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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

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

For the Fiscal Year Ended February 28, 2003

OR

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

Commission File No. 0-22183

MEADE INSTRUMENTS CORP.

(Exact Name of Registrant as Specified in Its Charter)





|                                                                             |  |                                            
|---------------------------------------------------------------------------- |  | -------------------------------------------
|Delaware
(State of Other Jurisdiction of Incorporation or Organization)      |  | 95-2988062
(I.R.S. Employer Identification)
|                                                                             |  |                                            
|6001 Oak Canyon, Irvine, California
(Address of principal executive offices) |  | 92618
(Zip Code)                           

Registrants telephone number, including area code: (949) 451-1450



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Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 Par Value Per Share

(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrants knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x

As of May 15, 2003, there were 19,806,026 outstanding shares of the
Registrants common stock, par value $0.01 per share (common stock), which is
the only class of common stock of the Registrant. As of May 15, 2003 the
aggregate market value of the shares of common stock held by non-affiliates of
the Registrant, computed based on the closing sale price of $2.90 per share as
reported by Nasdaq, was approximately $28 million.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12(b).2 of the Exchange Act).

|      |  |     
|----- |  | ----
|Yes o |  | No x

Documents Incorporated by Reference

Portions of the registrants Proxy Statement for the 2003 Annual Meeting
of Stockholders, which will be filed with the Securities and Exchange
Commission not later than 120 days after February 28, 2003, are incorporated by
reference into Part III of this Report.



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TABLE OF CONTENTS



|               |                                                                                               |  |  |  |  |  |  | 
|-------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I        
|               | Item 1. Business                                                                             
|               | Item 2. Properties                                                                           
|               | Item 3. Legal Proceedings                                                                    
|               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II       
|               | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters            
|               | Item 6. Selected Financial Data                                                              
|               | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|               | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|               | Item 8. Financial Statements and Supplementary Data                                          
|               | Item 9. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure 
|PART III      
|               | Item 10. Directors and Executive Officers of the Registrant                                  
|               | Item 11. Executive Compensation                                                              
|               | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|               | Item 13. Certain Relationships and Related Transactions                                      
|               | Item 14. Controls and Procedures                                                             
|PART IV       
|               | Item 15. Exhibits, Financial Statement Schedules, and Reports On Form 8-K                    
|               | REPORT OF INDEPENDENT ACCOUNTANTS                                                            
|               | CONSOLIDATED BALANCE SHEETS                                                                  
|               | CONSOLIDATED STATEMENTS OF OPERATIONS                                                        
|               | CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY                                              
|               | CONSOLIDATED STATEMENTS OF CASH FLOWS                                                        
|               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                   
|SIGNATURES    
|CERTIFICATIONS
|EXHIBIT 3.6   
|EXHIBIT 10.53 
|EXHIBIT 23.1  
|EXHIBIT 99.1  
|EXHIBIT 99.2  



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TABLE OF CONTENTS

|                                                                                                          |  |                                                                                       |                                      |          |    |      |  | 
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | ------------------------------------ | -------- | -- | ---- |  | 
|                                                                                                          |  |                                                                                       |                                      |          |    | Page
|                                                                                                          |  |                                                                                       |                                      |          |    |     
|                                                                                                          |  |                                                                                       |                                      | PART I   |    |      |  | 
|Item 1.                                                                                                   |  | Business                                                                              |                                      |          | 1  |     
|                                                                                                          |  |                                                                                       | Executive Officers of the Registrant |          |    | 8    | 
|Item 2.                                                                                                   |  | Properties                                                                            |                                      |          | 9  |     
|Item 3.                                                                                                   |  | Legal Proceedings                                                                     |                                      |          | 10 |     
|Item 4.                                                                                                   |  | Submission of Matters to a Vote of Security Holders                                   |                                      |          | 11 |     
|                                                                                                          |  |                                                                                       | PART II                              |          |    |      | 
|Item 5.                                                                                                   |  | Market for the Registrants Common Equity and Related Stockholder Matters             |                                      |          | 11 |     
|Item 6.                                                                                                   |  | Selected Financial Data                                                               |                                      |          | 12 |     
|Item 7.                                                                                                   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |                                      |          | 12 |     
|Item 7A.                                                                                                  |  | Quantitative and Qualitative Disclosures About Market Risk                            |                                      |          | 20 |     
|Item 8.                                                                                                   |  | Financial Statements and Supplementary Data                                           |                                      |          | 20 |     
|Item 9.                                                                                                   |  | Change in and Disagreements with Accountants on Accounting and Financial Disclosure   |                                      |          | 20 |     
|                                                                                                          |  |                                                                                       |                                      | PART III |    |      |  | 
|Item 10.                                                                                                  |  | Directors and Executive Officers of the Registrant                                    |                                      |          | 20 |     
|Item 11.                                                                                                  |  | Executive Compensation                                                                |                                      |          | 20 |     
|Item 12.                                                                                                  |  | Security Ownership of Certain Beneficial Owners and Management                        |                                      |          | 20 |     
|Item 13.                                                                                                  |  | Certain Relationships and Related Transactions                                        |                                      |          | 21 |     
|Item 14.                                                                                                  |  | Controls and Procedures                                                               |                                      |          | 21 |     
|                                                                                                          |  |                                                                                       |                                      | PART IV  |    |      |  | 
|Item 15.                                                                                                  |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |                                      |          | 22 |     
|                                                                                                          |  | CONSOLIDATED FINANCIAL STATEMENTS AND NOTES                                           |                                      |          |    |     
|Report of Independent Accountants                                                                         |  |                                                                                       | F-1                                  |         
|Consolidated Balance Sheets at February 28, 2003 and February 28, 2002                                    |  |                                                                                       | F-2                                  |         
|Consolidated Statements of Operations for the three years in the period ended February 28, 2003           |  |                                                                                       | F-3                                  |         
|Consolidated Statements of Stockholders Equity for the three years in the period ended
February 28, 2003 |  |                                                                                       | F-4                                  |         
|Consolidated Statements of Cash Flows for the three years in the period ended February 28, 2003           |  |                                                                                       | F-5                                  |         
|Notes to Consolidated Financial Statements                                                                |  |                                                                                       | F-6                                  |         





