**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe quarterly period ended August 31, 2007**

**or**

**£**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**CommissionFile Number 0-22183**

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**MEADE INSTRUMENTS CORP.**

(Exact name of registrantas specified in its charter)

| **Delaware**                              |   | **95-2988062**       |
|-------------------------------------------|--------|----------------------|
| (State or other  jurisdiction             |   | (I.R.S. Employer     |
| of incorporation  or organization)        |   | Identification  No.) |
| **6001 Oak Canyon, Irvine, CA**           |   | **92618**            |
| (Address of  principal executive offices) |   | (Zip Code)           |

 

**(949) 451-1450**

(Registrant’s telephonenumber, including area code)

Indicate by check mark ifthe registrant: (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x No o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and “largeaccelerated filer” in Rule 12(b)-2 of the Exchange Act.
| Large Accelerated Filer o | Accelerated Filer  o | Non-accelerated Filer x |
|---------------------------|----------------------|-------------------------|

 

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

As of October 15,2007, there were 23,284,730 outstanding shares of the Registrant’s commonstock, par value $0.01 per share.

 

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**MEADE INSTRUMENTSCORP.TABLE OF CONTENTS**
|                                                                                                                            | ** ** | **Page No.** |
|----------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
| **PART I—FINANCIAL INFORMATION**                                                                                 |       |              |
| Item  1. Financial Statements                                                                                              |       | 2                 |
| Condensed Consolidated Balance Sheets  (Unaudited)—August 31, 2007 and February 28, 2007                    |       | 2                 |
| Condensed Consolidated Statements of Operations  (Unaudited)—Three and Six Months Ended August 31, 2007 and 2006 |       | 3                 |
| Condensed Consolidated Statements of Cash Flows  (Unaudited)—Six Months Ended August 31, 2007 and 2006           |       | 4                 |
| Notes to Consolidated Financial Statements (Unaudited)                                                                     |       | 5                 |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations                        |       | 14                |
| Item 3. Quantitative and Qualitative Disclosures about  Market Risk                                                        |       | 22                |
| Item 4. Controls and Procedures                                                                                            |       | 23                |
| **PART II—OTHER  INFORMATION**                                                                                   |       |              |
| Item  1. Legal Proceedings                                                                                                 |       | 24                |
| Item  1A. Risk Factors                                                                                                     |       | 25                |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                                       |       | 31                |
| Item 3. Defaults Upon Senior Securities                                                                                    |       | 31                |
| Item 4. Submission of Matters to a Vote of Security  Holders                                                               |       | 32                |
| Item  5. Other Information                                                                                                 |       | 32                |
| Item 6.  Exhibits                                                                                                          |       | 32                |
| Signatures                                                                                                                 |       | 33                |

 

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**ITEM 1.**                FINANCIALSTATEMENTS.

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

| ** **                                                                                                                                                                       | ** ** | **August 31,  2007** | ** ** | **February 28,  2007** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|-----------------------------|------------|
| ASSETS                                                                                                                                                                           |       |                      |       |                        |       |   |   |
| Current assets:                                                                                                                                                                  |       |                      |       |                        |       |   |   |
| Cash                                                                                                                                                                             |       | $                         | 2,114      |                        |       | $ | 4,048 |   |   |
| Accounts receivable, less allowance for doubtful  accounts of $557 at August 31, 2007 and $1,048 at February 28, 2007                                                  |       | 12,826                    |       |                        | 12,445     |   |   |
| Inventories, net                                                                                                                                                                 |       | 33,824                    |       |                        | 25,289     |   |   |
| Prepaid expenses and other current assets                                                                                                                                        |       | 712                       |       |                        | 443        |   |   |
| Total current assets                                                                                                                                                             |       | 49,476                    |       |                        | 42,225     |   |   |
| Goodwill                                                                                                                                                                         |       | 3,141                     |       |                        | 3,141      |   |   |
| Acquisition-related intangible assets, net                                                                                                                                       |       | 4,515                     |       |                        | 4,682      |   |   |
| Property and equipment, net                                                                                                                                                      |       | 4,783                     |       |                        | 4,851      |   |   |
| Other assets, net                                                                                                                                                                |       | 285                       |       |                        | 230        |   |   |
|                                                                                                                                                                             |       | $                         | 62,200     |                        |       | $ | 55,129 |   |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                                       |       |                      |       |                        |       |   |   |
| Current  liabilities:                                                                                                                                                            |       |                      |       |                        |       |   |   |
| Bank lines of credit                                                                                                                                                             |       | $                         | 6,969      |                        |       | $ | 860 |   |   |
| Accounts payable                                                                                                                                                                 |       | 15,396                    |       |                        | 8,551      |   |   |
| Accrued liabilities                                                                                                                                                              |       | 4,083                     |       |                        | 6,810      |   |   |
| Income taxes payable                                                                                                                                                             |       | 33                        |       |                        | 1,415      |   |   |
| Current portion of long-term debt and capital lease  obligations                                                                                                                 |       | 1,128                     |       |                        | 200        |   |   |
| Total current liabilities                                                                                                                                                        |       | 27,609                    |       |                        | 17,836     |   |   |
| Long-term debt  and capital lease obligations                                                                                                                                    |       | 13                        |       |                        | 1,186      |   |   |
| Deferred income  taxes                                                                                                                                                           |       | 1,272                     |       |                        | 1,436      |   |   |
| Deferred rent                                                                                                                                                                    |       | 122                       |       |                        | 195        |   |   |
| Commitments and  contingencies                                                                                                                                                   |       |                      |       |                        |       |   |   |
| Stockholders’ equity:                                                                                                                                                       |       |                      |       |                        |       |   |   |
| Common stock; $0.01 par value; 50,000 shares  authorized; 23,285 and 20,086 shares issued and outstanding at  August 31, 2007 and February 28, 2007, respectively |       | 233                       |       |                        | 201        |   |   |
| Additional paid-in capital                                                                                                                                                       |       | 51,308                    |       |                        | 45,104     |   |   |
| Retained earnings (deficit)                                                                                                                                                      |       | (19,306                   | )          |                        | (11,096    | ) |   |
| Deferred stock compensation                                                                                                                                                      |       | (110                      | )          |                        | (148       | ) |   |
| Accumulated other comprehensive income                                                                                                                                           |       | 2,004                     |       |                        | 1,580      |   |   |
|                                                                                                                                                                             |       | 34,129                    |       |                        | 35,641     |   |   |
| Unearned ESOP  shares                                                                                                                                                            |       | (945                      | )          |                        | (1,165     | ) |   |
| Total stockholders’ equity                                                                                                                                                  |       | 33,184                    |       |                        | 34,476     |   |   |
|                                                                                                                                                                             |       | $                         | 62,200     |                        |       | $ | 55,129 |   |   |

 

See accompanying notes to condensed consolidated financial statements

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

| ** **                                                            | ** ** | **Three Months Ended August 31,** | ** ** | **Six Months Ended August 31,** | ** ** |
|-----------------------------------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                                            | ** ** | **2007**                                         | ** ** | **2006**                                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net sales                                                             |       | $                                                | 16,194     |                                           | $          | 18,585 |   | $ | 33,815 |   | $ | 37,331 |   |
| Cost of sales                                                         |       | 13,898                                           |       | 15,674                                         |       | 29,688 |   | 30,971 |   |
| Gross profit                                                          |       | 2,296                                            |       | 2,911                                          |       | 4,127 |   | 6,360 |   |
| Selling expenses                                                      |       | 2,917                                            |       | 4,423                                          |       | 5,168 |   | 7,782 |   |
| General and  administrative expenses                                  |       | 2,712                                            |       | 3,994                                          |       | 5,550 |   | 7,039 |   |
| ESOP expense                                                          |       | 66                                               |       | 72                                             |       | 135 |   | 150 |   |
| Research and  development expenses                                    |       | 561                                              |       | 379                                            |       | 1,009 |   | 706 |   |
| Operating loss                                                        |       | (3,960                                           | )          | (5,957                                         | )          | (7,735 | ) | (9,317 | ) |
| Interest expense                                                      |       | 231                                              |       | 116                                            |       | 325 |   | 215 |   |
| Loss before  income taxes                                             |       | (4,191                                           | )          | (6,073                                         | )          | (8,060 | ) | (9,532 | ) |
| Income tax  (benefit) expense                                         |       | (173                                             | )          | (140                                           | )          | 162 |   | (23 | ) |
| Net loss                                                              |       | $                                                | (4,018     | )                                              | $          | (5,933 | ) | $ | (8,222 | ) | $ | (9,509 | ) |
| Basic and diluted  loss per share                                     |       | $                                                | (0.20      | )                                              | $          | (0.30 | ) | $ | (0.42 | ) | $ | (0.49 | ) |
| Weighted average number  of shares outstanding—basic and diluted |       | 20,054                                           |       | 19,610                                         |       | 19,745 |   | 19,557 |   |

 

See accompanying notes to condensed consolidated financial statements

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**MEADE INSTRUMENTS CORP.**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands, except per share data) (Unaudited)

| ** **                                                                   | ** ** | **Six Months Ended August 31,** | ** ** |
|------------------------------------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2007**                                       | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                       |       |                                           |       |   |   |
| Net loss                                                                     |       | $                                              | (8,222     | ) | $ | (9,509 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                                           |       |   |   |
| Depreciation and amortization expense                                        |       | 819                                            |       | 902 |   |
| Deferred rent amortization                                                   |       | (73                                            | )          | (67 | ) |
| Deferred income taxes                                                        |       | (138                                           | )          | — |   |
| ESOP contribution                                                            |       | 135                                            |       | 150 |   |
| Change in allowance for doubtful accounts                                    |       | (499                                           | )          | — |   |
| Stock-based compensation                                                     |       | 276                                            |       | 234 |   |
| Changes in assets  and liabilities:                                          |       |                                           |       |   |   |
| Decrease in accounts receivable                                              |       | 276                                            |       | 1,111 |   |
| Increase in inventories                                                      |       | (8,365                                         | )          | (5,021 | ) |
| Increase (decrease) in prepaid expenses and other  assets                    |       | (394                                           | )          | 211 |   |
| Increase in accounts payable                                                 |       | 6,828                                          |       | 8,445 |   |
| Increase (decrease) in accrued liabilities                                   |       | (2,775                                         | )          | 1,323 |   |
| Increase (decrease) in income taxes payable                                  |       | (1,543                                         | )          | 494 |   |
| Net cash used in operating activities                                        |       | (13,675                                        | )          | (1,727 | ) |
| Cash flows from  investing activities:                                       |       |                                           |       |   |   |
| Additional consideration paid for Coronado  acquisition                      |       | —                                         |       | (1,026 | ) |
| Capital expenditures                                                         |       | (305                                           | )          | (290 | ) |
| Net cash used in investing activities                                        |       | (305                                           | )          | (1,316 | ) |
| Cash flows from  financing activities:                                       |       |                                           |       |   |   |
| Net proceeds from stock offering                                             |       | 5,979                                          |       | — |   |
| Net borrowings under bank lines of credit                                    |       | 6,109                                          |       | (257 | ) |
| Payments on long-term bank notes                                             |       | (280                                           | )          | (1,388 | ) |
| Payments under capital lease obligations                                     |       | (12                                            | )          | (16 | ) |
| Net cash provided by (used in) financing activities                          |       | 11,796                                         |       | (1,661 | ) |
| Effect of  exchange rate changes on cash                                     |       | 250                                            |       | 223 |   |
| Net decrease in  cash                                                        |       | (1,934                                         | )          | (4,481 | ) |
| Cash at beginning  of period                                                 |       | 4,048                                          |       | 7,589 |   |
| Cash at end of period                                                        |       | $                                              | 2,114      |   | $ | 3,108 |   |

 

See accompanying notes to condensed consolidated financial statements

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**MEADE INSTRUMENTS CORP.**NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(In Thousands, except per share data) (Unaudited)

**A.****                TheCondensed Consolidated Financial Statements Have Been Prepared by the Companyand are Unaudited.**

In management’s opinion, the information and amountsfurnished in this report reflect all adjustments (consisting of normalrecurring adjustments) considered necessary for the fair statement of thefinancial position and results of operations for the interim periods presented.These condensed consolidated financial statements should be read in conjunctionwith the Company’s Annual Report on Form 10-K for the fiscal yearended February 28, 2007.

