evaluating the impact that FAS No. 161 will have on its financial statements.

In
March 2008, the FASB issued FAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133" ("FAS
No. 161"). FAS No. 161 requires enhanced disclosure related to derivatives and hedging activities and thereby seeks to improve the transparency of financial reporting. Under FAS
No. 161, entities are required to provide enhanced disclosures relating to: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedge
items are accounted for under FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS No. 133"), and its related interpretations; and (c) how derivative
instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. FAS No. 161 must be applied prospectively to all derivative instruments and
non-derivative instruments that are designated and qualify as hedging instruments and related hedged items accounted for under FAS No. 133 for all financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, which begins with the Company's 2010 fiscal year. The Company is currently evaluating the impact that FAS No. 161 will
have on its financial statements.

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting

12

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principles,
and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This
Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company adopted SFAS No. 157
on March 1, 2008. The adoption did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. This
Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is
expected to expand the use of fair value measurement, which is consistent with the Board's long-term measurement objectives for accounting for financial instruments. Most of the provisions
of this Statement apply only to entities that elect the fair value option. However, the amendment to FASB Statement No. 115,Accounting for Certain Investments in Debt
and Equity Securities, applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do
not report net income. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company
adopted SFAS No. 159 on March 1, 2008.
The adoption did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations("SFAS 141R"). SFAS 141R
establishes the requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill
acquired. SFAS 141R also establishes disclosure requirements for business combinations. SFAS 141R is effective for annual periods beginning after December 31, 2008 and should be
applied prospectively for all business combinations entered into after the date of adoption. SFAS 141R will have an impact on our accounting for business combinations once adopted on
March 1, 2009, but the effect will be dependent upon acquisitions after that date.

In
December 2007, the FASB approved the issuance of SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statementsan amendment of
ARB No. 51("SFAS 160"). SFAS 160 will change the accounting and reporting for minority interests, which will now be termed noncontrolling interests. SFAS 160
requires noncontrolling interest to be presented as a separate component of equity and requires the amount of
net income attributable to the parent and to the noncontrolling interest to be separately identified on the consolidated statement of operations. SFAS 160 is effective for fiscal years
beginning on or after December 15, 2008. We do not expect adoption of SFAS 160 to have any impact on our consolidated financial position, results of operations or cash flows.

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction
with our consolidated financial statements and related notes included in this Form 10-Q. This discussionmaycontain forward-looking
statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements due to known and unknown risks, uncertainties and
other factors, including those risks discussed in "Risk Factors" in the Company's annual report on Form 10-K. Those risk factors expressly qualify all subsequent oral and written
forward-looking statements attributable to us or persons acting on our behalf. We do not have any intention or obligation to update forward-looking statements included in this
Form 10-Q after the date of this Form 10-Q, except as required by law.

Overview of the Company

Meade Instruments Corp. is engaged in the design, manufacture, marketing and sales of consumer optics products, primarily telescopes
and binoculars. We design our products in-house or with the assistance of external consultants. Most of our products are manufactured overseas by contract manufacturers in Asia while our
high-end telescopes have historically been manufactured and assembled in our U.S. and Mexico facilities. During the third quarter of fiscal 2008, we announced the closure of our U.S.
manufacturing operations and the transition of high-end telescope production to our Mexico facilities. As of the first
quarter ended May 31, 2008, substantially all of the manufacturing has been transferred; however, due to the transition our Mexico facility is not yet producing all high-end
telescopes at levels that meet customer demand. Sales of our products are driven by an in-house sales force as well as a network of sales representatives throughout the U.S. We currently
operate out of three primary locations: Irvine, California; Tijuana, Mexico; and Rhede, Germany. Our California facility serves as the Company's corporate headquarters and U.S. distribution center;
our Mexico facilities perform manufacturing, assembly, repair, packaging, research and development, and other general and administrative functions. Our Germany location is primarily engaged in the
distribution of our finished products in Europe. Our business is highly seasonal and our financial results vary significantly on a quarter-by-quarter basis throughout each
year.