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PART I




Item 1.Business

General

Meade Instruments Corp. is a multinational consumer optics
company that designs, manufactures, imports and distributes telescopes,
telescope accessories, binoculars, riflescopes, microscopes and other optical products.
Meade is dedicated to bringing innovative, cutting-edge, consumer-friendly
products to the consumer optics marketplace. That dedication to bringing
consumers the broadest offering of consumer optical products led to the
Companys acquisition of Simmons Outdoor Corp. (Simmons) in October 2002.
Simmons, a highly-regarded and well-known designer and distributor of
riflescopes and binoculars, offers complete binocular and riflescope product lines under the Simmons®,
Weaver® and Redfield® brand names. With Simmons, Meade has expanded its
presence in the sporting goods market, a market the Company has not
significantly penetrated in the past. Meades dedication to product innovation
and brand recognition has led to the successful introduction of a wide range of
products  products such as the Meade CaptureView, a binocular with an
integrated digital camera introduced in early fiscal 2003 that contributed over
$15 million to net sales in its first year on the market. The Company believes
that it offers not only the broadest and most complete line of telescopes and
telescope accessories available but also, with the acquisition of Simmons, one
of the broadest, most complete and most highly respected lines of riflescopes,
binoculars and spotting scopes for the sports optics enthusiast. The Company
offers hundreds of different telescope, riflescope and binocular models as well
as hundreds of accessory products for consumer telescope and sports optics
buyers. The Companys telescopes range in aperture from under 2 inches to 16
inches and in retail price from less than $100 to more than $15,000. The
Company offers several families of riflescopes and binoculars under its brand
names at retail price points from about $10 to more than $500. Whether a
consumer is a serious amateur astronomer, an avid
naturalist or someone just looking for a good binocular, Meade offers a complete
range of quality products to satisfy almost any desire the consumer optics
buyer may have.

Founded in 1972, Meade has a decades-long reputation for providing the
amateur astronomer with technically sophisticated products at competitive
prices. Combining its manufacturing expertise with its dedication to
innovation, quality and value, Meade has developed and produced some of the
industrys most technologically advanced consumer telescopes at affordable
prices. Although professional and institutional applications of Meades
telescopes are not Meades primary market, the Companys Schmidt-Cassegrain
telescopes are used by many universities, scientific laboratories and aerospace
companies throughout the world. The Company has capitalized on its brand name
recognition among serious amateur astronomers and its ability to bring advanced
technology to lower price points to market successfully its less-expensive
telescopes to beginning and intermediate amateur astronomers. Meade is a major
supplier of telescopes to such retailers as Discovery Channel Stores (formerly
The Nature Company), Aldi (Germany), Wal-Mart, and Sams Club.

Meade
was sold by its founder and then-current Chief Executive Officer to an
investor group in 1986. It was reacquired by the Companys senior management
in 1991. After the reacquisition, management emphasized a business plan that
concentrated on new product development, securing a reliable supplier of
less-expensive telescopes, effective targeted marketing and customer service.
To those ends the Company committed $3.0 million, $2.2 million and $2.1 million
to research and development during fiscal 2003, 2002 and 2001, respectively,
and has, over the last five fiscal years, committed $9.7 million in the
aggregate to research and development. These research and development
expenditures were centered on the development of technologically advanced
less-expensive telescopes, new products for the general consumer and sports
optics markets as well as product improvement and industrial applications of
the Companys existing technologies.

Meade
manufactures a complete line of advanced astronomical
telescopes in Irvine, California, including the production of all of the
advanced optical systems, which are critical components of telescopes. Many of
the Companys less-expensive telescopes and its binoculars and riflescopes are
manufactured under proprietary designs by manufacturers located in Asia,
including mainland China, Taiwan, the Philippines and Japan. The Company also
sources component parts for small to midrange telescopes and related
accessories from several suppliers in mainland China, Taiwan, Japan
and Korea. These
parts are assembled into finished products in the Companys wholly-owned
Mexican assembly plant (See Item 2. Properties).

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The Company complements its efforts in new product development with an
aggressive marketing plan. The Companys marketing plan includes print
advertising in astronomy, outdoor and hunting related magazines and, at times,
in general consumer magazines. The marketing plan also includes extensive
co-operative advertising campaigns with many of the Companys key retail
partners, as well as point-of-sale marketing displays. In addition, Meade
publishes comprehensive, full-color, high-quality product catalogs that provide
significant product exposure for a broad range of consumers including the
serious amateur astronomer, the avid birder, the weekend sports enthusiast or
hunter.

On September 1, 1999 the Company acquired 100% of the stock and equity
interests in Bresser Optik GmbH & Co. KG, and Bresser Optik Geschaftsfuhrung
und Verwaltungs GmbH (collectively Bresser), for $5.0 million in cash and
201,830 shares of the Companys common stock valued at approximately $2.0
million. Bresser is a German distributor of binoculars, telescopes, microscopes
and other consumer optical products. Bresser has provided the Company greater
distribution opportunities for the Companys products. Moreover, Bressers
significant presence in the binocular and low-priced telescope market in Europe
has strengthened the Companys penetration into these markets. In January 2000,
the Company also purchased what was formerly its German distributor for
approximately $1.1 million cash.

On October 25, 2002 the Company acquired 100% of the outstanding common
stock of Simmons Outdoor Corp. for $20,829,000 cash ($16,000,000 was paid at
close; the balance was paid in December, 2002). Simmons, a designer and
distributor of riflescopes, binoculars and other consumer sports optics offers
products under the Simmons, Weaver and Redfield brand names. To fund a portion
of the purchase price, the Company sold 3,291,801 shares of its common stock in
a private placement for net cash proceeds of $7,344,000. The balance of the
purchase price was funded through borrowings on the Companys bank line of
credit.