TheCompany has experienced and expects substantial fluctuations in its sales,gross margins and profitability to continue from quarter to quarter. Factorsthat influence these fluctuations include the volume and timing of ordersreceived, changes in the mix of products sold, market acceptance of the Company’sproducts, competitive pricing pressures, the Company’s ability to meet demandand delivery schedules and the timing and extent of research and developmentexpenses, marketing expenses and product development expenses. In addition, asubstantial portion of the Company’s net sales and operating income typicallyoccur in the third quarter of the Company’s fiscal year primarily due todisproportionately higher customer demand for less-expensive products duringthe holiday season. The results of operations for the quarters ended August 31,2007 and 2006, respectively, are not necessarily indicative of the operatingresults for the entire fiscal year.

**B.****               Liquidity**

The Company incurred a net loss of $ $8.2 million inthe six months ended August 31, 2007 after incurring net losses of $19.2million and $14.0 million in the years ended February 28, 2007 and 2006,respectively. These losses were largely driven by decreases in revenues andgross margins. Revenue during the first six months of fiscal 2008 wasnegatively affected by the loss of a significant customer, Discovery ChannelStores, which announced that it was closing its retail mall operations. Revenuesin the 2007 and 2006 fiscal years were negatively affected by a lack ofsupply of riflescopes and some of the Company’s foreign-sourced and domesticallyproduced telescopes. In addition, the Company’s largest competitor in thetelescope market is owned by a China based manufacturer that can offer verycompetitively priced products. This competition has put particular pressure onthe Company’s revenue and margins for high-end telescopes. Gross margins havedecreased due to the reduced sales volume of higher-end products during theyear (not covering fixed costs for manufactured product), and the aggressiveinventory rationalization and SKU reduction initiatives undertaken bymanagement. Operating margins have also suffered due to costs related tofacility closures and non-recurring legal, audit and consulting fees related tostock options and litigation and severance (in fiscal 2007).

With respect to sales recovering from the declinesexperienced during fiscal 2007 and year-to-date fiscal 2008, managementbelieves that: 1) production of its riflescope and telescope products (bothdomestically produced and foreign sourced) are now fully on-line across allproduct lines and that production will be able to fully meet demand; 2) acombination of new products, effective marketing and appropriate pricing maystimulate demand for the Company’s higher-end products; and 3) while competitionfor low-end products will continue to be acute, the Company may be able toincrease demand for these products with enhanced and new product introductions,targeted marketing and competitive pricing.

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In August 2007, the Company completed a privateplacement of 3.1 million shares of the Company’s common stock for grossproceeds of $6.1 million that significantly enhanced the Company’s liquidity. However,due to the seasonality of the Company’s business, the Company relies on itsdomestic credit facility to meet much of its liquidity needs. During thequarter ended August 31, 2007, the Company was not in compliance with theEBITDA-based restrictive covenant in the credit facility agreement. On October 11,2007 the Company obtained a 30-day waiver from its lender related to thiscovenant and is currently negotiating an amendment to the credit facilityrelated to future covenants. The Company expects that it will reach agreementwith its lender within the 30-day timeline. However, if no amendment orextension of the waiver is obtained, the Company may be in default under theprovisions of the credit facility and the Company’s lender may acceleraterepayment. In this event, the Company may need to raise funds to repay itslender and there can be no assurance that such funds will be available.

On October 11,2007, we announced a restructuring plan that would significantly reduce ourcost structure by moving our California-based manufacturing operations to alower-cost location. In addition, we announced that the Board of Director’s hasformed a special committee and will engage an investment bank to assist theCompany in exploring strategic alternatives. Such alternatives may involve afinancial restructuring of the Company’s capital structure or potentially thesale of all or a portion of the Company. At this time there can be no assurancethat the Company will be able to execute on any strategic alternatives.

**C.****               StockBased Compensation**

The Company accounts for stock-based compensation inaccordance with the provisions of Statement of Financial Accounting Standards123R, (“SFAS 123R”) *Share-Based Payment*,which establishes accounting for equity instruments exchanged for employeeservices. Under the provisions of SFAS 123R, share-based compensation cost ismeasured 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 compensationexpenses, included in general and administrative expenses in the Company’scondensed consolidated statement of operations for the three and six monthsended August 31, 2007 and 2006, were approximately $0.3 million and $0.2million, respectively. Due to deferred tax valuation allowances provided duringthe quarter, no net benefit was recorded against the share-based compensationcharged during the period.

The Company estimates the fair value of stock optionsusing the Black-Scholes valuation model. Key input assumptions used to estimatethe fair value of stock options include the expected option term, forfeiturerate, the expected volatility of the Company’s stock over the option’s expectedterm, the risk-free interest rate over the option’s expected term, and theCompany’s expected annual dividend yield. The Company believes that thevaluation technique and the approach utilized to develop underlying assumptionsare appropriate in calculating the fair values of the Company’s stock optionsgranted in the six months ended August 31, 2007. Estimates of fair valueare not intended to predict actual future events or the value ultimatelyrealized by persons who receive equity awards.

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The fair value of theCompany’s stock options was estimated on the grant date using the Black-Scholesoption-pricing model with the following assumptions:

**For the six months ended August 31, 2007 and 2006**

| ** **                  | ** ** | **2007**  | ** ** | **2006**  | ** ** |
|-----------------------------|------------|-----------|------------|-----------|------------|
| Expected life(1)            |       | 3.8 years |       | 6.2 years |       |
| Expected volatility(2)      |       | 69        | %          | 73        | %          |
| Risk-free interest  rate(3) |       | 4.3       | %          | 5.0       | %          |
| Expected dividends          |       | None      |       | None      |       |

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(1)          The option term wasdetermined using the simplified method for estimating expected option life.

(2)          The stock volatility foreach grant is measured using the weighted average of historical daily pricechanges of the Company’s common stock over the most recent period equal to theexpected option life of the grant, adjusted for activity which is not expectedto occur in the future.

(3)          The risk-free interestrate for periods equal to the expected term of the share option is based on theU.S. Treasury yield curve in effect at the time of grant.

As of August 31,2007 there was approximately $1.8 million of unrecognized compensation costrelated to unvested stock options. This cost is expected to be recognized overa weighted-average period of approximately 4 years. At February 28, 2007,there was approximately $1.1 million of unrecognized compensation costs relatedto unvested stock options.

**D.****              Compositionof Certain Balance Sheet Accounts**

Thecomposition of inventories is as follows: 

| ** **      | ** ** | **August 31,  2007** | ** ** | **February 28,  2007** | ** ** |
|-----------------|------------|---------------------------|------------|-----------------------------|------------|
| Raw materials   |       |                      | $          | 6,973                       |       |   |   | $ | 5,575 |   |   |
| Work-in-process |       |                      | 3,659      |                        |       |   | 5,560 |   |   |
| Finished goods  |       |                      | 23,192     |                        |       |   | 14,154 |   |   |
|            |       |                      | $          | 33,824                      |       |   |   | $ | 25,289 |   |   |

 

Thecomposition of acquisition-related intangible assets is as follows:

| ** **                                                   | ** ** | **August 31,  2007** | ** ** | **February 28,  2007** | ** ** |
|--------------------------------------------------------------|------------|---------------------------|------------|-----------------------------|------------|
| Brand  names—non-amortizing                             |       |                      | $          | 2,041                       |       |   |   | $ | 2,041 |   |   |
| Trademarks                                                   |       |                      | 1,938      |                        |       |   | 1,938 |   |   |
| Customer  relationships                                      |       |                      | 1,390      |                        |       |   | 1,390 |   |   |
| Completed  technologies                                      |       |                      | 1,620      |                        |       |   | 1,620 |   |   |
| Other                                                        |       |                      | 56         |                        |       |   | 56 |   |   |
| Accumulated  amortization                                    |       |                      | (2,530     | )                           |       |   | (2,363 | ) |   |
| Total amortizing acquisition-related intangible  assets, net |       |                      | 2,474      |                        |       |   | 2,641 |   |   |
| Total  acquisition-related intangible assets, net            |       |                      | $          | 4,515                       |       |   |   | $ | 4,682 |   |   |

 

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Amortization of trademarks and customer relationshipsover the next five fiscal years is estimated as follows:

| **Fiscal Year** | ** ** | ** ** | ** ** | **Amount** | ** ** |
|----------------------|------------|------------|------------|------------|------------|
| 2008                 |       |       | $          | 336        |       |   |
| 2009                 |       |       | 336        |       |       |
| 2010                 |       |       | 336        |       |       |
| 2011                 |       |       | 336        |       |       |
| 2012                 |       |       | 336        |       |       |
| Thereafter           |       |       | 961        |       |       |

 

TheCompany accounts for goodwill and acquisition-related intangible assets inaccordance with Statement of Financial Accounting Standards No. 142, *Goodwill and Other Intangible Assets* (“SFAS 142”) whichrequires that goodwill and identifiable assets determined to have an indefinitelife no longer be amortized, but instead be tested for impairment at leastannually.

**E.****               Commitmentsand Contingencies**

The following purported Stockholder derivative actionhas been filed challenging conduct by certain of the Company’s current andformer board members and officers in connection with various stock option grants:

*In reMeade Instruments Corp. Derivative Litigation,* No. 06-CC-205,Superior Court of the State of California for the County of Orange, filed October 6,2006. On November 22, 2006, the court consolidated under the above captiontwo state derivative actions: (i) *Barclayv. Diebel*, et al., No. 06-CC-205, Superior Court ofthe State of California for the County of Orange, filed October 6, 2006and (ii) *Bryant v Diebel*, etal., No. 06-CC-206, Superior Court of the State of Californiafor the County of Orange, filed October 6, 2006. The plaintiffs filed aconsolidated complaint on December 22, 2006, and the defendants fileddemurrers to the complaint on February 5, 2007. The consolidatedcomplaint asserts causes of action for breach of fiduciary duty, accounting,abuse of control, gross mismanagement, constructive trust, corporate waste,rescission, unjust enrichment, and violation of California Corporations Code inconnection with the Company’s option granting practices. On May 23, 2007,the parties in both this action and the class action discussed belowparticipated in a mediation. As a result of this mediation, the parties in bothactions reached a preliminary settlement understanding, which includescorporate governance reforms and an amount to cover plaintiffs’ attorneys’ fees.The Company anticipates that the monetary portion of the proposed settlementwill be covered by the Company’s director and officer liability insurance. Theparties have submitted the settlement agreement and related paperwork for thecourt’s approval.

The following putative federal securities class actionhas also been filed challenging conduct by the Company and certain of itscurrent and former board members and officers in connection with various stockoption grants:

*Grecianv. Meade Instruments Corp., et al.,* No. SA CV 06-908AG (JTLx), United states District Court for the Central District of California,filed September 27, 2006. On January 8, 2007, the court granted thenamed plaintiffs’ motion to be appointed lead plaintiffs. On February 22,2007, the plaintiffs filed their second amended complaint, which asserts claimsfor violations of Section 10(b), 14(a) and 20(a) of the SecuritiesExchange Act in connection with the Company’s option granting practices. On May 23,2007, the parties in both this action and the derivative action discussed aboveparticipated in a mediation. As a result of this mediation, the parties in bothactions reached a preliminary settlement understanding, which includescorporate governance reforms and an award to the class, from which plaintiffs’attorneys’ fees and administrative costs would be paid. The Company 

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anticipates that themonetary portion of the proposed settlement will be covered by the Company’sdirector and officer liability insurance. The parties have submitted thesettlement agreement and related paperwork for the court’s approval.

On September 28,2006, Daniel Azari, Paul T. Jones (dba Star Instruments) and RC OpticalSystems, Inc. filed an action against Meade and certain Meade dealers inthe United States District Court for the Southern District of New York,alleging the following claims: (1) violation of the Racketeer InfluencedAnd Corrupt Organization Act (“RICO”); (2) violation of New York GeneralBusiness Law §§ 349 and 350; (3) violation of California Business andProfessions Code § 17200; (4) unfair competition; and (5) productdisparagement. The gravamen of the complaint is that Meade and other defendantsallegedly falsely advertise Meade’s Advanced Ritchey-Chretien products as beingRitchey-Chretien products. On October 31, 2006, Plaintiffs filed anAmended Complaint, adding claims for violation of the Lanham Act. On January 3,2007, the United States District Court for the Southern District of New Yorkgranted a motion filed by Meade and ordered the case transferred to the UnitedStates District Court for the Central District of California. In March 2007,the court dismissed the following claims: (1) violation of the RICO Act; (2) violationof New York General Business Law §§ 349 and 350; and (3) productdisparagement. In June 2007, the court dismissed all claims byPlaintiff Daniel Azari. The complaint seeks injunctive relief, compensatorydamages, and attorneys’ fees and costs.