We
believe that the Company holds valuable brand names and intellectual property that provides us with a competitive advantage in the marketplace. The Meade brand name is ubiquitous in
the consumer telescope market, while the Coronado brand name represents a unique niche in the area of solar astronomy. Our Bresser® brand covers a variety of optical and other products and
is primarily recognized in Europe. During fiscal 2009 we sold our Simmons, Weaver and Redfield sports optics brands and associated inventory for gross cash proceeds of $15 million.

The
Company hired a new chief executive officer in May 2006 with extensive experience in turnaround situations in an effort to restructure the Company and return it to profitability
after two years of financial losses. In the ensuing 12 months, the Company replaced a significant number of its executives, including its senior officer over operations and its chief financial
officer. The Company embarked on a number of initiatives to resolve supply chain constraints, to reduce the Company's cost structure, to reduce the number of SKUs and required level of inventory, and
to increase investment for new product innovations and introductions.

During
the fiscal year ended February 29, 2008, our operating results were negatively impacted by the closure and transition of our U.S. manufacturing operations, related
headcount reductions and severance costs, and aggressive reductions in inventory. During the first quarter of fiscal 2009, our operating results reflect lower revenue for the Company's
high-end products coming out of Mexico due to the transition in manufacturing. In addition, the Company believes that the current economic environment is not favorable to telescope sales
and that there is uncertainty over the level of revenues

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during
the remainder of fiscal 2009. The overall turnaround of the Company is a continuing effort, and we will continue to evaluate long-term opportunities to further reduce our cost
structure; these opportunities, if executed upon, may result in additional short-term costs that must be recognized in our current consolidated financial statements.

During
the third quarter of fiscal 2008, our Board of Directors formed a special committee that engaged an investment bank to assist the Company in exploring strategic alternatives.
During the first four months of fiscal 2009, we sold our Simmons, Weaver and Redfield sport optics brands for gross
proceeds of $15 million. The exploration of strategic alternatives has been ongoing. Such alternatives may involve a financial restructuring of the Company's capital structure or potentially
the sale of all or a portion of the Company. At this time there can be no assurance that the Company will be able to execute on any strategic alternatives.

The
Company's consolidated financial statements for the fiscal year ended February 29, 2008 were prepared assuming the Company would continue as a going concern; however, the
Company's recurring losses and accumulated deficit raise substantial doubts about its ability to continue as a going concern. The Company's ability to continue as a going concern is in doubt as a
result of a declining sales trend, recurring losses from operations and accumulated deficit and is subject to the Company's ability to increase revenue, restructure the Company by significantly
reducing its cost structure and/or consummating a strategic transaction.

In
August 2007, we completed a private placement of 3.1 million shares of the Company's common stock for gross proceeds of $5.8 million that improved the Company's
liquidity. However, due to the seasonality of the Company's business, we continue to rely on our domestic credit facility to meet much of our liquidity needs. The Company was not in compliance with
the restrictive covenants in the credit facility agreement as of the end of fiscal 2008; in addition from time to time in recent history the Company has not been in compliance with certain of the
restrictive covenants. Although the non-compliance as of fiscal 2008 was waived through the Sixteenth Amendment to the Amended and Restated Credit Agreement between the Company and Bank of
America N.A., and although we have historically been able to obtain amendments and/or waivers from our lender in the past, there is also no guarantee that the Company will be in compliance with the
restrictive covenants in the future, and in the event of noncompliance, there is no guarantee that we will be able to obtain an amendment or waiver. If no amendment or waiver is obtained, the Company
may be in default under the provisions of the credit facility and the Company's lender may accelerate repayment. In this event, we may need to raise funds to repay our lender and there can be no
assurance that such funds will be available.