In the United States and Canada, the Company distributes its products
through a network of more than 500 specialty retailers, distributors and mass
merchandisers, which offer Meades products in more than 3,000 retail store
locations. The Company also sells certain of its telescope models to selected
national mail order dealers. In addition to products sold through Meade Europe
(formerly Bresser) channels, Meade sells its products internationally through a
network of over 30 foreign distributors, many of which service dealer locations
in their respective countries. Revenues from customers outside North America
were $27.2 million for the fiscal year ended February 28, 2003, and accounted
for approximately 24.5% of the Companys net sales for the fiscal year ended
February 28, 2003 (See Note 8 of Notes to Consolidated Financial Statements).
The Company intends to continue to pursue an integrated strategy of product
line expansion, aggressive marketing, and expansion of the Companys domestic
and international distribution networks.

The Company continues to pursue industrial applications for its
technologies and its product development and manufacturing capabilities. To
that end, Meade announced, during fiscal 2002, several relationships with
companies involved in free-space optics communication technologies and digital
imaging applications in the scientific research and medical diagnostic
equipment markets. Several of those companies have since ceased doing business.
Meades principal source of revenue in the industrial marketplace is the sale
of digital CCD imagers used in a life sciences research system manufactured and
sold by the Eastman Kodak Companys Scientific Imaging Systems group (based in
Rochester, NY and New Haven, CT). However, sales to Eastman Kodak amounted to
less than 1% of net sales for the year ended February 28, 2003.
While Meade continues to pursue industrial applications for its technologies,
the Company does not believe sales of products into such markets will
contribute meaningfully to the Companys sales and profitability for the
foreseeable future.

Recent Developments

On April 21, 2003, the Company announced that John C. Diebel will resign
as the Companys Chairman and Chief Executive Officer effective May 31, 2003.
Steven G. Murdock will become Chief Executive Officer and retain his position
as President. Harry L. Casari, a current member of the Companys Board of
Directors, will become Chairman of the Board of Directors. Mr. Diebel remains
a member of the Board of Directors.

In connection with Mr. Diebels resignation, the Company and Mr. Diebel
have entered into a Transition Agreement pursuant to which, among other
matters, Mr. Diebel has agreed to serve as a consultant to the Company until
May 31, 2004.

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Industry Overview

Market-size data for the consumer optics industry are difficult to obtain
because nearly all of the companies in the industry are privately held. The
Company believes the overall size of the consumer optics market is driven, in
part, by the introduction of new products.

The Company offers products at numerous price points in the consumer
optics market, from advanced astronomical telescopes, state-of-the-art
riflescopes and cutting-edge binoculars with integrated digital cameras to
less-expensive telescopes for beginning amateur astronomers and low-priced
binoculars for the casual observer.

The advanced astronomical telescope market is characterized by frequent
technological developments, including the relatively recent introduction of
electronic and computer-aided features. Serious amateur astronomers demand that
the optical, electronic and mechanical performance of the telescopes and
accessories they purchase be of very high quality. These advanced telescopes
continue to drive the technological advances specifically in the telescope
industry and generally in the consumer optics industry.

Telescopes are generally offered in three different optical
configurations: (a) refracting telescopes, which use a lens at the upper end of
the optical tube to collect light; (b) reflecting telescopes, which use a
concave mirror as the primary optical element; and (c) catadioptric
(mirror-lens) telescopes, which employ a combination of mirrors and lenses to
form the image. Each type has its own advantages: refractors are easy to
maintain, yield sharp images and are relatively inexpensive in smaller
apertures; reflectors generally are the lowest-cost means of purchasing larger
apertures and are well suited to the intermediate amateur astronomer; and
mirror-lens telescopes are more portable in larger apertures.

The binocular market is typically characterized less by technological
developments than by styling, features and price. However, Meade believes its
introduction of the CaptureView binocular with an integrated digital camera
demonstrates that innovation can drive binocular sales as well. Among the
first to market with the concept of an integrated binocular/digital camera,
Meades CaptureView offered a quality integrated product at an attractive
retail price (only $99 at most retail outlets in the U.S.) The principal
features considered by binocular buyers include: (1) the diameter of the
objective lenses, which serve to collect light, (2) the types of prisms used to
right the visual image  either porro prisms (which give some binoculars the
familiar zig-zag profile) or roof prisms that permit straight line designs, and
(3) the magnification, or power, of the optical system. A binoculars field of
view, anti-reflective lens coatings and eye relief are also considered by
consumers buying binoculars. Binoculars typically range in size from mini
binoculars that generally have objective lenses not larger than 26mm to
professional-level binoculars that can support objective lenses exceeding 60mm
in diameter. Binocular retail prices range from under $10 to several thousand
dollars. Meade binoculars, offered under the Meade, Bresser, Simmons, Weaver
and Redfield brand names, generally sell for between $15 and $400 at retail.

The riflescope (and pistolscope) market demands a product that is rugged,
absolutely waterproof and unerringly accurate. Like the binocular and
telescope markets, features, styling and price are prime motivators in the
riflescope market. Brand reputation is also a critical element in the
riflescope consumers buying decision. The principal features considered by
rifle and pistol scope buyers include: (1) light gathering ability and light
transmission which are principally dependent on the diameter of the objective
lens and the effectiveness of the anti-reflective coatings applied to the
various lens surfaces in the scope, (2) waterproof/fogproof/shockproof
integrity and durability of construction, (3) eye relief, which measures the
distance from the shooters eye to the surface of the ocular lens, (4) ease of
adjustment for windage and elevation and (5) magnification  riflescopes
typically offer variable magnification but come in fixed magnifications as
well. Rifle and pistol scopes are sized by the diameter of the objective lens,
which typically ranges from 20mm to 50mm, and are priced from under $30 to
nearly $2,000 at retail. Meade rifle and pistol scopes, offered under the
Simmons, Weaver and Redfield brand names, generally sell for between $30 and
$600 at retail.