On June 13, 2006,the Company issued a press release announcing that it had received notificationfrom the Securities and Exchange Commission (the “SEC”) of an informal inquiryinto the Company’s past stock option grant practices. The Company iscooperating with the SEC in this inquiry.

Due to theuncertainties of litigation, the Company is unable to provide an evaluation ofthe likelihood of either a favorable or unfavorable outcome in the abovementioned cases.

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

**F.****                LossPer Share**

Basic loss per share amounts exclude the dilutiveeffect of potential shares of common stock. Basic loss per share is based uponthe weighted-average number of shares of common stock outstanding, whichexcludes unallocated ESOP shares. Diluted loss per share is based upon theweighted-average number of shares of common stock and dilutive potential sharesof common stock outstanding for each period presented. Potential shares ofcommon stock include outstanding stock options and restricted stock, which maybe included in the weighted average number of shares of common stock under thetreasury stock method.

Thetotal number of options and restricted shares outstanding were as follows:

| ** **                     | ** ** | **August 31,  2007** | ** ** | **February 28,  2007** | ** ** |
|--------------------------------|------------|---------------------------|------------|-----------------------------|------------|
| Stock options  outstanding     |       |                      | 3,477      |                        |       |   | 2,741 |   |   |
| Restricted shares  outstanding |       |                      | 104        |                        |       |   | 95 |   |   |

 

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Areconciliation of the basic weighted average number of shares outstanding andthe diluted weighted average number of shares outstanding follows:

| ** **                                                                                                                                                                                                       | ** ** | **Three Months Ended August 31,**         | ** ** | **Six Months Ended August 31,**           | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                       | ** ** | **    2007    ** | ** ** | **    2006    ** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Basic weighted  average number of shares                                                                                                                                                                         |       |                                                     | 20,054     |                                                     |       |   | 19,610 |   |   | 19,745 |   | 19,557 |   |
| Dilutive  potential shares of common stock                                                                                                                                                                       |       |                                                     | —     |                                                     |       |   | — |   |   | — |   | — |   |
| Diluted weighted  average number of shares outstanding                                                                                                                                                           |       |                                                     | 20,054     |                                                     |       |   | 19,610 |   |   | 19,745 |   | 19,557 |   |
| Number 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 |       |                                                     | 3,352      |                                                     |       |   | 3,688 |   |   | 3,322 |   | 3,688 |   |
| Potential shares of  common stock excluded from the calculation of weighted average shares                                                                                                             |       |                                                     | 239        |                                                     |       |   | 203 |   |   | 269 |   | 168 |   |

 

Weightedaverage shares for the three and six month periods ended August 31, 2007and 2006, respectively, exclude the aggregate dilutive effect of potentialshares of common stock related to stock options and restricted stock, becausethe Company incurred a loss and the effect would be anti-dilutive.

**G.****              ComprehensiveLoss**

Comprehensiveloss is defined as a change in the equity of a business enterprise during aperiod from transactions and other events and circumstances from non-ownersources and, at August 31, 2007 and 2006, includes foreign currencytranslation adjustments and adjustments to the fair value of highly effectivederivative instruments. For the three months ended August 31, 2007 and2006, the Company had other comprehensive loss as follows:

| ** **                                                                   | ** ** | **Three Months Ended  August 31,** | ** ** | **Six Months Ended  August 31,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2007**                                          | ** ** | **2006**                                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net loss                                                                     |       | $                                                 | (4,018     | )                                               | $          | (5,933 | ) | $ | (8,222 | ) | $ | (9,509 | ) |
| Currency  translation adjustments                                            |       | 111                                               |       | 1                                               |       | 237 |   | 481 |   |
| Change in fair  value of foreign currency forward contracts, net of tax |       | 170                                               |       | 243                                             |       | 187 |   | (581 | ) |
| Total other  comprehensive loss                                              |       | $                                                 | (3,737     | )                                               | $          | (5,689 | ) | $ | (7,798 | ) | $ | (9,609 | ) |

 

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**H.****              ProductWarranties**

TheCompany provides reserves for the estimated cost of product warranty-relatedclaims at the time of sale, and periodically adjusts the provision to reflectactual experience related to its standard product warranty programs and itsextended warranty programs. The amount of warranty liability accrued reflectsmanagement’s best estimate of the expected future cost of honoring Companyobligations under its warranty plans. Additionally, from time to time, specificwarranty accruals may be made if unforeseen technical problems arise. Meade andBresser branded products, principally telescopes and binoculars, are generallycovered by a two-year limited warranty. Many of the Simmons products,principally riflescopes and binoculars, have lifetime limited warranties. Mostof the Coronado products have limited five-year warranties. Changes in the warrantyliability, which is included as a component of accrued liabilities on theaccompanying condensed consolidated balance sheets, were as follows:

| ** **                | ** ** | **Three Months Ended  August 31,**        | ** ** | **Six Months Ended  August 31,**          | ** ** |
|---------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                | ** ** | **    2007    ** | ** ** | **    2006    ** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Beginning balance         |       |                                                     | $          | 1,372                                                    |       |   |   | $ | 1,110 |   |   | $ | 1,184 |   | $ | 1,053 |   |
| Warranty accrual          |       |                                                     | 379        |                                                     |       |   | 185 |   |   | 974 |   | 442 |   |
| Labor and  material usage |       |                                                     | (298       | )                                                        |       |   | (162 | ) |   | (705 | ) | (362 | ) |
| Ending balance            |       |                                                     | $          | 1,453                                                    |       |   |   | $ | 1,133 |   |   | $ | 1,453 |   | $ | 1,133 |   |

 

**I.****                   DerivativeInstruments and Hedging Activities**

TheCompany, at times, utilizes derivative financial instruments to manage itscurrency exchange rate and interest rate risks. The Company does not enter intothese arrangements for trading or speculation purposes. The Company’s Germansubsidiary purchases inventory from Asian suppliers in U.S. dollars. A forwardexchange contract is typically entered into when the U.S. dollar amount of theinventory purchase is firm. Given our foreign exchange position, a change inforeign exchange rates upon which these foreign exchange contracts are basedwould result in exchange gains and losses.

| ** **                  | ** ** | **August 31, 2007** | ** ** | **February 28, 2007** | ** ** |
|-----------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| ** **                  | ** ** | **Notional  Amount**          | ** ** | **Fair Value**             | ** ** | **Notional  Amount** | ** ** | **Fair Value** | ** ** |
| Forward currency  contracts |       |                          | $          | 9,400                           |       |   |   | $ | 9,570 |   |   |   | — |   |   |   | — |   |   |
|                             |            |                               |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

At August 31,2007, the fair value of forward currency contracts is recorded in accruedliabilities on the accompanying consolidated balance sheets. Changes in thefair value of the cash flow forward currency contracts have been recorded as acomponent of accumulated other comprehensive loss, net of tax, as these itemshave been designated and qualify as cash flow hedges. Due to continuing taxablelosses, the Company has provided an allowance against all tax benefitsgenerated during the quarter. Therefore, the change in the fair value of thecash flow forward currency contracts is presented in the accompanyingconsolidated financial statements with no net tax benefit. The settlement dateson the forward currency contracts vary based on the underlying instrumentsthrough February 2008.

**J.****                  BankBorrowings**

The Company was not in compliance with certain of itsrestrictive covenants under its U.S. credit agreement for the period ended August 31,2007. The Company has obtained a temporary waiver from its bank and is innegotiations regarding an amendment to its U.S. credit agreement. See Liquidityfootnote.

On May 31, 2007, the Company executed theEleventh Amendment to Amended and Restated Credit Agreement (the “EleventhAmendment”). The Eleventh Amendment makes the following key changes to the U.S.credit agreement: (1) extends the expiration date to September 30,2009; (2) reduces the facility to 

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$30,000,000; (3) adjuststhe pricing grid based on the Company’s calculated fixed charge coverage ratio;(4) removes the $4 million reserve previously established in the FifthAmendment; (5) sets minimum EBITDA, tangible net worth and capitalexpenditure requirements measured on a rolling four quarter basis beginningwith the quarter ending May 31, 2007 and minimum fixed charge coverageratio covenants measured on a rolling four quarter basis beginning with thequarter ending on May 31, 2008; (6) requires payment of anintercompany loan to the Company’s European subsidiary in the amount ofapproximately $2,000,000 by not later than July 31, 2007; and (7) establishesprepayment penalties. The Company repaid its intercompany loan of approximately$2,000,000 in July 2007.

Amountsoutstanding under the Company’s various bank and other debt instruments are asfollows:

| ** **                                          | ** ** | **August 31, 2007** | ** ** | **February 28, 2007** | ** ** |
|-----------------------------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| Domestic bank  revolving line of credit             |       |                          | $          | 6,969                           |       |   |   | $ | 860 |   |   |
| European bank  revolving line of credit             |       |                          | —     |                            |       |   | — |   |   |
| Total bank  revolving lines of credit               |       |                          | $          | 6,969                           |       |   |   | $ | 860 |   |   |
| European term loans                                 |       |                          | $          | 1,126                           |       |   |   | $ | 1,360 |   |   |
| Notes payable and  capital lease obligations        |       |                          | 15         |                            |       |   | 26 |   |   |
| Total debt and  capital lease obligations           |       |                          | 1,141      |                            |       |   | 1,386 |   |   |
| Less current  portion                               |       |                          | (1,128     | )                               |       |   | (200 | ) |   |
| Total long-term debt and  capital lease obligations |       |                          | $          | 13                              |       |   |   | $ | 1,186 |   |   |

 

**K.****              IncomeTaxes**

During the year ended February 28, 2006, thecompany recorded a full valuation allowance against its deferred tax assets. TheCompany determined, in accordance with SFAS No. 109, *Accountingfor Income Taxes*, that there was sufficient uncertainty surroundingthe future realization of its deferred tax assets to warrant the recording of afull valuation allowance. The valuation allowance was recorded based upon theCompany’s determination that there was insufficient objective evidence, at thetime, to recognize those assets for financial reporting purposes. For theperiods ended August 31, 2007, the Company has not changed its assessmentregarding the recoverability of its deferred tax assets. Ultimate realizationof the benefit of the deferred tax assets is dependent upon the Companygenerating sufficient taxable income in future periods, including periods priorto 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 nomaterial increase in the liability for unrecognized income tax benefits.

At the adoption date of March 1, 2007 and as of August 31,2007, unrecognized tax benefits, all of which affect the effective tax rate ifrecognized, were $0.1 million and $0.1 million, respectively. Management doesnot anticipate that there will be a material change in the balance ofunrecognized tax benefits within the next 12 months.

The Company recognizes interest and penalties relatedto uncertain tax positions in income tax expense. As of the adoption date of March 1,2007 and as of August 31, 2007, accrued interest related to uncertain taxpositions was less than $0.1 million.

Thetax years 2003-2006 remain open to examination by the major taxing jurisdictionsto which the Company is subject.

**L.****                NewAccounting Pronouncements**

In June 2006, the FASB issued FASB InterpretationNo. 48, *Accounting for Uncertainty in Income Taxes—anInterpretation of FASB Statement No. 109* (“FIN 48”). FIN 48clarifies the accounting for 

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uncertainty in incometaxes recognized in an enterprise’s financial statements in accordance withFASB Statement No. 109, *Accounting for IncomeTaxes*, and prescribes a recognition threshold and measurementattribute for the financial statement recognition and measurement of a taxposition taken or expected to be taken in a tax return. FIN 48 also providesguidance on derecognition, classification, interest and penalties, accountingin interim periods, disclosure and transition. The Company adopted theprovisions of FIN 48 as of March 1, 2007. The adoption of FIN 48 did nothave a material impact on the Company’s results of operations or financialposition.