Critical Accounting Policies and Estimates

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that it believes are reasonable based upon the
information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the periods presented. Actual results may differ from these estimates under different assumptions or conditions. The significant accounting policies which management believes are
the most critical to assist users in fully understanding and evaluating the Company's reported financial results include the following:

Revenue Recognition

The Company's revenue recognition policy complies with Securities and Exchange Commission ("SEC") Staff Accounting Bulletin
No. 104,Revenue Recognition in Financial Statements. Revenue from the sale of products is recognized when title and risk of loss has passed to
the customer, typically at the

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time
of shipment, persuasive evidence of an arrangement exists, including a fixed price, and collectibility is reasonably assured. Revenue is not recognized at the time of shipment if these criteria
are not met. Under certain circumstances, the Company accepts product returns or offers markdown incentives. Material management judgments must be made and used in connection with establishing sales
returns and allowances estimates. The Company continuously monitors and tracks returns and allowances and records revenues net of provisions for returns and allowances. The Company's estimate of sales
returns and allowances is based upon several factors including historical experience, current market and economic conditions, customer demand and acceptance of the Company's products and/or any
notification received by the Company of such a return. Historically, sales returns and allowances have been within management's estimates; however, actual returns may differ significantly, either
favorably or unfavorably, from management's estimates depending on actual market conditions at the time of the return.

Inventories

Inventories are stated at the lower of cost, as determined using the first-in, first-out ("FIFO") method, or
market. Costs include materials, labor and manufacturing overhead. The Company evaluates the carrying value of its inventories taking into account such factors as historical and anticipated future
sales compared with quantities on hand and the price the Company expects to obtain for its products in their respective markets. The Company also evaluates the composition of its inventories to
identify any slow-moving or obsolete product. These evaluations require material management judgments, including estimates of future sales, continuing market acceptance of the Company's
products, and current market and economic conditions. Inventory may be written down based on such judgments for any inventories that are identified as having a net realizable value less than its cost.
However, if the Company is not able to meet its sales expectations, or if market conditions deteriorate significantly from management's estimates, reductions in the net realizable value of the
Company's inventories could have a material adverse impact on future operating results.

Goodwill and Intangible Assets

Goodwill and intangible assets are accounted for in accordance with SFAS No. 142,Goodwill and
Intangible Assets. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment annually and also in the
event of an impairment indicator. As required by SFAS No. 142, we evaluate the recoverability of goodwill based on a two-step impairment test. The first step compares the fair value
of each reporting unit with its carrying amount, including goodwill. If the carrying amount exceeds the fair value, then the second step of the impairment test is performed to measure the amount of
any impairment loss. Fair value is determined based on estimated future cash flows, discounted at a rate that approximates our cost of capital. Such estimates are subject to change and we may be
required to recognize an impairment loss in the future. Any impairment losses will be reflected in operating income.

Income taxes

A deferred income tax asset or liability is established for the expected future consequences of temporary differences in the financial
reporting and tax basis of assets and liabilities. Significant judgment is necessary in the determination of the recoverability of the Company's deferred tax assets. Deferred tax assets are reviewed
regularly for recoverability and the Company establishes a valuation allowance when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company
assesses the recoverability of the deferred tax assets on an ongoing basis. In making this assessment, the Company is required to consider all available positive and negative evidence to determine
whether, based on such evidence, it is more likely than not that some portion, or all, of the net deferred assets will be realized in future periods. If it is determined that it is more likely

16

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than
not that a deferred tax asset will not be realized, the value of that asset will be reduced to its expected realizable value, thereby decreasing net income. If it is determined that a deferred
tax asset that had previously been written down will be realized in the future, the value of that deferred tax asset will be increased, thereby increasing net income in the period when the
determination is made. Actual results may differ significantly, either favorably or unfavorably, from the evidence used to assess the recoverability of the Company's deferred tax assets.

The
Company adopted the provisions of FIN 48 on March 1, 2007. As of May 31, 2008 the liability for income taxes associated with uncertain tax positions decreased
from $0.2 million to $0.1 million due to the expiration of the statute of limitations for various Federal and state filings.