Meade believes that it is uniquely positioned in the marketplace to
capitalize on its strong family of brand names, its research and development
resources, its history of innovation and its manufacturing capabilities, to
bring new and innovative products to the consumer and sports optics markets.

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Competitive Strengths

Meade believes that it derives significant benefits from its position as a
leading designer and distributor of telescopes, binoculars,
riflescopes, microscopes and
other optical related products. These benefits include its ability to offer its
customers one of the most innovative, broadest product lines available,
embodying both high quality and value. The Company attributes its success to
the following competitive strengths:

New Products/Research and Development.Meade places a primary emphasis on
product innovation and quality through its research and development efforts.
The Company employs an in-house engineering staff that develops new products
for the broad spectrum of markets the Company sells into as well as
technological advances and improvements to existing products. The Company is
able to obtain additional benefits by out-sourcing certain research and
development services to supplement its internal expertise. Meade believes that
the members of its senior level management are among the most experienced in
the telescope industry. The Company, its
management and its employees are dedicated to the goal of producing technically
superior yet price-competitive products and have been responsible for some of
the consumer optics industrys most technically advanced, easy to use, consumer
telescopes, binoculars and riflescopes.

Broad Line of Products.The Company has pursued a strategy in which it
uses the tremendous advancements in microprocessor technology to building on
its existing know-how in advanced telescope design and operation to bring
computer technology and features to telescopes at lower and lower price points.
Through its acquisitions of Bresser in 1999, and Simmons in 2002, the Company
has expanded its product lines to include a wide variety of binoculars and
telescopes under the Bresser brand name (a well-known and respected brand in
Germany and throughout Europe) and complete lines of riflescopes, pistolscopes
and binoculars under the Simmons, Weaver and Redfield brand names. As a result,
the Company offers hundreds of different telescope, riflescope and binocular
models with several different optical configurations, as well as hundreds of
accessory products for the consumer telescope and sports optics buyers. The
Companys telescopes range in aperture from under 2 to 16 inches and in retail
price from less than $100 to more than $15,000. The Company offers several
families of riflescopes and binoculars under its several brand names at retail
price points from about $10 to more than $500. Whether a consumer is a serious amateur astronomer, an avid hunter or someone just
looking for a good binocular, Meade offers a complete range of quality products
to satisfy almost any desire the consumer optics buyer may have.

Optical Systems Expertise.Meade has made substantial investments to
develop an expertise in optical engineering, providing it with the ability to
produce high quality optics on-site in Irvine, California. Meade employs highly
skilled opticians who use sophisticated manufacturing techniques and equipment,
including specialized optical polishing machines and vacuum-coating machines,
to produce what the Company believes to be the highest quality optics available
in the more advanced consumer telescope market. Meade uses its optical
engineering expertise to ensure that the optics in its foreign-sourced
telescopes, binoculars and riflescopes meet the strictest of standards.

Quality Control.Meades manufacturing and engineering personnel
coordinate the manufacturing process in order to ensure that product quality is
maintained at a high level within an efficient cost structure. The Company has
in place quality controls covering all aspects of the manufacturing process of
its products, from each products precision optical system to its final
assembly and testing. Certain of the Companys less expensive and mid-range
telescope models and accessories are assembled at the Companys assembly plant
located in Tijuana, Mexico. The Company manufactures the majority of its
high-end advanced telescopes in its manufacturing facility in Irvine,
California, while many of the Companys less-expensive telescopes, and its
binoculars and riflescopes are produced for the Company by manufacturers
located in the Far East, principally mainland China, Taiwan, Japan
and the Philippines. Meade regularly
sends product and design engineers to the Far East to monitor the manufacturing
processes at the various plants that produce its telescopes, telescope
components, binoculars, riflescopes and accessories. Meade also regularly
commits at least one of its United States based quality control engineers to
the Far East.

Broad Distribution Network.The Companys sales force in the U.S. and in
Germany works closely with specialty retailers, distributors and mass
merchandisers on product quality, technical knowledge and customer

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service. Meade expanded its distribution network with the acquisition of
Simmons. Simmons distributes its products, inside and outside the U.S.,
principally through mass merchandisers and distributors in the sporting goods
marketplace. Meade did not have significant presence in the sporting goods
marketplace prior to the acquisition of Simmons. Meade has its own on-site
graphic arts departments to work with specialty retailers, distributors and
mass merchandisers to produce print advertising, hang-tags for displays within
retail outlets and other point-of-sale support. This capability provides the
Companys customers with a comprehensive marketing program to assist in their
sales efforts. As a result of these efforts, Meade has become a major supplier
of telescopes, binoculars and riflescopes to such retailers as Discovery
Channel Store (formerly The Nature Company), Aldi (Germany), Wal-Mart, Sams
Club and Jerrys Sport Center. Meade Europe also has continued to expand
Meades international presence.

Superior Customer Service.Meade believes that its high levels of customer
service and technical support are important factors that differentiate it from
its competitors. In an effort to provide each of the Companys customers with
post-sale service and to relieve them of the burden of such service, Meade has
established multiple dedicated toll-free telephone numbers so that its
customers and end users can call the Companys support personnel with any
questions relating to its products. In addition to giving its customers
personal attention, the Company believes that providing this toll-free
assistance also reduces product returns by better educating first-time users
about telescope, binocular and riflescope operation. In addition, in an effort
to simplify assembly of the Companys products, Meade pre-assembles a
substantial portion of its telescopes prior to packaging.