In September 2006, the FASB issued SFAS No. 157,*Fair Value Measurements*. This Statementdefines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles, and expands disclosures about fairvalue measurements. This Statement applies under other accountingpronouncements that require or permit fair value measurements, the FASB havingpreviously concluded in those accounting pronouncements that fair value is therelevant measurement attribute. Accordingly, this Statement does not requireany new fair value measurements. This Statement is effective for financialstatements issued for fiscal years beginning after November 15, 2007 andinterim periods within those fiscal years. The Company does not expect theadoption of SFAS No. 157 in fiscal 2009 to have a material impact on itsresults of operations or financial position.

In September 2006, the Securities and ExchangeCommission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB No. 108”)regarding the process of quantifying financial statement misstatements. SAB No. 108states that registrants should use both a balance sheet approach and an incomestatement approach when quantifying and evaluating materiality of amisstatement. The interpretations in SAB No. 108 contain guidance oncorrecting errors under the dual approach as well as provide transitionguidance for correcting errors. This interpretation does not change therequirements within SFAS No. 154 for the correction of an error infinancial statements. The Company adopted the provisions of SAB No. 108 asof March 1, 2007. The adoption of SAB No. 108 did not have a materialimpact on the Company’s results from operations or financial position.

In February 2007,the FASB issued SFAS No. 159, *The FairValue Option for Financial Assets and Financial Liabilities* (“SFAS159”), which allows entities to choose to measure many financial instrumentsand certain other items at fair value. SFAS 159 will become effective beginningwith the Company’s first quarter 2009 fiscal period. The Company is currentlyevaluating the potential impact of this standard on its results of operationsand financial position.

**M.****            PrivatePlacement of Common Stock**

On August 24, 2007, the Company entered into aPurchase Agreement (the “Purchase Agreement”) with five institutional investors(the “Investors”) pursuant to which the investors purchased in a privateplacement 3,157,895 shares of the Company’s common stock, par value $0.01 (the “CommonShares”) at a purchase price of $1.90 per share. Three of the Investors (the “HummingbirdInvestors”) are controlled by a director of the Company, Paul D. Sonkin,through his management and control of Hummingbird Capital, LLC, the generalpartner of the Hummingbird Investors. The Hummingbird Investors purchased inthe aggregate 526,316 of the Common Shares and paid a purchase price of $2.00per share (or an aggregate purchase price of approximately $1.1 million) inaccordance with the applicable rules of the Nasdaq Global Market. Netproceeds from the sale of the Common Shares were approximately $5.9 million.

In connection with entering into the PurchaseAgreement, on August 24, 2007, the Company also entered into aRegistration Rights Agreement with the Investors (the “Registration RightsAgreement”). The Registration Rights Agreement provides that the Company file aregistration statement with the Securities and Exchange Commission (the “Commission”)covering the resale of the Common Shares within 30 days after the Closing Date(the “Filing Deadline”). On September 21, 2007, the Company filed aregistration statement with the Commission covering such resale.

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**ITEM 2.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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

**Overview of theCompany**

Meade Instruments Corporation is engaged in thedesign, manufacture, marketing and sales of consumer optics products, primarilytelescopes, binoculars and riflescopes. We design our products in-house or withthe assistance of external consultants. Most of our products are manufacturedoverseas by contract manufacturers in Asia while our high-end telescopes aremanufactured and assembled in our U.S. and Mexico facilities. Sales of ourproducts are driven by an in-house sales force as well as a network of salesrepresentatives throughout the U.S. We currently operate out of three primarylocations: Irvine, California; Tijuana, Mexico; and Rhede, Germany. OurCalifornia facility serves as the Company’s corporate headquarters, U.S.distribution center, and manufacturing operation of certain optics and high-endtelescopes; our Mexico facility primarily performs assembly, repair, andpackaging; while our Germany location is primarily engaged in the distributionof our finished products in Europe. Our business is highly seasonal and ourfinancial results vary significantly on a quarter-by-quarter basis throughouteach year.

We believe that the Company holds valuable brand namesand intellectual property that provides us with a competitive advantage in themarketplace. In the consumer telescope market, the Meade brand name isubiquitous while the Coronado brand name represents a unique niche in the areaof solar astronomy. Our riflescope and binocular brand names include theSimmons, Weaver and Redfield brands and these brands are household names amonghunters and active sportsmen nationwide. Our Bresser brand is primarilyrecognized in Europe.

After two years of financial losses, the Companybrought on a new chief executive officer in May 2006 with extensiveexperience in turnaround situations in an effort to restructure the Company andreturn it to profitability. In the ensuing 12 months, the Company replaced asignificant number of its executives, including its senior officer overoperations and its chief financial officer. The Company embarked on a number ofinitiatives to resolve supply chain constraints, to reduce the Company’s coststructure, to reduce the number of SKUs and required level of inventory, and toincrease investment for new product innovations and introductions.

During the fiscal year ended February 28, 2007,our results were negatively impacted by the closure and consolidation of fourU.S. facilities into one, related headcount reductions and severance costs,aggressive reductions in inventory, and legal and audit costs associated withthe Company’s restatement of historical results due to errors in accounting forstock options and deferred rent. While we believe that we have made significantprogress in restructuring the Company, we also believe that the restructuringis not complete and that the turnaround of the Company will be a continuingeffort. As such, we are continuing to evaluate long-term opportunities tofurther reduce our cost structure and these opportunities, if executed upon,may result in additional short-term costs that must be recognized in ourcurrent financial statements.

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In August 2007, the Company completed a privateplacement of 3.1 million shares of the Company’s common stock for grossproceeds of $6.1 million that significantly enhanced the Company’s liquidity. However,due to the seasonality of the Company’s business, the Company relies on itsdomestic credit facility to meet much of its liquidity needs. During thequarter ended August 31, 2007, the Company was not in compliance with theEBITDA-based restrictive covenant in the credit facility agreement. On October 11,2007 the Company obtained a 30-day waiver from its lender related to thiscovenant and is currently negotiating an amendment to the credit facilityrelated to future covenants. The Company expects that it will reach agreementwith its lender within the 30-day timeline. However, if no amendment orextension of the waiver is obtained, the Company may be in default under theprovisions of the credit facility and the Company’s lender may acceleraterepayment. In this event, the Company may need to raise funds to repay itslender and there can be no assurance that such funds will be available.

On October 11, 2007,we announced a restructuring plan that would significantly reduce our cost structureby moving our California-based manufacturing operations to a lower-costlocation. In addition, we announced that the Board of Director’s has formed aspecial committee and will engage an investment bank to assist the Company inexploring strategic alternatives. Such alternatives may involve a financialrestructuring of the Company’s capital structure or potentially the sale of allor a portion of the Company. At this time there can be no assurance that theCompany will be able to execute on any strategic alternatives.

**Critical AccountingPolicies and Estimates**

The Company’s financialstatements are prepared in accordance with accounting principles generallyaccepted in the United States of America. The preparation of these financialstatements requires management to make certain estimates, judgments andassumptions that it believes are reasonable based upon the informationavailable. These estimates and assumptions affect the reported amounts ofassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the periods presented. Actual resultsmay differ from these estimates under different assumptions or conditions. Thesignificant accounting policies which management believes are the most criticalto assist users in fully understanding and evaluating the Company’s reportedfinancial results include the following:

*Revenue Recognition*

The Company recognizesrevenue when persuasive evidence of an arrangement exists, delivery hasoccurred, the price to the buyer is fixed or determinable, and collectibilityis reasonably assured. Those criteria are typically met when product is shippedand revenue is not recognized at the time of shipment if these criteria are notmet. Although there are many factors that influence revenue recognition, theprincipal reason the Company may not recognize revenue at the time of shipmentis if the substance of the transaction is a consignment. Consignment typearrangements happen on a limited basis. Under certain circumstances, theCompany may accept product returns that have historically been primarilyrelated to lower-end Meade branded products. Management judgments must be madeand used in connection with establishing the sales return estimates. TheCompany continuously monitors and tracks returns and records revenues net ofprovisions for returns. The Company’s estimate of sales returns is based uponseveral factors including historical experience, current market and economicconditions, customer demand and acceptance of the Company’s products,notification received by the Company of returns and all other availableinformation that would assist the Company in making a determination of itssales return reserves. While sales returns have historically been withinmanagement’s estimates, actual returns may differ significantly from management’sestimates depending on actual market conditions at the time of the return.

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*Inventories*

Inventories are stated atthe lower of cost, as determined using the first-in, first-out (“FIFO”) method,or market. Costs include materials, labor and manufacturing overhead. TheCompany evaluates the carrying value of its inventories taking into accountsuch factors as historical and anticipated future sales compared withquantities on hand and the price the Company expects to obtain for its productsin their respective markets. The Company also evaluates the composition of itsinventories to identify any slow-moving or obsolete product. These evaluationsrequire material management judgments, including estimates of future sales,continuing market acceptance of the Company’s products, and current market andeconomic conditions. Inventory may be written down based on such judgments forany inventories that are identified as having a net realizable value less thanits 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 havea material adverse impact on future operating results.

*Goodwill andIntangible Assets*

Goodwill and intangibleassets are accounted for in accordance with SFAS No. 142, *Goodwill and Intangible Assets*. Under SFASNo. 142, goodwill and intangible assets with indefinite lives are notamortized but are tested for impairment annually and also in the event of animpairment indicator. As required by SFAS No. 142, we evaluate therecoverability of goodwill based on a two-step impairment test. The first stepcompares the fair value of each reporting unit with its carrying amount,including goodwill. If the carrying amount exceeds the fair value, then thesecond step of the impairment test is performed to measure the amount of anyimpairment loss. Fair value is determined based on estimated future cash flows,discounted at a rate that approximates our cost of capital. Such estimates aresubject to change and we may be required to recognize an impairment loss in thefuture. Any impairment losses will be reflected in operating income.

*Income taxes*

A deferred income tax asset or liability isestablished for the expected future consequences of temporary differences inthe financial reporting and tax bases of assets and liabilities. Significantjudgment is necessary in the determination of the recoverability of the Company’sdeferred tax assets. Deferred tax assets are reviewed regularly forrecoverability and the Company establishes a valuation allowance when it ismore likely than not that some portion, or all, of the deferred tax assets willnot be realized. The Company assesses the recoverability of the deferred taxassets on an ongoing basis. In making this assessment, the Company is requiredto 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 isdetermined that it is more likely than not that a deferred tax asset will notbe realized, the value of that asset will be reduced to its expected realizablevalue, thereby decreasing net income. If it is determined that a deferred taxasset that had previously been written down will be realized in the future, thevalue of that deferred tax asset will be increased, thereby increasing netincome in the period when the determination is made. Actual results may differsignificantly, either favorably or unfavorably, from the evidence used toassess the recoverability of the Company’s deferred tax assets.

The Company adopted the provisions of FIN 48 on March 1,2007. As a result of the implementation of FIN 48, the Company recognized nomaterial increase in the liability for unrecognized income tax benefits.

At the adoption date of March 1, 2007 and as of August 31,2007, unrecognized tax benefits, all of which affect the effective tax rate ifrecognized, were $0.1 million and $0.1 million, respectively. 

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Management does notanticipate that there will be a material change in the balance of unrecognizedtax benefits within the next 12 months.

The Company recognizes interest and penalties relatedto uncertain tax positions in income tax expense. As of the adoption date of March 1,2007 and as of August 31, 2007, accrued interest related to uncertain taxbenefit was less than $0.1 million.

The tax years 2003-2006remain open to examination by the major taxing jurisdictions to which theCompany is subject.

**Results ofOperations**

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

*Three Months Ended August 31,2007 Compared to Three Months Ended August 31, 2006*

Net sales during the second quarter of fiscal year2008 were $16.2 million, a decrease of approximately 13% from the prior year’ssecond quarter net sales of $18.6 million. This decrease was largely driven bya reduction in sales to one of the Company’s largest customers due to thetiming of order fulfillment, and the closure of Discovery Channel Stores’retail locations. Sales to Discovery Channel Stores were $0.1 million duringthe quarter ended August 31, 2007 versus $1.1 million in the same periodlast year. This Discover Channel reduction primarily affected the Company’ssales of low-end and intermediate telescopes. Overall sales of telescopes were$12.2 million in the second quarter of fiscal 2008 compared with $14.5 millionin the same quarter of fiscal 2007. Sales of riflescopes were $3.0 million, an18% increase compared with $2.6 million in the same quarter last year as theCompany began shipping riflescope models that had not been available in theprior year due to supply chain constraints. The Company expects to beessentially stocked in riflescopes for the upcoming season. The U.S. dollarweakened versus the Euro from the prior year quarter which positively affectedthe Company’s reported sales by approximately $0.2 million.