Management
does not anticipate that there will be a material change in the balance of unrecognized tax benefits within the next 12 months. The Company recognizes interest and
penalties related to uncertain tax positions in income tax expense. As of the adoption date of March 1, 2007 and as of May 31, 2008, accrued interest related to uncertain tax benefit was
less than $0.1 million. The tax years 2004-2007 remain open to examination by the major taxing jurisdictions to which the Company is subject.

Results of Operations

The nature of the Company's business is highly seasonal. Historically, sales in the third quarter ended
November 30th each year have been significantly higher than sales achieved in each of the other three fiscal quarters of the year. Thus expenses and to a greater extent,
operating income may significantly vary by quarter. Therefore, caution is advised when appraising results for a period shorter than a full year, or when comparing any period other than to the same
period of the previous year.

Three Months Ended May 31, 2008 Compared to Three Months Ended May 31, 2007

Net sales during the first quarter of fiscal year 2009 were $12.0 million, down approximately 32% from the prior year's first
quarter net sales of $17.6 million. Of the $5.6 million decrease in net sales, approximately 50% was driven by lower revenue for high-end telescope products and accessories.
The Company closed down its high-end manufacturing operations in the U.S. during the last quarter of fiscal 2008 and transferred this production to its facilities in Mexico. These
facilities have not yet ramped up production to levels that meet market demand and the Company has accumulated a backlog for high-end telescopes. The Company expects to clear this backlog
by the third quarter of fiscal 2009. In addition, riflescope revenue decreased by $1.7 million from the year ago levels as a result of weaker demand.

Gross
profit for the quarter ending May 31, 2008 was $2.6 million or 21% of net sales compared with $1.8 million or 10% of net sales in the prior year's comparable
quarter. The improvement in gross profit margin was primarily driven by lower indirect manufacturing costs as a result of the closure of the Company's U.S. manufacturing operations. In addition,
during the first quarter of fiscal 2008 the Company sold certain inventory at lower margins as part of the Company's ongoing campaign to reduce inventory levels.

Selling
expenses for the quarter ending May 31, 2008 were $1.9 million, a 14% decrease from $2.3 million for the same quarter in the prior year. While the lower
sales volume contributed to the lower selling expenses, the overall decrease was also due to lower headcount and reduced discretionary spending.

General
and administrative expenses for the quarter ending May 31, 2008 were $2.8 million, consistent with the same quarter in the prior year.

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Research
and development expenses for the quarter ending May 31, 2008 were $0.3 million compared with $0.4 million for the same quarter in the prior year. The
decrease was principally due to headcount reductions associated with the ongoing restructuring of the Company.

During
the quarter the Company sold its Weaver and Redfield sport optics brands and associated inventory for gross cash proceeds of $8 million. This sale resulted in a gain of
approximately $4.5 million. Excluding this gain, the Company would have reported a net loss of $2.7 million, or $0.12 per share.

Interest
expense was consistent at approximately $0.1 million in both comparable periods.

Income
tax expense was $0.1 million on consolidated basis compared with $0.3 million in the same quarter of fiscal 2008. The tax expense relates almost exclusively to taxes
that the Company will pay in Germany for its profitable European subsidiary. The Company did not record any income tax provision or benefit in the U.S. due to its loss from operations, level of net
operating losses and valuation allowances placed against the deferred tax assets.

Seasonality

The Company has experienced, and expects to continue to experience, substantial fluctuations in its sales, gross margins and
profitability from quarter to quarter. Factors that influence these fluctuations include the volume and timing of orders received, changes in the mix of products sold, market acceptance of the
Company's products, competitive pricing pressures, the Company's ability to meet fluctuating demand and delivery schedules, the timing and extent of research and development expenses, the timing and
extent of product development costs and the timing and
extent of advertising expenditures. In addition, a substantial portion of the Company's net sales and operating income typically occurs in the third quarter of the Company's fiscal year primarily due
to disproportionately higher customer demand for less-expensive telescopes during the holiday season. The Company continues to experience significant sales to mass merchandisers. Mass
merchandisers, along with specialty retailers, purchase a considerable amount of their inventories to satisfy such seasonal customer demand. These purchasing patterns have caused the Company to
increase its level of inventory during its second and third quarters in response to such demand or anticipated demand. As a result, the Company's working capital requirements have correspondingly
increased at such times.