Products

Meade has developed and expanded its product line to include a full line
of telescopes and accessories for the beginning, intermediate and serious
amateur astronomer. The Company offers a complete line of binoculars from small
aperture theater glasses to full-size waterproof roof-prism glasses and the
Companys recently introduced CaptureView binocular with an integrated digital
camera. The Companys product offerings also include a complete line of
riflescopes from the lower-to-moderate priced Simmons and Redfield lines to the
higher priced precision scopes in the Weaver line. Moreover, in addition to
adding new products, the Company continually refines and improves its existing
products. Certain of Meades products are described in greater detail below:

Advanced Astronomical Telescopes.Among the Companys most sophisticated
products are its LX series Schmidt-Cassegrain and Maksutov-Cassegrain
telescopes, which incorporate an optical system that provides high-quality
resolution, contrast and light transmission. The LX series offers the serious
amateur astronomer a broad range of products, from the attractively priced
Autostar-controlled LX90, to the state-of-the-art LX200GPS line. The LX200GPS
telescopes, available in 7, 8, 10, 12, 14 and 16-inch apertures, are the most
popular of the Companys telescopes among serious amateur astronomers. The
LX200GPS telescopes feature a Global Positioning System (GPS) receiver for
automatic telescope alignment and a built-in computer library of more than
145,000 celestial objects. These objects are cataloged in the Companys
proprietary hand-held computerized Autostar II control system. By entering any
of the celestial objects presented on the Autostar II display, the telescope
automatically locates and tracks the selected object. Advanced telescopes also
include the Companys LXD55 series. The LXD55 series offers the more serious
amateur a wide variety of advanced features on larger aperture telescopes at
economical prices. The advanced astronomical telescopes collectively
represented approximately 3% of telescope units shipped and approximately 21%
of the Companys net sales for the fiscal year ended February 28, 2003.

Entry-Level Telescopes.Designed specifically for the beginning to
intermediate amateur astronomer or terrestrial observer, the Companys
less-expensive 60mm to 114mm refracting, reflecting and spotting telescopes and
the ETX series telescopes include many of the features of the more advanced
telescopes at economical prices. With the NG and NGC series of telescopes (the
NG telescopes) and the Digital Electronic Series telescopes (the DS
telescopes), with apertures ranging from 60mm to 114mm, and the ETX series,
with apertures ranging from 70mm to 125mm, some of the most sophisticated
features of the Companys advanced telescopes are made available at some of the
Companys lowest retail price points. Equipped with the hand-held Autostar
Computer Controller, the ETX series and the DS telescopes can find and track
any one of one thousand or more celestial objects at the push of a button. The
Autostar, with its go to capability, brought to the general consumer for
prices starting at a few hundred dollars, features that had previously been
available only on the most sophisticated high-end telescopes selling for
thousands of dollars. The Company offers several variations of its small
refracting and reflecting telescopes (including its traditional models, the NG telescopes
and the DS telescopes) for distribution on a semi-exclusive

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basis to specific specialty retailers. These telescope models comprise the
lower-price end of the Companys telescope product line. Sales of entry-level
telescopes comprised approximately 97% of the Companys telescope units shipped
and approximately 36% of the Companys net sales for the fiscal year ended
February 28, 2003.

Binoculars.The Company expanded its market presence in binoculars with
the acquisition of Simmons in 2002 and Bresser in 1999. The Simmons brands are
widely recognized in the sports optics marketplace as quality products at
competitive prices. The Bresser name is equally well recognized in Germany and
other countries in Europe as a quality supplier of a wide range of binoculars.
Binocular sales accounted for well over one half of the Companys sales
attributed to Germany during fiscal 2003. The Company also sells a complete
line of consumer binoculars through its existing domestic distribution network
under the Meade brand name, including the Companys CaptureView, a binocular
with an integrated digital camera. The binoculars sold by the Company are
purchased from manufacturers outside the United States. Binocular sales,
comprising over one million units in fiscal 2003, represented approximately 24%
of the Companys net sales for the fiscal year ended February 28, 2003.

Rifle and pistol scopes. The Company expanded its product offerings to
include riflescopes and pistolscopes with the acquisition of
Simmons in October 2002. Simmons sells riflescopes under the Simmons, Weaver
and Redfield brand names. Riflescope sales accounted for most of the
Companys sales
attributed to Simmons during fiscal 2003. The riflescopes sold by the Company
are purchased from manufacturers outside the United States. Riflescopes
represented approximately 8% of the Companys net sales for the fiscal year
ended February 28, 2003.

Accessories.The Company also offers accessories for each of its principal
product lines that range from additional eyepieces and celestial observation
software for telescopes to bore sighters for riflescopes. Approximately 250
telescope accessory products are currently available from the Company. Sales of
accessories represented approximately 9% of the Companys net sales for the
fiscal year ended February 28, 2003. Other miscellaneous products such as
industrial optical and digital imaging products, microscopes and other consumer
optical products accounted for approximately 2% of the Companys net sales for
fiscal 2003.

Sales and Marketing

The
Companys telescopes, binoculars, riflescopes, microscopes and accessories are sold
through a domestic network of mail order dealers, specialty retailers,
distributors and mass merchandisers. Internationally, the Companys products
are sold through its wholly owned subsidiary in Germany to specialty retailers
and mass merchandisers and through a network of foreign distributors and
dealers in other countries around the world. The Companys high-end telescopes
are generally sold through mail order dealers or single and multiple-location
specialty retailers. Meades less-expensive telescopes are sold in similar
venues but are sold principally through mass merchandisers. The Companys
binoculars and riflescopes are sold principally through a network of domestic
distributors, as well as through specialty retailers and mass merchandisers.
The Company maintains direct contact with its larger dealers and its domestic
and foreign distributors through the Companys sales professionals. A network
of independent representatives is used to maintain contact with its smaller
specialty retailers. Included among the Companys customers are the following
retail outlets, mass merchandisers and foreign distributors: Discovery Channel
Stores (formerly The Nature Company), Wal-Mart, Aldi (Germany), MIC
International Corp. (Japan), Sams Club and Jerrys Sport Center. For
additional information about geographic areas, see Note 8 of Notes to
Consolidated Financial Statements.