Gross profit for the quarter ending August 31,2007 was $2.3 million or 14.2% of net sales compared with $2.9 million or 15.7%of net sales in the prior year’s comparable quarter. The decrease in grossprofit margin was due to the lower sales volume over which our fixed costs wereabsorbed as well as a shift in product mix toward lower margin products.

Selling expenses for the quarter ending August 31,2007 were $2.9 million, a 34% decrease from $4.4 million for the same quarterin the prior year. The decrease in selling expenses versus the prior year wasdue to lower sales commissions associated with lower revenue, lower freightexpenses, headcount reductions related to the restructuring of the Company andthe consolidation of four domestic facilities into one, and a deliberatereduction in advertising and marketing costs.

General and administrative expenses for the quarterending August 31, 2007 were $2.7 million, a 33% decrease from $4.0 millionfor the same quarter in the prior year. The decrease versus the prior year wasprimarily due to headcount reductions related to the restructuring of theCompany and the consolidation of four domestic facilities into one, anincreased focus on cost controls and a reduction in legal and audit fees fromthe prior year due to the non-recurrence of certain one-time costs associated withthe prior year’s restatements of the Company’s financial statements.

Research and development expenses for the quarterending August 31, 2007 were $0.6 million compared with $0.4 million forthe same quarter in the prior year. The increase was principally due to anincrease in the development of new products slated for market introductionduring the current fiscal year.

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Interest expense increased by $0.1 million due to ahigher balance on the U.S. bank revolving line of credit.

Income tax benefit was$0.2 million on a consolidated basis compared with $0.1 million in the samequarter of fiscal 2007. The tax benefit relates almost exclusively to taxesthat the Company will pay in Germany for its profitable European subsidiary. TheCompany did not record any income tax provision or benefit in the U.S. due toits loss from operations, and valuation allowances placed against the deferredtax assets.

*Six Months Ended August 31,2007 Compared to Six Months Ended August 31, 2006*

Net sales during the six months ending August 31,2007 were $33.8 million, a decrease of approximately 9% from net sales of $37.3million for the same period in the prior year. This decrease was largely drivenby a reduction in sales to one of the Company’s largest customers due to the timingof order fulfillment and the closure of Discovery Channel Stores’ retaillocations which had historically been a significant customer of the Company. Salesto Discovery Channel Stores were $0.3 million during the six months ended August 31,2007 versus $3.1 million in the same period last year. This Discovery Channelreduction primarily affected the Company’s sales of low-end and intermediatetelescopes. Overall sales of telescopes were $20.8 million in the six monthsended August 31, 2007 compared with $26.7 million in the same period offiscal 2007. Sales of riflescopes were $6.8 million, a 28% increase comparedwith $5.4 million in the same period last year as the Company began shippingriflescope models that had not been available in the prior year due to supplychain constraints. The Company expects to be essentially stocked in riflescopesfor the upcoming season. The U.S. dollar weakened versus the Euro from theprior year which positively affected the Company’s reported sales byapproximately $0.7 million.

Gross profit for the six months ending August 31,2007 was $4.1 million or 12% of net sales compared with $6.4 million or 17% ofnet sales in the prior year. The decrease in gross profit was due to lowersales, the sale of inventory at low margins as part of the Company’s ongoingcampaign to reduce inventory levels and inventory that the Company otherwisedetermined was excess or obsolete and wrote down accordingly. The Company alsosaw a shift in product mix toward lower margin products. In addition, theCompany experienced a higher-than-anticipated increase in warranty claims andadjusted its reserve for warranties accordingly.

Selling expenses for the six months ending August 31,2007 were $5.2 million, a 34% decrease from $7.8 million for the same period inthe prior year. The decrease in selling expenses versus the prior year was dueto lower sales commissions and freight costs associated with lower revenue,headcount reductions related to the restructuring of the Company and theconsolidation of four domestic facilities into one, lower bad debt expense thatincluded a bad debt recovery, and a deliberate reduction in advertising andmarketing costs.

General and administrative expenses for the six monthsending August 31, 2007 were $5.5 million, a 22% decrease from $7.0 millionfor the same period in the prior year. The decrease versus the prior year wasdue to headcount reductions related to the restructuring of the Company and theconsolidation of four domestic facilities into one, a reduction in legal feesfrom the prior year due to non-recurrence of certain one-time costs and anincreased focus on cost controls.

Research and development expenses for the six monthsending August 31, 2007 were $1.0 million compared with $0.7 million forthe same quarter in the prior year. The increase was principally due to anincrease in the development of new products slated for market introductionduring the current fiscal year.

Interest expense increased $0.1 million due to higherborrowing on the U.S. bank revolving line of credit. During the six monthsended August 31, the Company finalized a renewal of it credit facilitywith 

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Bank of America, which wasfiled as an exhibit to its Annual Report on Form 10-K for the fiscalyear ended February 28, 2007.

Income tax expense(benefit) was an expense of $0.2 million on a consolidated basis for the sixmonths ending August 31, 2007 compared with a benefit of $23 thousand inthe same period of fiscal 2007. The tax benefit relates almost exclusively totaxes that the Company will pay in Germany for its profitable Europeansubsidiary. The Company did not record any income tax provision or benefit inthe U.S. due to its loss from operations, level of net operating losses andvaluation allowances placed against the deferred tax assets.

**Seasonality**

The Company hasexperienced, and expects to continue to experience, substantial fluctuations inits sales, gross margins and profitability from quarter to quarter. Factorsthat influence these fluctuations include the volume and timing of ordersreceived, changes in the mix of products sold, market acceptance of the Company’sproducts, competitive pricing pressures, the Company’s ability to meetfluctuating demand and delivery schedules, the timing and extent of researchand development expenses, the timing and extent of product development costsand the timing and extent of advertising expenditures. In addition, asubstantial portion of the Company’s net sales and operating income typicallyoccurs in the third quarter of the Company’s fiscal year primarily due todisproportionately higher customer demand for less-expensive telescopes duringthe holiday season. The Company continues to experience significant sales tomass merchandisers. Mass merchandisers, along with specialty retailers,purchase a considerable amount of their inventories to satisfy such seasonalcustomer demand. These purchasing patterns have caused the Company to increaseits level of inventory during its second and third quarters in response to suchdemand or anticipated demand. As a result, the Company’s working capitalrequirements have correspondingly increased at such times.

**Liquidity andCapital Resources**

During the six months ended August 31, 2007, theCompany funded its operations principally by a private placement of 3,157,895shares of its common stock for net proceeds of $5.9 million, borrowing on itsbank lines of credit and by utilizing its cash on hand. Cash flow fromoperating activities was negatively affected principally by losses for theperiod and an increase in inventories, which was partially offset by anincrease in accounts payable. The increase in inventories coincides with theCompany’s preparations for the holiday season. Working capital totaledapproximately $21.9 million at August 31, 2007, compared to $24.4 millionat February 28, 2007. Working capital requirements fluctuate during theyear due to the seasonal nature of the business. These requirements aretypically financed through a combination of internally-generated cash flow fromoperating activities and short-term bank borrowings.

The Company had $2.1 million in cash at August 31,2007, consistent with the level as of May 31, 2007 but a decrease comparedto $4.0 million at February 28, 2007. Operations used approximately $13.7million in cash, offsetting $5.9 million in net proceeds from a privateplacement of 3,157,895 shares of the Company’s common stock and $6.1 million ofnet borrowings on its bank lines of credit. The main reason for the decrease incash is the continued net losses sustained by the Company and the increase ininventories. Inventories increased approximately $8.4 million in preparationfor the Company’s peak shipping period to support the holiday season. Inventoriesat August 31, 2007 were $33.8 million compared to $25.3 million at February 28,2007—the lowest level at a year-end reporting period since February 28,1999. Overall inventory turns increased to 2.0 times during the first sixmonths of fiscal 2008, up from 1.7 times during the same period in the prioryear. Working capital requirements fluctuate during the year due to theseasonal nature of the business. These requirements are typically financedthrough a combination of internally generated cash flow from operatingactivities and short-term bank borrowings.

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The Company continues to depend on operating cash flowand availability under its bank lines of credit to provide short-termliquidity. Availability under its domestic bank lines of credit at August 31,2007 was over $5.0 million. During the quarter ended August 31, 2007, theCompany was not in compliance with the EBITDA-based restrictive covenant in thecredit facility agreement. On October 11, 2007 the Company obtained a 30-daywaiver from its lender related to this covenant and is currently negotiating anamendment to the credit facility related to future covenants. The Companyexpects that it will reach agreement with its lender within the 30-daytimeline. However, if no amendment or extension of the waiver is obtained, theCompany may be in default under the provisions of the credit facility and theCompany’s lender may accelerate repayment. In this event, the Company may needto raise funds to repay its lender and there can be no assurance that suchfunds will be available.

On May 31, 2007, the Company executed theEleventh Amendment to Amended and Restated Credit Agreement (the “EleventhAmendment”). The Eleventh Amendment made the following key changes to the U.S.credit agreement: (1) extends the expiration date to September 30,2009; (2) reduces the facility to $30,000,000; (3) adjusts thepricing grid based on the Company’s calculated fixed charge coverage ratio; (4) removesthe $4 million reserve previously established in the Fifth Amendment; (5) setsminimum EBITDA, tangible net worth and capital expenditure requirementsmeasured on a rolling four quarter basis beginning with the quarter ending May 31,2007 and minimum fixed charge coverage ratio covenants measured on a rollingfour quarter basis beginning with the quarter ending on May 31, 2008; (6) requirespayment of an intercompany loan to the Company’s European subsidiary in theamount of approximately $2,000,000 by not later than July 31, 2007; and (7) establishesprepayment penalties. The fee for the amendment was $125,000. Upon execution ofthe Eleventh Amendment the Company was in compliance with all of its bankcovenants. The Company repaid its intercompany loan of approximately $2,000,000in July 2007.

In the event the Company’s plans require more capitalthan is presently anticipated, or in the event the Company requires amendmentsto the covenants or other terms and conditions of the credit agreement that itis unable to secure from its bank, additional sources of liquidity such as debtor equity financings may be required to meet its capital needs. There can be noassurance that such additional sources of capital will be available onreasonable terms, if at all. However, management believes that operating cashflow and bank borrowing capacity in connection with the Company’s businessshould provide sufficient liquidity for the Company’s obligations for at leastthe next twelve months.

Capital expenditures,including financed purchases of equipment, aggregated $0.3 million for each ofthe six month periods ended August 31, 2007 and 2006. The Company had nomaterial capital expenditure commitments at August 31, 2007. On December 1,2004, the Company acquired substantially all of the assets and assumedsubstantially all of the liabilities of Coronado Technology Group, LLC, forapproximately $2.5 million in cash plus contingent consideration. A finalpayment of approximately $1.0 million was paid in May 2006 based upon thefinancial performance of the acquired operations for the twelve months ended December 31,2006.

**New AccountingPronouncements**

In June 2006, the FASB issued FASB InterpretationNo. 48, *Accounting for Uncertainty in Income Taxes—anInterpretation of FASB Statement No. 109* (“FIN 48”). FIN 48clarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with FASB Statement No. 109,*Accounting for Income Taxes*, andprescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax position taken or expected to be

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taken in a tax return. FIN48 also provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods, disclosure and transition. TheCompany adopted the provisions of FIN 48 as of March 1, 2007. The adoptionof FIN 48 did not have a material impact on the Company’s results of operationsor financial position.

In September 2006, the FASB issued SFAS No. 157,*Fair Value Measurements*. This Statementdefines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles, and expands disclosures about fairvalue measurements. This Statement applies under other accountingpronouncements that require or permit fair value measurements, the FASB havingpreviously concluded in those accounting pronouncements that fair value is therelevant measurement attribute. Accordingly, this Statement does not requireany new fair value measurements. This Statement is effective for financialstatements issued for fiscal years beginning after November 15, 2007 andinterim periods within those fiscal years. The Company does not expect theadoption of SFAS No. 157 in fiscal 2009 to have a material impact on itsresults of operations or financial position.