Liquidity and Capital Resources

During the three months ended May 31, 2008, the Company funded its operations principally by borrowing on its bank lines of
credit, proceeds of approximately $8.0 million from the sale of its Weaver and Redfield brands and related assets and by utilizing its cash on hand. Cash flow from operating activities was
negatively affected principally by losses for the period, excluding the gain on its brand sales of approximately $4.5 million.

Working
capital totaled approximately $19.7 million at May 31, 2008, compared to $17.0 million at February 29, 2008. Working capital requirements fluctuate
during the year due to the seasonal nature of the business. These requirements are typically financed through a combination of internally-generated cash flow from operating activities and
short-term bank borrowings.

The
Company had $4.7 million in cash at May 31, 2008, a slight increase compared to $4.3 million at February 29, 2008. The Company's cash during its peak
operating season is comprised mainly of timing differences, as cash is swept on a daily basis to pay down the Company's bank lines of credit. The Company utilizes its availability on its bank lines of
credit to fund operations. Availability under its domestic bank lines of credit at May 31, 2008 was approximately $4.4 million. During the three months ended May 31, 2008,
operations used approximately $2.1 million in cash, offsetting the $8.0 million in proceeds from its sale of its Weaver and Redfield brands and related assets, which the Company also

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used
to repay its domestic line of credit. Working capital requirements fluctuate during the year due to the seasonal nature of the business. These requirements are typically financed through a
combination of internally generated cash flow from operating activities and short-term bank borrowings.

In
June 2008, the Company sold its Simmons brand and related assets for gross proceeds of approximately $7.3 million. The cash generated from the sale of this brand, as well as
the $8.0 million generated from the sale of its Weaver and Redfield brands, fully repaid the Company's domestic credit facility balance. The Company plans to implement a restructuring plan that
includes headcount reductions, facility consolidation, and reductions in corporate overhead and manufacturing costs. Cash flow projections developed by management indicate the Company believes that it
will have sufficient liquidity and capital resources to support current operations through fiscal 2009; however, such sufficiency cannot be assured. Further, the Company continues to depend on
operating cash flow and availability under its bank lines of credit to provide short-term liquidity. The Company's U.S. credit facility expires in September 2009, is collateralized by
substantially all of the domestic assets of the Company and its domestic subsidiaries and contains certain financial covenants including, but not limited to, minimum EBITDA levels, minimum tangible
net worth targets, minimum fixed charge coverage ratios and certain limits on capital expenditures. In addition, the opinion of our independent auditors dated June 13, 2008 expresses
significant doubt about the Company's ability to continue as a going concern which triggered an automatic default under the terms of the Company's bank line of credit. On July 15, 2008, the
Company entered into the Sixteenth Amendment to the Amended and Restated Credit Agreement dated as of October 25, 2002 (the "Sixteenth Amendment") among Bank of America, N.A. (the "Lender").
The Sixteenth Amendment made the following key changes to the credit agreement: (1) reduced the revolver line amount from $15 million currently to $12 million at
November 30, 2008 and $10 million at December 31, 2008; (2) decreased certain amounts of collateral to be used in the borrowing base calculations; and (3) set
minimum EBITDA, tangible net worth and capital expenditure requirements measured on a monthly basis and set minimum fixed charge coverage ratio covenants. Under the Sixteenth Amendment, the Lender
also waived the Company's non-compliance with the covenants under the credit agreement as of the Company's fiscal 2008 year-end and brought the Company into compliance
with all covenants. From time to time in recent history the Company has not been in compliance with certain of the restrictive covenants. While the Company has historically been able to obtain
amendments and/or waivers from its lender, there is no guarantee that the Company will be in compliance with the restrictive covenants in the future, and in the event of noncompliance, there is no
guarantee that the Company will be able to obtain an amendment or waiver. If no amendment or waiver is obtained, the Company may be in default under the provisions of the credit facility and the
Company's lender may accelerate repayment. In this event, the Company may need to raise funds to repay its lender and there can be no assurance that such funds will be available.