The Companys sales force works closely with its dealers, specialty
retailers, distributors and mass merchandisers on product quality, technical
knowledge and customer service. The Company employs approximately thirty-seven
persons in sales and customer service positions in the U.S. and Europe, all of
whom have significant industry experience. These individuals advise the
Companys specialty retailers about the quality features of the Companys
products and provide answers to questions from specialty retailers as well as
directly from end users of the Companys products. The Company stresses service
to both its customers and end users by providing marketing assistance in the
form of hang-tags, catalog layouts and other print media as well as dedicated
toll free customer service telephone numbers. In addition to giving its
customers personal attention, the Company believes toll free telephone numbers
also help reduce the number of product returns from end users who are generally
unfamiliar with the assembly and operation of telescopes, binoculars and
riflescopes. The Companys dedication to providing a high level of customer
service is one factor that management believes sets Meade apart from its
competition.

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The Companys telescope products are regularly advertised in most major
domestic and international telescope and astronomy-related magazines and
periodicals with comprehensive, full color, technically informative
advertisements which present a consistent message of innovation and quality
about the Company and its products. Innovation and quality is also the theme in
the Simmons advertising and marketing programs. The Simmons brands are
regularly advertised in several of the most widely circulated hunting and
outdoors consumer magazines. The Company also focuses advertising dollars on
point-of-sale promotions and displays in partnership with its retail customers
to cooperatively market the Companys products to the end consumer.

Throughout fiscal 2003, the Company sold its products to mail order
dealers, to distributors and to more than 600 specialty retailers and mass
merchandisers that offer Meades products in more than
11,000 retail store
outlets. During fiscal 2003, Wal-Mart (including Sams Club) and Discovery
Channel Store (DCS, formerly The Nature Company), accounted for approximately
15% and 11% of the Companys net sales, respectively. During fiscal 2002,
Wal-Mart (including Sams Club) and DCS, accounted for approximately 13% and
11% of the Companys net sales, respectively. During fiscal 2001, DCS accounted
for approximately 13% of the Companys net sales. The Companys ten largest
customers, in the aggregate, accounted for approximately 49% of the Companys
net sales in fiscal 2003. The loss of, or the failure to replace, any
significant portion of the sales made to any significant customer could
adversely affect results of operations of the Company to the extent the Company
did not replace any such lost sales with increased sales to existing or new
customers.

Operations

Materials and Supplies.The Company purchases high grade optical glass in
order to avoid imperfections that can degrade optical performance. Lenses and
mirrors for the Companys domestically manufactured telescopes are individually
polished and hand-figured by master opticians to achieve a high level of
resolution. The Company purchases metal telescope components from numerous
foundries, metal stamping and metal working companies. Certain of the Companys
products contain computerized drive systems and other electronic circuitry. The
components of these computerized drive and electronic systems are purchased
from various suppliers and are generally assembled by third party vendors.

Polishing and Hand Figuring.After a Schmidt-Cassegrain,
Maksutov-Cassegrain, ED-refractor or Schmidt-Newtonian glass surface is fine
ground, the mirror or lens is polished for up to 16 hours to obtain full
transmission or reflectivity. It is at this point that the Companys opticians
perform the final lens or mirror shaping (a process called figuring).

Optical Testing.As each of the Companys ED-refractors,
Maksutov-Cassegrain optical sets, Schmidt-Cassegrain optical sets, or parabolic
Newtonian primary mirrors progress through the grinding, polishing and
hand-figuring stages of development, they are repeatedly tested and re-tested
for irregularities, smoothness of figure and correction.

Optical Alignment and Centration.Finished, individually-matched
Maksutov-Cassegrain and Schmidt-Cassegrain optical sets and matched
ED-refractor doublet objective lenses are sent to the optical alignment and
centration department, where each optical set is placed into a special optical
tube that permits rotation of the optical elements about their optical axes.
With optimal orientation fixed, each optics set is placed into machined
housings of an optical tube or collimation lens cell. The optical system is
once again tested and only after passing this final test is an optical tube
system ready to be used.

The Company works closely with factories in the Far East developing
proprietary telescope, binocular and riflescope designs and ensuring that the
manufacturing processes result in products that meet the Companys quality
standards. Meade maintains relationships with several suppliers in the Far East
in order to diversify its supply. Most of those suppliers are located in
mainland China. Many of the Companys telescopes, telescope components and
accessories, binoculars and riflescopes purchased during fiscal 2003 were
supplied by these Chinese manufacturers. The Company owns many of the key
designs, molds and dies used by the Far-Eastern suppliers. Meade regularly
sends product and design engineers to the Far-East to monitor the manufacturing
processes at the various plants that produce its products and accessories.
Meade also regularly commits at least one of its United States based quality
control engineers to the Far East.

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In fiscal year 2000 the Company began an assembly operation in a 26,000
sq. ft. building located in Tijuana, Mexico (the Mexico Facility). In
December 1999, the Mexico Facility was expanded to approximately 50,000 sq. ft.
At February 28, 2003, this facility employed approximately 135 people engaged
in the assembly of several products including less-expensive and mid-range
telescopes, electronic sub-assemblies, and accessory products.

Competition

The telescope, binocular and riflescope industries are highly competitive
and sensitive to consumer needs and preferences. In the telescope market, Meade
competes in the United States and Canada with Celestron International, Inc.
(Celestron), and Bushnell Performance Optics, Inc. (Bushnell) and, to a
lesser extent, with other significantly smaller companies which service niche
markets. In Europe and Japan, the Company competes primarily with Celestron,
Vixen Optical Industries, Ltd., and with other smaller regional telescope
importers and manufacturers. Some of the Companys current and potential
competitors in the telescope market may possess greater financial or technical
resources and competitive cost advantages due to a number of factors,
including, without limitation, lower taxes and substantially lower costs of
labor associated with manufacturing. In May 2002, Celestron transferred certain
of its assets in an assignment for the benefit of creditors proceeding. Those
assets were sold in June 2002 to a new Celestron entity, Celestron Acquisition
LLC.