In September 2006, the Securities and ExchangeCommission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB No. 108”)regarding the process of quantifying financial statement misstatements. SAB No. 108states that registrants should use both a balance sheet approach and an incomestatement approach when quantifying and evaluating materiality of amisstatement. The interpretations in SAB No. 108 contain guidance oncorrecting errors under the dual approach as well as provide transitionguidance for correcting errors. This interpretation does not change therequirements within SFAS No. 154 for the correction of an error infinancial statements. The Company adopted the provisions of SAB No. 108 asof March 1, 2007. The adoption of SAB No. 108 did not have a materialimpact on the Company’s results from operations or financial position.

In February 2007, theFASB issued SFAS No. 159, *The FairValue Option for Financial Assets and Financial Liabilities* (“SFAS159”), which allows entities to choose to measure many financial instrumentsand certain other items at fair value. SFAS 159 will become effective beginningwith the Company’s first quarter 2009 fiscal period. The Company is currentlyevaluating the potential impact of this standard on its results of operationsand financial position.

**Forward-LookingInformation**

The preceding “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”section contains various “forward looking statements” within the meaning of Section 27Aof the Securities Act of 1933, as amended, and Section 21E of theSecurities and Exchange Act of 1934, as amended, which represent the Company’sreasonable judgment concerning the future and are subject to risks anduncertainties that could cause the Company’s actual operating results andfinancial position to differ materially, including the following: the Companybeing able to see continued progress in its restructuring efforts, the timingof such restructuring efforts, and the fact that the restructuring efforts willresult in positive financial results in the future; the Company’s expectationthat it will be able to resolve its liquidity challenges through negotiationwith its lenders and through restructuring its business to reduce its coststructure; the Company’s expectation that it can successfully transfer itsmanufacturing operations to another low-cost location without significantlydisrupting its supply chain; the Company’s expectations in the amounts of costsavings to be achieved through restructuring the Company; the Company’sexpectations that it will be able to successfully negotiate new covenants withits lender on terms favorable to the Company; the Company’s ability tonegotiate a potential strategic alternative, if at all; the Company’sexpectation that it will be able to build inventory of other necessary productsin preparation for the holiday season: the Company’s expectation that it willcontinue to experience fluctuations in its sales, gross margins andprofitability from quarter to quarter consistent with prior periods; theCompany’s expectation that contingent liabilities will not have a materialeffect on the Company’s financial position or results of operations; theCompany’s expectation that operating cash flow and bank borrowing capacity in 

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connectionwith the Company’s business should provide sufficient liquidity for the Company’sobligations for at least the next twelve months.

**ITEM 3.**                QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain levels of market risks,including changes in foreign currency exchange rates and interest rates. Marketrisk is the potential loss arising from adverse changes in market rates andprices, such as foreign currency exchange and interest rates. The Companyconducts business in a number of foreign countries and is primarily exposed tocurrency exchange-rate risk with respect to its transactions and net assetsdenominated in the Euro. Business activities in various currencies expose theCompany to the risk that the eventual net United States dollar cash inflowsresulting from transactions with foreign customers and suppliers denominated inforeign currencies may be adversely affected by changes in currency exchangerates. In prior years, foreign currency fluctuations have not had a materialimpact on Meade’s revenues or results of operations. There can be no assurancethat European or other currencies will remain stable relative to the U.S.dollar or that future fluctuations in the value of foreign currencies will nothave a material adverse effect on the Company’s business, operating results,financial condition or cash flows.

TheCompany has adopted a hedging program to manage its foreign currency exchangerate and, at times, interest rate risks. Upon continuing evaluation and whendeemed appropriate by management, the Company may enter into hedginginstruments to manage its foreign currency exchange and interest rate risks.From time to time, the Company enters into forward exchange contracts toestablish with certainty the U.S. dollar amount of future firm commitmentsdenominated in a foreign currency. The notional amounts of the forward exchangecontracts vary, typically with the seasonal inventory requirements of theCompany’s German subsidiary. The Company’s German subsidiary purchasesinventory from Asian suppliers in U.S. dollars. A forward exchange contract istypically entered into when the U.S. dollar amount of the inventory purchase isfirm. Given our foreign exchange position, a change in foreign exchange ratesupon which these foreign exchange contracts are based would result in exchangegains and losses. In all material aspects, these exchange gains and losseswould be fully offset by exchange gains and losses on the underlying netmonetary exposures for which the contracts are designated as hedges. We do notexpect material exchange rate gains and losses from unhedged foreign currencyexposures. As of August 31, 2007, the Company had the following forwardexchange contracts outstanding:

| ** **                  | ** ** | **August 31, 2007** | ** ** | **February 28, 2007** | ** ** |
|-----------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| ** **                  | ** ** | **Notional  amount**          | ** ** | **Fair Value**             | ** ** | **Notional  amount** | ** ** | **Fair Value** | ** ** |
| Forward currency  contracts |       |                          | $          | 9,400                           |       |   |   | $ | 9,570 |   |   |   | — |   |   |   | — |   |   |
|                             |            |                               |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

At August 31, 2007, the fair value of forwardcurrency contracts is recorded in accrued liabilities on the accompanyingConsolidated Balance Sheets. Changes in the fair value of the cash flow forwardcurrency contracts have been recorded as a component of accumulated othercomprehensive income (loss), net of tax, as these items have been designatedand qualify as cash flow hedges. Due to continuing taxable losses, the Companyhas provided an allowance against all tax benefits generated during thequarter. Therefore, the change in the fair value of the cash flow forwardcurrency contracts is presented in the accompanying financial statements withno net tax benefit. The settlement dates on the forward currency contracts varybased on the underlying instruments through February 2008.

The Company’s financialinstruments consist of cash, accounts receivable, accounts payable, short-termobligations, and long-term obligations. The Company’s principal exposure tointerest rate fluctuations relates primarily to the U.S. revolving loan. Thedebt under the U.S. revolving loan bears interest at a floating rate tied toeither the LIBOR rate or the bank prime rate of interest. Management believesthat a 

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1%increase in interest rates on its U.S. revolving loan would have resulted in animmaterial amount of less than $0.1 million additional interest expense for thesix months ended August 31, 2007.

**ITEM 4.**                CONTROLSAND PROCEDURES

**Evaluation ofDisclosure Controls and Procedures.**

The Company’s management (with the participation ofour Chief Executive Officer and Chief Financial Officer) evaluated theeffectiveness of the Company’s disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d- 15(e) under the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”)), as of the quarter endedAugust 31, 2007. Disclosure controls and procedures are designed to ensurethat information required to be disclosed by the Company in the reports itfiles or submits under the Exchange Act is recorded, processed, summarized andreported on a timely basis and that such information is accumulated andcommunicated to management, including the Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosure. A control system, no matter how well designed and operated, canprovide only reasonable, not absolute, assurance that the objectives of thecontrol system are met. Further, because of the inherent limitations in allcontrol systems, no evaluation of controls can provide absolute assurance thatall control issues and instances of fraud, if any, have been or will bedetected. Our disclosure controls and procedures are designed to providereasonable assurance of achieving their objectives.

The Company’s Chief Executive Officer and ChiefFinancial Officer concluded, based on their evaluation, that the Company’sdisclosure controls and procedures are effective for the Company as of the endof the period covered by this report.

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**PART II—OTHER INFORMATION**

**ITEM 1.**                LEGALPROCEEDINGS

The following purported Stockholder derivative actionhas been filed challenging conduct by certain of the Company’s current andformer board members and officers in connection with various stock option grants:

*In reMeade Instruments Corp. Derivative Litigation,* No. 06-CC-205,Superior Court of the State of California for the County of Orange, filed October 6,2006. On November 22, 2006, the court consolidated under the above captiontwo state derivative actions: (i) *Barclayv. Diebel*, et al., No. 06-CC-205, Superior Court ofthe State of California for the County of Orange, filed October 6, 2006and (ii) *Bryant v Diebel*, et al.,No. 06-CC-206, Superior Court of the State of California forthe County of Orange, filed October 6, 2006. The plaintiffs filed aconsolidated complaint on December 22, 2006, and the defendants fileddemurrers to the complaint on February 5, 2007. The consolidated complaintasserts causes of action for breach of fiduciary duty, accounting, abuse ofcontrol, gross mismanagement, constructive trust, corporate waste, rescission,unjust enrichment, and violation of California Corporations Code in connectionwith the Company’s option granting practices. On May 23, 2007, the partiesin both this action and the class action discussed below participated in amediation. As a result of this mediation, the parties in both actions reached apreliminary settlement understanding, which includes corporate governancereforms and an amount to cover plaintiffs’ attorneys’ fees. The Companyanticipates that the monetary portion of the proposed settlement will becovered by the Company’s director and officer liability insurance. The partieshave submitted the settlement agreement and related paperwork for the court’sapproval.

The following putative federal securities class actionhas also been filed challenging conduct by the Company and certain of itscurrent and former board members and officers in connection with various stockoption grants:

*Grecianv. Meade Instruments Corp., et al.,* No. SA CV 06-908AG (JTLx), United states District Court for the Central District of California,filed September 27, 2006. On January 8, 2007, the court granted thenamed plaintiffs’ motion to be appointed lead plaintiffs. On February 22,2007, the plaintiffs filed their second amended complaint, which asserts claimsfor violations of Section 10(b), 14(a) and 20(a) of theSecurities Exchange Act in connection with the Company’s option grantingpractices. On May 23, 2007, the parties in both this action and thederivative action discussed above participated in a mediation. As a result ofthis mediation, the parties in both actions reached a preliminary settlementunderstanding, which includes corporate governance reforms and an award to theclass, from which plaintiffs’ attorneys’ fees and administrative costs would bepaid. The Company anticipates that the monetary portion of the proposedsettlement will be covered by the Company’s director and officer liabilityinsurance. The parties have submitted the settlement agreement and relatedpaperwork for the court’s approval.

On September 28, 2006, Daniel Azari, Paul T.Jones (dba Star Instruments) and RC Optical Systems, Inc. filed anaction against Meade and certain Meade dealers in the United States DistrictCourt for the Southern District of New York, alleging the following claims: (1) violationof the Racketeer Influenced And Corrupt Organization Act (“RICO”); (2) violationof New York General Business Law §§ 349 and 350; (3) violation ofCalifornia Business and Professions Code § 17200; (4) unfair competition;and (5) product disparagement. The gravamen of the complaint is that Meadeand other defendants allegedly falsely advertise Meade’s AdvancedRitchey-Chretien products as being Ritchey-Chretien products. On October 31,2006, Plaintiffs filed an Amended Complaint, adding claims for violation of theLanham Act. On January 3, 2007, the United States District Court for theSouthern District of New York granted a motion filed by Meade and ordered thecase transferred to the United States District Court for the Central Districtof California. In March 2007, the court dismissed the following claims: (1) violationof 

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the RICO Act; (2) violationof New York General Business Law §§ 349 and 350; and (3) productdisparagement. In June 2007, the court dismissed all claims byPlaintiff Daniel Azari. The complaint seeks injunctive relief, compensatorydamages, and attorneys’ fees and costs.

On June 13, 2006, the Company issued a pressrelease announcing that it had received notification from the Securities andExchange Commission (the “SEC”) of an informal inquiry into the Company’s paststock option grant practices. The Company is cooperating with the SEC in thisinquiry.

Due to the uncertainties of litigation, the Company isunable to provide an evaluation of the likelihood of either a favorable orunfavorable outcome in the above mentioned cases.

In addition to the above,the Company is involved from time to time in litigation incidental to itsbusiness. Management believes that the outcome of such litigation will not havea material adverse effect on the financial position, results of operations orcash flows of the Company.

**ITEM 1.A. RISKFACTORS**

The shares of our commonstock being offered involve a high degree of risk. You should carefullyconsider the following discussion of risks as well as all other information inthis prospectus before purchasing any of the shares offered pursuant to thisprospectus.