During
the third quarter of fiscal 2008, the Company announced that the Board of Directors had formed a special committee that has engaged an investment bank to assist the Company in
exploring strategic alternatives. Subsequent to fiscal 2008, the Company announced that it had sold its Simmons, Weaver and Redfield sport optics brands for gross proceeds of $15 million.
However, the review of strategic alternatives is continuing. Such alternatives may involve a financial restructuring of the Company's capital structure or potentially the sale of all or a portion of
the Company. At this time there can be no assurance that the Company will be able to execute on any strategic alternatives.

Capital
expenditures, including financed purchases of equipment, aggregated $0.1 million and $0.1 million for the three month periods ended May 31, 2008 and 2007,
respectively. The Company had no material capital expenditure commitments at May 31, 2008.

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Inflation

The Company does not believe that inflation has had a material effect on the results of operations during the past three years.
However, there can be no assurance that the Company's business will not be affected by inflation in fiscal 2009 and beyond.

New Accounting Pronouncements

In April 2008, the FASB issued FASB Staff Position No. FAS 142-3,"Determination of the
Useful Life of Intangible Assets"("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, "Goodwill and Other Intangible Assets"and
requires enhanced disclosures relating to: (a) the entity's accounting policy on the treatment of costs incurred to renew or extend the term of a recognized intangible asset; (b) in the
period of acquisition or renewal, the weighted-average period prior to the next renewal or extension (both explicit and implicit), by major intangible asset class and (c) for an entity that
capitalizes renewal or extension costs, the total amount of costs incurred in the period to renew or extend the term of a recognized intangible asset for each period for which a statement of financial
position is presented, by major intangible asset class. FSP 142-3 must be applied prospectively to all intangible assets acquired as of and subsequent to fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. We are currently evaluating the impact that FAS No. 161 will have on our financial
statements.

In
March 2008, the FASB issued FAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133" ("FAS
No. 161"). FAS No. 161 requires enhanced disclosure related to derivatives and hedging activities and thereby seeks to improve the transparency of financial reporting. Under FAS
No. 161, entities are required to provide enhanced disclosures relating to: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedge
items are accounted for under FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS No. 133"), and its related interpretations; and (c) how derivative
instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. FAS No. 161 must be applied prospectively to all derivative instruments and
non-derivative instruments that are designated and qualify as hedging instruments
and related hedged items accounted for under FAS No. 133 for all financial statements issued for fiscal years and interim periods beginning after November 15, 2008, which for us begins
with our 2010 fiscal year. We are currently evaluating the impact that FAS No. 161 will have on our financial statements.

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that
require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement
does not require any new fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years.

Accordingly,
this Statement does not require any new fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. The Company adopted SFAS No. 157 on March 1, 2008. The adoption did not have a material impact on the Company's
consolidated financial position, results of operations or cash flows.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. This
Statement permits entities to choose to measure many financial instruments

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and
certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with
the Board's long-term measurement objectives for accounting for financial instruments. Most of the provisions of this Statement apply only to entities that elect the fair value option.
However, the amendment to FASB Statement No. 115,Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company adopted SFAS No. 159 on March 1, 2008. The adoption did not
have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations("SFAS 141R"). SFAS 141R
establishes the requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill
acquired. SFAS 141R also establishes disclosure requirements for business combinations. SFAS 141R is effective for annual periods beginning after December 31, 2008 and should be
applied
prospectively for all business combinations entered into after the date of adoption. SFAS 141R will have an impact on our accounting for business combinations once adopted on March 1,
2009, but the effect will be dependent upon acquisitions after that date.