The binocular and riflescope markets are generally more competitive than
the telescope market with a greater number of competitors at each price point.
In the binocular market, the Company competes primarily with Bushnell, Nikon
Inc., Canon Inc., Minolta Camera, Co., Ltd., Pentax Corporation and various
smaller manufacturers and resellers. In the riflescope market, the Company
competes primarily with Bushnell, Leupold & Stevens, Inc., BSA Optics, Inc.,
Burris Company and Kahles GmbH. Many of these competitors in the binocular and
riflescope market have significantly greater brand name recognition and
financial and technical resources than those of the Company, and many have
long-standing positions, customer relationships and established brand names in
their respective markets.

Employees

As of February 28, 2003, Meade had approximately 500 full-time employees.
The Company believes that it offers competitive compensation and other benefits
and that its employee relations are good. None of the Companys United
States-based employees is represented by a union. The Companys employees at
the Mexico Facility are represented by a union. The success of the Companys
future operations depends in large part on the Companys ability to attract and
retain highly skilled technical, marketing and management personnel. There can
be no assurance that the Company will be successful in attracting and retaining
such key personnel.

In order to enable its employees to share in the Companys growth and
prosperity, Meade established the Meade Instruments Corp. Employee Stock
Ownership Plan (the ESOP), effective March 1, 1996. The ESOP provides
participating United States-based employees an opportunity to receive
beneficial ownership of Meades common stock.

Executive Officers of the Registrant

Set forth below are the names, ages, titles and present and past positions
of the persons serving as executive officers of the Company as of May 15, 2003:

|                      |  |     |    |          |  |                                                            
|--------------------- |  | --- | -- | -------- |  | -----------------------------------------------------------
|Name                  |  | Age |    | Position
|                      |  |     |    |         
|John C. Diebel        |  |     | 59 |          |  | Chairman of the Board and Chief Executive Officer          
|Steven G. Murdock     |  |     | 51 |          |  | President, Chief Operating Officer, Secretary, Director    
|Joseph A. Gordon, Jr. |  |     | 53 |          |  | Senior Vice President  North American Sales, Director     
|Brent W. Christensen  |  |     | 44 |          |  | Senior Vice President  Finance and Chief Financial Officer
|Mark D. Peterson      |  |     | 41 |          |  | Senior Vice President and General Counsel                  
|Robert L. Davis       |  |     | 36 |          |  | Senior Vice President  Corporate Development              

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John C. Diebelfounded Meade Instruments Corp. in 1972. He has been the
Chairman of the Board and Chief Executive Officer of the Company for the
majority of the time since December 1975. Prior to founding the Company, Mr.
Diebel worked as an engineer for TRW Inc. and Hughes Aircraft Co. Mr. Diebel
graduated from the California Institute of Technology with BS and MS degrees in
electrical engineering and received a Ph.D. degree in electrical engineering
from the University of Southern California. On April 21, 2003, the Company
announced that John C. Diebel will resign as the Companys Chairman and Chief
Executive Officer effective May 31, 2003. Mr. Diebel remains a member of the
Board of Directors.

Steven G. Murdock, a director of the Company since April 1996, has been
the Companys President and Chief Operating Officer since October 1990 and the
Companys Secretary since April 1996. From May 1980 to October 1990, Mr.
Murdock was the Companys Vice President of Optics. From November 1968 to May
1980, Mr. Murdock worked as the optical manager for Coulter Optical, Inc., an
optics manufacturer. Mr. Murdock received a BS degree in business
administration from California State University at Northridge. In connection
with Mr. Diebels resignation as Chief Executive Officer, Steven G. Murdock
will become Chief Executive Officer and retain his position as President.

Joseph A. Gordon, Jr., a director of the Company since April 1996, has
been the Companys Senior Vice President  North American Sales since June
1995. From December 1984 to June 1995, he worked as the Companys Vice
President  North American Sales. From January 1981 to December 1984, Mr.
Gordon was the Vice President of Sales at Celestron. Mr. Gordon received a BS
degree in marketing from the University of Cincinnati.

Brent W. Christensenhas been the Companys Senior Vice President -
Finance and Chief Financial Officer since March 1, 2002. Mr. Christensen was
the Companys Vice President  Finance from June 1995 and Chief Financial
Officer from April 1996. From August 1993 to June 1995, he worked as the
Companys controller. Mr. Christensen is a Certified Public Accountant, and
from January 1985 to August 1993, he worked as an audit manager with Ernst &
Young LLP. Mr. Christensen received a BA degree in business administration from
California State University at Fullerton.

Mark D. Petersonhas been the Companys Senior Vice President and General
Counsel since March 1, 2002. Mr. Peterson was the Companys Vice President and
General Counsel from October 1997. From October 1991 to October 1997, Mr.
Peterson was an attorney with OMelveny & Myers LLP, specializing in corporate
and securities law. Mr. Peterson received a BS degree in accounting from
Brigham Young University and a JD degree from the University of California 
Berkeley, Boalt Hall School of Law.

Robert L. Davishas been the Companys Senior Vice President  Corporate
Development since March 1, 2003. Mr. Davis was the Companys Vice President and
Assistant General Counsel from December 1999. From September 1996 to December
1999, Mr. Davis was an attorney with OMelveny & Myers LLP, specializing in
corporate and securities law. From August 1994 to September 1996 he worked as
an attorney with Morrison & Foerster LLP, specializing in corporate finance and
labor and employment law. Mr. Davis received a BA degree in English and a JD
degree from Brigham Young University.