***Our failure tocomply with any of the financial covenants in our credit facilities or otherdebt agreements could have a material adverse impact on our business.***

We depend on operatingcash flow and availability under our bank lines of credit, both in the UnitedStates and Europe, to provide short-term liquidity. For the year ended February 28,2007 and the six months ended August 31, 2007, we incurred significantoperating and net losses which diminished the availability under our U.S.credit agreement and consumed a significant portion of our net assets. Continuedoperating losses could adversely affect our ability to maintain requiredfinancial covenants under our various debt agreements. Due to operating lossesover the past three years, we have, several times, renegotiated the financialcovenants contained in our U.S. credit agreement. During the quarter ended August 31,2007, the Company was not in compliance with the EBITDA-based restrictivecovenant in the credit facility agreement. On October 11, 2007 the Companyobtained a 30-day waiver from its lender related to this covenant and iscurrently negotiating an amendment to the credit facility related to futurecovenants. The Company expects that it will reach agreement with its lenderwithin the 30-day timeline, although such agreement may contain lessfavorable terms. If no amendment or extension of the waiver is obtained, theCompany may be in default under the provisions of the credit facility and theCompany’s lender may accelerate repayment.  In this event, the Company may need to raisefunds to repay its lender and there can be no assurance that such funds will beavailable. If we are unable to renegotiate acceptable terms, obtain necessarywaivers or secure new debt or equity financing, this could have a materialadverse effect on our business, results of operations and financial condition.

***We rely onindependent contract manufacturers and, as a result, we are exposed topotential disruptions in product supply.***

All of our consumer optics products with retail pricesunder $500 are currently manufactured by independent contract manufacturers,principally located in China. We do not have long-term contracts with our Asianmanufacturers, and we compete with other consumer optics companies forproduction facilities. We have experienced, and continue to experience,difficulties with these manufacturers, including reductions in the availabilityof production capacity, failure to meet our quality control standards, failureto meet production deadlines and increased manufacturing costs. Somemanufacturers in China are facing labor shortages as migrant workers seekbetter wages and working conditions. If this trend continues, our currentmanufacturers’ operations could be adversely affected.

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If our currentmanufacturers cease doing business with us, we could experience an interruptionin the manufacture of our products. Although we believe that we could findalternative manufacturers, we may be unable to establish relationships withalternative manufacturers that will be as favorable as the relationships wehave now. For example, new manufacturers may have higher prices, less favorablepayment terms, lower manufacturing capacity, lower quality standards or higherlead times for delivery. If we are unable to provide products to our customersthat are consistent with our standards or the manufacture of our products isdelayed or becomes more expensive, this could result in our customers cancelingorders, refusing to accept deliveries or demanding reductions in purchaseprices, any of which could have a material adverse effect on our business andresults of operations.

***We may be unable to successfully execute our growthand profitability strategies.***

Our net sales andoperating results have fluctuated significantly over the past five fiscal yearsand we may experience similar fluctuations in the future. Our ability to growin the future depends upon, among other things, our ability to return toprofitability, the maintenance and enhancement of our brand image and expansionof our product offerings and distribution channels. Furthermore, if ourbusiness becomes larger, we may not be able to effectively manage our growth. Weanticipate that as the business grows, we will have to improve and enhance ouroverall financial and managerial controls, reporting systems and procedures. Wemay be unable to successfully implement our current growth and profitabilitystrategies or other growth strategies or effectively manage our growth, any ofwhich would negatively impact our business, results of operations and financialcondition.

***Our business may be negatively impacted as a result ofchanges in the economy.***

Our business depends onthe general economic environment and levels of consumer spending that affectnot only the ultimate consumer, but also retailers, our primary directcustomers. Purchases of consumer optics tend to decline in periods of recessionor uncertainty regarding future economic prospects, when consumer spending,particularly on discretionary items, declines. During periods of recession oreconomic uncertainty, we may not be able to maintain or increase our sales toexisting customers, make sales to new customers, maintain or increase ourinternational operations on a profitable basis, or maintain or improve ourearnings from operations as a percentage of net sales. As a result, ouroperating results may be materially adversely affected by downward trends inthe economy or the occurrence of events that adversely affect the economy ingeneral.

***The disruption,expense and potential liability associated with existing and unanticipatedfuture litigation against us could have a material adverse effect on ourbusiness, results of operations, financial condition and cash flows.***

We are subject to variouslegal proceedings and threatened legal proceedings from time to time. Anyunanticipated litigation in the future, regardless of its merits, couldsignificantly divert management’s attention from our operations and result insubstantial legal fees being borne by us. Further, there can be no assurancethat any actions that have been or will be brought against us will be resolvedin our favor or, if significant monetary judgments are rendered against us,that we will have the ability to pay such judgments. Such disruptions, legalfees and any losses resulting from these claims could have a material adverseeffect on our business, results of operations financial condition and cashflows.

***Our future successdepends upon our ability to respond to changing consumer demands andsuccessfully market new products.***

The consumer opticsindustry is subject to changing consumer demands and technology trends. Accordingly,we must identify those trends and respond in a timely manner. Demand for andmarket acceptance of new products are uncertain and achieving market acceptancefor new products generally requires substantial product development andmarketing efforts and expenditures. If we do not continue to 

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meetchanging consumer demands and develop successful products in the future, ourgrowth and profitability will be negatively impacted. We frequently makedecisions about product designs and marketing expenditures several months toyears in advance of the time when consumer acceptance can be determined. If wefail to anticipate, identify or react appropriately to changes in trends or arenot successful in marketing new products, we could experience excessinventories, higher than normal markdowns or an inability to profitably sellour products. Because of these risks, the consumer optics industry hasexperienced periods of growth in revenues and earnings and thereafter periodsof declining sales and losses. Similarly, these risks could have a materialadverse effect on our results of operations, financial condition or cash flows.

***Our business and the success of our products could beharmed if we are unable to maintain our brand image.***

Our principal brandsinclude Meade®, Bresser®, Simmons®, Weaver®, Redfield® and Coronado®. If we areunable to timely and appropriately respond to changing consumer demand, ourbrand names and brand images may be impaired. Even if we react appropriately tochanges in consumer preferences, consumers may consider these brands to beoutdated or undesirable. If we fail to maintain and develop our principalbrands, our sales and profitability will be adversely affected.

***Our business could be harmed if we fail to maintainappropriate inventory levels.***

We place orders withsuppliers for many of our products prior to the time we receive all of ourcustomers’ orders. We do this to minimize purchasing costs, the time necessaryto fill customer orders and the risk of non-delivery. We, at times, alsomaintain an inventory of certain products that we anticipate will be in greaterdemand. However, we may be unable to sell the products we have ordered inadvance from manufacturers or that we have in our inventory. Inventory levelsin excess of customer demand may result in inventory write-downs, and the saleof excess inventory at discounted prices could significantly impair our brandimage and have a material adverse effect on our operating results and financialcondition. Conversely, if we underestimate consumer demand for our products orif our suppliers fail to supply the products that we require with the qualityand at the time we need them, we may experience inventory shortages. Inventoryshortages might delay shipments to our customers, negatively impact ourretailer and distributor relationships, and diminish brand loyalty.

***We face intensecompetition, including competition from companies with significantly greaterresources, and, if we are unable to compete effectively with these competitors,our market share may decline and our business could be harmed.***

We face intense competition from other establishedcompanies. A number of our competitors have significantly greater financial,technological, engineering, manufacturing, marketing and distribution resourcesthan we do. Their greater capabilities in these areas may enable them to betterwithstand periodic downturns in the consumer optics market, compete more effectivelyon the basis of price and production and more quickly develop new products. Inaddition, new companies may enter the markets in which we compete, furtherincreasing competition in the consumer optics industry.

We believe that ourability to compete successfully depends on a number of factors, including thetype and quality of our products and the strength of our brand names, as wellas many factors beyond our control. We may not be able to compete successfullyin the future, and increased competition may result in price reductions,reduced profit margins, loss of market share and an inability to generate cashflows that are sufficient to maintain or expand the development and marketingof new products, any of which would adversely impact our results of operationsand financial condition.

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***We depend upon a relatively small group of customersfor a large portion of our sales.***

During fiscal 2007, 2006and 2005 net sales to our ten largest customers accounted for approximately49%, 30%, and 35% of total net sales, respectively. During the fiscal year2007, 2006 and 2005, our top two customers accounted for approximately 30%,23%, and 16%, respectively. We anticipate that such concentration of net salesamongst a relatively few number of customers will continue. Although we havelong-term relationships with many of our customers, those customers do not havecontractual obligations to purchase our products and we cannot be certain thatwe will be able to retain our existing major customers. Furthermore, the retailindustry regularly experiences consolidation, contractions and closings whichmay result in a loss of customers or the loss of our ability to collectaccounts receivable from major customers in excess of amounts that we haveinsured. If we lose a major customer, experience a significant decrease insales to a major customer or are unable to collect the accounts receivable of amajor customer in excess of amounts insured, our business could be harmed.

***Our internationalsales and third-party manufacturing operations are subject to the risks ofdoing business abroad, particularly in China, which could affect our ability tosell or manufacture our products in international markets, obtain products fromforeign suppliers or control product costs.***

A significant portion of our net sales continue to bederived from sales of products manufactured in foreign countries, with mostmanufactured in China. We also sell our products in several foreign countriesand plan to increase our international sales efforts as part of our growthstrategy. Foreign manufacturing and sales are subject to a number of risks,including the following: political and social unrest, including that related tothe U.S. military presence in Iraq; changing economic conditions; currencyexchange rate fluctuations; international political tension and terrorism;labor shortages and work stoppages; electrical shortages; transportationdelays; loss or damage to products in transit; expropriation; nationalization;the imposition of domestic and international tariffs and trade duties, importand export controls and other non-tariff barriers, exposure to different legalstandards (particularly with respect to intellectual property), compliance withforeign laws, and changes in domestic and foreign governmental policies. Wehave not, to date, been materially affected by any such risks, but we cannotpredict the likelihood of such developments occurring or the resultinglong-term adverse impact on our business, results of operations or financialcondition.

In particular, because most of our products aremanufactured in China, adverse changes in trade or political relations withChina, political instability in China, the occurrence of a natural disastersuch as an earthquake or hurricane in China or the outbreak of a pandemicdisease such as Severe Acute Respiratory Syndrome (SARS) or the Avian Flu inChina would severely interfere with the manufacture of our products and wouldhave a material adverse effect on our operations. In addition, electricalshortages, labor shortages or work stoppages may extend the productiontime necessary to produce our orders, and there may be circumstances in thefuture where we may have to incur premium freight charges to expedite thedelivery of product to our customers. If we incur a significant amount ofpremium charges to airfreight product for our customers, gross profit will benegatively affected if we are unable to pass those charges on to our customers.

Also, the manufacturers ofour products that are located in China may be subject to the effects ofexchange rate fluctuations should the Chinese currency not remain stable withthe U.S. dollar. The value of the Chinese currency depends to a large extent onthe Chinese government’s policies and China’s domestic and internationaleconomic and political developments. The valuation of the yuan may increaseincrementally over time should the Chinese central bank allow it to do so,which could significantly increase labor and other costs incurred in theproduction of our products in China.

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***Our business could be harmed if our contractmanufacturers or suppliers violate labor, trade or other laws.***

We require our independent contract manufacturers tooperate in compliance with applicable United States and foreign laws andregulations. Manufacturers may not use convicted, forced or indentured labor(as defined under United States law) nor child labor (as defined by themanufacturer’s country) in the production process. Compensation must be paid inaccordance with local law and factories must be in compliance with local safetyregulations. Although we promote ethical business practices and send sourcingpersonnel periodically to visit and monitor the operations of our independentcontract manufacturers, we do not control them or their labor practices. If oneof our independent contract manufacturers violates labor or other laws ordiverges from those labor practices generally accepted as ethical in the UnitedStates, it could result in the loss of certain of our major customers, adversepublicity for us, damage our reputation in the United States or render ourconduct of business in a particular foreign country undesirable or impractical,any of which could harm our business.