In
December 2007, the FASB approved the issuance of SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statementsan amendment of
ARB No. 51("SFAS 160"). SFAS 160 will change the accounting and reporting for minority interests, which will now be termed noncontrolling interests. SFAS 160
requires noncontrolling interest to be presented as a separate component of equity and requires the amount of
net income attributable to the parent and to the noncontrolling interest to be separately identified on the consolidated statement of operations. SFAS 160 is effective for fiscal years
beginning on or after December 15, 2008. We do not expect adoption of SFAS 160 to have any impact on our consolidated financial position, results of operations or cash flows.

Forward-Looking Information

The preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contains various "forward
looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which represent
the Company's reasonable judgment concerning the future and are subject to risks and uncertainties that could cause the Company's actual operating results and financial position to differ materially,
including the following: the Company being able to see continued progress in its restructuring efforts, the timing of such restructuring efforts, and the fact that the restructuring efforts will
result in positive financial results in the future; the Company's expectation that it will be able to resolve its liquidity challenges through negotiation with its lenders and through restructuring
its business to reduce its cost structure; the Company's expectation that it can successfully transfer its manufacturing operations without significantly disrupting its supply chain; the Company's
expectations in the amounts of cost savings to be achieved through restructuring the Company; the Company's expectations that it will be able to successfully negotiate new covenants with its lender on
terms favorable to the Company; the Company's ability to negotiate a potential strategic alternative, if at all; the Company's expectation that it will be able to build inventory of other necessary
products in preparation for the holiday season; the Company's expectation that it will continue to experience fluctuations in its sales, gross margins and profitability from quarter to quarter
consistent with prior periods; the Company's expectation that contingent liabilities will not have a material effect on the Company's financial position or results of operations; the Company's
expectation that operating cash

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flow
and bank borrowing capacity in connection with the Company's business should provide sufficient liquidity for the Company's obligations for at least the next twelve months.

ITEM 3.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

The Company's management (with the participation of our Chief Executive Officer and Chief Financial Officer) evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as of the quarter ended May 31, 2008. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, have been or will be detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their
objectives.

The
Company's Chief Executive Officer and Chief Financial Officer concluded, based on their evaluation, that the Company's disclosure controls and procedures are effective for the
Company as of the end of the period covered by this report.

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PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Not applicable.

ITEM 1.A.    RISK FACTORS

Not applicable.

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

Not applicable.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5.    OTHER INFORMATION

Not applicable.

ITEM 6.    EXHIBITS

|             |  |                                                                    
|------------ |  | -------------------------------------------------------------------
|
|Exhibit 31.1 |  | Sarbanes-Oxley Act Section 302 Certification by Steven L. Muellner*
|Exhibit 31.2 |  | Sarbanes-Oxley Act Section 302 Certification by Paul E. Ross*      
|Exhibit 32.1 |  | Sarbanes-Oxley Act Section 906 Certification by Steven L. Muellner*
|Exhibit 32.2 |  | Sarbanes-Oxley Act Section 906 Certification by Paul E. Ross*      

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23

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SIGNATURES

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.

MEADE INSTRUMENTS CORP.Dated: July 18, 2008

By:

/s/STEVEN L. MUELLNERSteven L. Muellner President and Chief Executive OfficerBy:

/s/PAUL E. ROSSPaul E. Ross Senior Vice PresidentFinance and
Chief Financial Officer


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EXHIBIT INDEX

|             |  |                                                                    
|------------ |  | -------------------------------------------------------------------
|
|Exhibit 31.1 |  | Sarbanes-Oxley Act Section 302 Certification by Steven L. Muellner*
|Exhibit 31.2 |  | Sarbanes-Oxley Act Section 302 Certification by Paul E. Ross*      
|Exhibit 32.1 |  | Sarbanes-Oxley Act Section 906 Certification by Steven L. Muellner*
|Exhibit 32.2 |  | Sarbanes-Oxley Act Section 906 Certification by Paul E. Ross*      

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