In addition, if we, or ourforeign manufacturers, violate United States or foreign trade laws orregulations, we may be subject to extra duties, significant monetary penalties,the seizure and the forfeiture of the products we are attempting to import orthe loss of our import privileges. Possible violations of United States orforeign laws or regulations could include inadequate record keeping of importedproducts, misstatements or errors as to the origin, quota category,classification, marketing or valuation of our imported products, fraudulentvisas or labor violations. The effects of these factors could render ourconduct of business in a particular country undesirable or impractical and havea negative impact on our operating results.

***Our quarterlyrevenues and operating results fluctuate as a result of a variety of factors,including seasonal fluctuations in the demand for consumer optics, deliverydate delays and potential fluctuations in our annualized tax rate, which mayresult in volatility of our stock price.***

Our quarterly revenues andnet operating results have varied significantly in the past and can be expectedto fluctuate in the future due to a number of factors, many of which are beyondour control. Our major customers generally have no obligation to purchaseforecasted amounts and may cancel orders, change delivery schedules or changethe mix of products ordered with minimal notice and without penalty. As aresult, we may not be able to accurately predict our quarterly sales or netoperating results. In addition, sales of consumer optics have historically beenseasonal in nature and tied to the winter holiday shopping season, with thestrongest sales generally occurring in our third fiscal quarter. Holidayshopping sales typically begin to ship in August, and delays in the timing,cancellation, or rescheduling of the related orders by our wholesale customerscould negatively impact our net sales and results of operations. Morespecifically, the timing of when products are shipped is determined by thedelivery schedules set by our wholesale customers, which could cause sales toshift between our second, third and fourth quarters. Because our expense levelsare partially based on our expectations of future net sales, expenses may bedisproportionately large relative to our revenues, and we may be unable toadjust spending in a timely manner to compensate for any unexpected revenueshifts or shortfalls, which could have a material adverse effect on our netoperating results. Also, our annualized tax rate is based upon projections ofour domestic and international operating results for the year, which arereviewed and revised by management as necessary at the end of each quarter, andit is highly sensitive to fluctuations in the projected mix of internationaland domestic earnings. Any quarterly fluctuations in our annualized tax ratethat may occur could have a material impact on our quarterly net operatingresults. As a result of these specific and other general factors, our netoperating results vary from quarter to quarter and the results for anyparticular quarter may not be necessarily indicative of results for the fullyear which may lead to volatility in our stock price.

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***Changes in currency exchange rates could affect ourrevenues and operating results.***

A significant portion ofour production is accomplished offshore, principally in China, and asignificant portion of our net sales were denominated in foreign currencies andare subject to exchange rate fluctuation risk. Although we may engage in somehedging activities to reduce foreign exchange transaction risk, changes in theexchange rates between the U.S. dollar and the currencies of Europe and Asiacould make our products less competitive in foreign markets, and could reducethe sales and operating results represented by foreign currencies. Additionally,such fluctuation could result in an increase in cost of products sold inforeign markets reducing margins and earnings.

***We may not be able to raise additional funds whenneeded for our business or to exploit opportunities.***

Our future liquidity andcapital requirements will depend on numerous factors, including our success inrecognizing and exploiting opportunities for expansion through potential futureacquisitions. We may need to raise additional funds to support expansion,develop new technologies, respond to competitive pressures, or take advantageof unanticipated opportunities. If required, we may raise additional fundsthrough public or private debt or equity financing, strategic relationships orother arrangements. There can be no assurance that such financing will beavailable on acceptable terms, if at all, and such financing, if obtained,would be dilutive to our stockholders.

***Our trademarks,design patents, utility patents and other intellectual property rights may notbe adequately protected outside the United States.***

We believe that ourtrademarks, design patents, utility patents and other proprietary rights areimportant to our business and our competitive position. We devote substantialresources to the establishment and protection of our trademarks, design patentsand utility patents on a worldwide basis. Nevertheless, we cannot assure thatthe actions we have taken to establish and protect our trademarks and otherproprietary rights outside the United States will be adequate to preventinfringement of our technologies or trade names by others or to prevent othersfrom seeking to block sales of our products as a violation of the trademarksand proprietary rights of others. Also, we cannot assure that others will notassert rights in, or ownership of, our trademarks, patents, designs and otherproprietary rights or that we will be able to successfully resolve these typesof conflicts to our satisfaction. In addition, the laws of certain foreigncountries may not protect proprietary rights to the same extent as do the lawsof the United States. We may face significant expenses and liability inconnection with the protection of our intellectual property rights outside theUnited States, and if we are unable to successfully protect our rights orresolve intellectual property conflicts with others, our business or financialcondition may be adversely affected.

***Our ability tocompete could be jeopardized if we are unable to protect our intellectualproperty rights or if we are sued for intellectual property infringement.***

We use trademarks onvirtually all of our products and believe that having distinctive marks thatare readily identifiable is an important factor in creating a market for ourproducts, in identifying the Company and in distinguishing our goods from thegoods of others. We consider our Meade®, Bresser®, Simmons®, Weaver®, Redfield®and Coronado® trademarks and brand names to be among our most valuable assetsand we have registered these trademarks in many countries. In addition, we ownmany other trademarks and trade names, which we utilize in marketing ourproducts. We continue to vigorously protect our trademarks against infringement.We also have a number of utility patents and design patents covering componentsand features used in many of our telescope, riflescope, binocular and otherproducts. We believe our success depends more upon skills in design, researchand development, production and marketing rather than upon our patent position.However, we have followed a policy of filing applications for United States andforeign patents on designs and technologies that we deem valuable as criticalcontributors to our business.

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***We are exposed topotential risks from recent legislation requiring public companies to evaluatecontrols under Section 404 of the Sarbanes-Oxley Act of 2002.***

We are subject to variousregulatory requirements, including the Sarbanes-Oxley Act of 2002. We, like allother public companies, are incurring expenses and diverting management’s timein an effort to comply with Section 404 of the Sarbanes-Oxley Act of 2002(“Section 404”). We are a non-accelerated filer and we are in the earlystages of process documentation and evaluation of our systems of internalcontrol. We are required to assess our compliance with Section 404 for theyear ending February 29, 2008. We expect to devote the necessaryresources, including additional internal and supplemental external resources,to support our assessment. If, in the future, we identify one or more materialweaknesses, or our external auditors are unable to attest that our management’sreport is fairly stated or to express an opinion on the effectiveness of ourinternal controls, this could result in a loss of investor confidence in ourfinancial reports, have an adverse effect on our stock price and/or subject usto sanctions or investigation by regulatory authorities.

***Our charter andbylaws, as well as applicable corporate laws, could limit the ability of othersto take over management control of the Company. We will have the ability toissue preferred stock, which could adversely affect the rights of holders ofour common stock.***

Our Certificate ofIncorporation and Bylaws provide for:

·       advancenotice requirements for stockholder proposals and director nominations,

·       aprohibition on stockholder action by written consent, and

·       limitationson calling stockholder meetings.

In addition, we aresubject to the anti-takeover provisions of Section 203 of the DelawareGeneral Corporation Law, which prohibits us from engaging in a “business combination”with an “interested stockholder” for a period of three years after the date ofthe transaction in which the person became an interested stockholder, unlessthe business combination is approved in a prescribed manner. These provisionscould have the effect of discouraging certain attempts to acquire the Company,which could deprive our stockholders of the opportunity to sell their shares ofcommon stock at prices higher than prevailing market prices. In addition, ourBoard of Directors has authority to issue up to 1,000,000 shares of preferredstock and to fix the price, rights, preferences, privileges and restrictions,including voting rights, of those shares without any further vote or action bythe stockholders. The rights of the holders of our common stock will be subjectto, and may be adversely affected by, the rights of the holders of anypreferred stock that may be issued in the future. The issuance of preferredstock could affect adversely the voting power of holders of our common stock andthe likelihood that such holders will receive dividend payments and paymentsupon liquidation. Additionally, the issuance of preferred stock may have theeffect of delaying, deferring or preventing a change in control of the Company,may discourage bids for our common stock at a premium over the market price ofthe common stock and may affect adversely the market price of and the votingand other rights of the holders of our common stock.

**ITEM 2.**                UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

**ITEM 3.**                DEFAULTSUPON SENIOR SECURITIES

Not applicable.

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**ITEM 4.**                SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of the Stockholders of MeadeInstruments Corp. was held on July 12, 2007 for the purpose of (i) electingseven directors to the Board of Directors and (ii) voting on a proposal toratify the appointment of Moss Adams LLP as the Company’s independentregistered public accounting firm for the fiscal year ending February 28,2008.

Proposal 1. Steven L. Muellner, Paul D. Sonkin, StevenG. Murdock, Harry L. Casari, Timothy C. McQuay, Frederick H. Schneider, Jr.and James M. Chadwick were elected by a plurality vote to serve as directors ofthe Company for a term of one year and until their respective successors areelected and qualified.

Thetabulation of votes cast for the election of Messrs. Muellner, Sonkin,Murdock, Casari, McQuay, Schneider and Chadwick was as follows:

| ** **                        | ** ** | **Votes For** | ** ** | **Abstentions** | ** ** |
|-----------------------------------|------------|--------------------|------------|-----------------|------------|
| Steven L.  Muellner               |       | 12,208,371         |       |            | 168,799    |   |   |
| Paul D. Sonkin                    |       | 12,208,371         |       |            | 168,799    |   |   |
| Steven G. Murdock                 |       | 12,208,371         |       |            | 168,799    |   |   |
| Harry L. Casari                   |       | 12,208,371         |       |            | 168,799    |   |   |
| Timothy C. McQuay                 |       | 12,208,371         |       |            | 168,799    |   |   |
| Frederick H.  Schneider, Jr. |       | 12,208,371         |       |            | 168,799    |   |   |
| James M. Chadwick                 |       | 12,208,371         |       |            | 168,799    |   |   |

 

Proposal2. The proposal to ratify the appointment of Moss Adams LLP as the Company’sindependent registered public accounting firm was approved. The affirmativevote of a majority of the votes cast by holders of the shares of common stockof the Company present in person or by proxy at the Annual Meeting and entitledto vote on Proposal 2, voting together as a single class, was required forapproval. The tabulation of votes was as follows:

| **Votes For** | ** ** | **Votes Against** | ** ** | **Abstentions** | ** ** |
|--------------------|------------|------------------------|------------|-----------------|------------|
| 12,180,303         |       |                   | 145,757    |            |       |   | 51,110 |   |   |
|                    |            |                        |            |                 |            |  |  |  |  |

 

**ITEM 5.**                OTHERINFORMATION

Not applicable.

**ITEM 6.**                EXHIBITS

Exhibits filed withthis Form 10-Q.

1.                 Exhibit 10.93Limited Waiver Agreement, dated October 11, 2007, by and among Bank ofAmerica, N.A., as lender, and Meade Instruments Corp., a Delaware corporation,Simmons Outdoor Corp., a Delaware corporation, and Coronado Instruments, Inc.,a California corporation*

2.                 Exhibit 31.1Sarbanes-Oxley Act Section 302 Certification by Steven L. Muellner*

3.                 Exhibit 31.2Sarbanes-Oxley Act Section 302 Certification by Paul E. Ross*

4.                 Exhibit 32.1Sarbanes-Oxley Act Section 906 Certification by Steven L. Muellner*

5.                 Exhibit 32.2Sarbanes-Oxley Act Section 906 Certification by Paul E. Ross*

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*                    Filedherewith.

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                               | **MEADE  INSTRUMENTS CORP.** |
|-------------------------------|------------------------------|
| Dated: October 15,  2007 | By:                          | /s/ STEVEN L. MUELLNER |
|                          |                         | Steven L. Muellner |
| * *                      | * *                     | *President and Chief Executive Officer* |
|                          | By:                          | /s/ PAUL E. ROSS |
|                          |                         | Paul E. Ross |
| * *                      | * *                     | *Senior Vice President, Finance and* |
| * *                      | * *                     | *Chief Financial Officer* |

 

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**EXHIBITINDEX**
| Exhibit No.   | ** ** | ** **                                                                                                                                                                                                                                                                   | ** ** | **Description** |
|--------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| Exhibit 10.93 |       | Limited Waiver  Agreement, dated October 11, 2007, by and among Bank of America, N.A.,  as lender, and Meade Instruments Corp., a Delaware corporation, Simmons  Outdoor Corp., a Delaware corporation, and Coronado Instruments, Inc., a  California corporation* |
| 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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*                    Filedherewith.

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