Item 2.Properties

During fiscal 2003, the Company leased a 161,000 square foot
manufacturing, distribution and corporate facility and a 42,000 square foot
warehouse both of which are located in Irvine, California. The manufacturing,
distribution and corporate facility lease expires in 2007. The warehouse lease
expired in March 2003 and the Company vacated the premises as of April 1, 2003.
Simmons leases a 96,000 square foot distribution facility in Thomasville,
Georgia that includes 6,000 square feet of office space. The Simmons lease
expires in December 2007. The Company leases 45,000 square feet of warehouse
space in Meridian, Mississippi on a month-to-month basis. The Company also
leases a 50,000 square foot assembly plant in Tijuana, Mexico. The Tijuana
lease expires in 2004 with three, five-year options. The Company owns a 30,000
square foot office and distribution facility located in Borken, Germany. The
Company also leases a 1,200 square foot office space, in Graefelfing, Germany
with a cancellation notice period of 6 months to the end of any calendar year.
The Company leases office space in Florida for a sales employee,
which lease expires in July 2003. The Companys management believes that all facilities occupied by the Company
are adequate for present requirements, and that the Companys current equipment
is in good condition and suitable for the operations involved.

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Item 3.Legal Proceedings

On October 17, 2001, the Company filed suit against Tasco Sales, Inc.
(Tasco) and Celestron International, Inc. (Celestron), charging the two
companies with patent infringement and unfair competition. The complaint,
filed in the United States District Court, Central District of California,
Southern Division (Case No. SA-CV 01-976 (GLT)), alleges that Tasco and
Celestron willfully infringed Meades Patent No. 6,304,376, entitled Fully
Automated Telescope System With Distributed Intelligence. In addition to
seeking compensation for damages incurred, including enhanced damages, the suit
seeks to enjoin Tasco and Celestron from continuing to manufacture or sell
products that infringe Meades patent. On or around November 7, 2001, the
defendants filed an answer, subsequently amended, to the complaint in which it
denied the Companys allegations and set forth various affirmative defenses.
On or around November 19, 2001, Defendants filed a counterclaim, also
subsequently amended, against the Company for declaratory judgment of
non-infringement of the Companys patent, for declaratory judgment that the
Companys patent is unenforceable and invalid, and for claims that the Company
is infringing a Celestron design patent, U.S. Patent No. D438,221, and
Celestrons trade dress. The counterclaim further alleges that the Company has
willfully infringed Celestrons design patent and seeks an unspecified amount
of damages, enhanced damages, and an injunction and other unspecified relief
against the Company. However, Celestron recently dismissed its design-patent
counterclaim with prejudice as to Meade products on sale up to that time. On
February 28, 2003, a partial Summary Judgment issued in favor of Celestron in
which the Court held that Celestron did not literally infringe Meades 376
patent. On May 23, 2003, a further partial Summary Judgment issued in favor of
Celestron in which the Court held that Celestron did not infringe Meades 376
patent under the doctrine of equivalents. Meade is currently evaluating its
options with respect to an appeal of these rulings. Due to the uncertainties of
litigation, the Company is unable to provide an evaluation of the likelihood of
either a favorable or unfavorable outcome in these cases.

On June 4, 2002, the Company filed suit against Celestron, Tasco and other
related or affiliated parties charging the defendant with patent infringement.
The complaint, (the 799 lawsuit) filed in the United States District Court,
Central District of California, Southern Division (Case No. SA CV 02-544
(GLT)), alleges that the defendants willfully infringed Meades Patent No.
6,392,799, entitled Fully Automated Telescope System With Distributed
Intelligence. The patent covers the Companys level the telescope and point
it North alignment technology (the Telescope Alignment Technology), which
allows a telescope user to easily align a computer operated telescope. In
addition to seeking compensation for damages incurred, including enhanced
damages, the suit seeks to enjoin Tasco, Celestron and the other defendants
from continuing to manufacture or sell products that infringe Meades telescope
alignment patent. On December 16, 2002, the District Court denied Meades
motion. The Company intends to continue to vigorously assert the 799 patent
against Celestron, Tasco, and the other defendants and to vigorously defend
against their counterclaims. Due to the uncertainties of litigation, the
Company is unable to provide an evaluation of the likelihood of either a
favorable or unfavorable outcome in this case.

On June 7, 2002, the Company filed suit against Celestron, Tasco and other
related or affiliated parties, charging the defendants with correction of
patent inventorship, false and misleading representations in violation of the
Lanham Act, unfair competition and fraudulent business practices. The
complaint, (the 942 lawsuit) filed in the United States District Court,
Central District of California, Southern Division (Case No. SA-CV 02-558
(GLT)), alleges that the defendants misappropriated the Companys Telescope
Alignment Technology and subsequently conspired to obtain United States Patent
No. 6,369,942, entitled Auto-alignment tracking telescope mount (the 942
Patent), by fraudulently representing themselves as the inventors and owners
of the Telescope Alignment Technology. In addition to other remedies, the suit
seeks to establish that the Company invented the Telescope Alignment Technology
and that equitable and legal title to the 942 Patent should be vested in the
Company. Due to the uncertainties of litigation, the Company is unable to
provide an evaluation of the likelihood of either a favorable or unfavorable
outcome in this case.

On November 21, 2002, Celestron filed an action alleging that Meade
products infringe United States Patent No. 6,467,738 entitled Tripod Structure
for Telescopes. The complaint seeks injunctive relief, compensatory and treble
damages in an unspecified amount, and attorneys fees and costs. Meade has
filed an answer denying all claims in Celestrons complaint. Celestron also filed a motion for a preliminary injunction based on its
patent. Meade opposed Celestrons motion. On December 16, 2002, the District
Court denied Celestrons motion. Due to the uncertainties of litigation, the
Company is unable to provide an evaluation of the likelihood of either a
favorable or unfavorable outcome in this case.

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Celestron and Tasco, in May 2002, transferred certain of their assets in
an assignment for the benefit of creditors proceeding to James Feltman, an
assignee. Assignee James Feltman subsequently sold the assets on or around
June 24, 2002 to a new Celestron entity, Celestron Acquisition LLC. Celestron
Acquisition LLC, along with Celestron and Tasco, is a defendant in the
above-referenced lawsuits. James Feltman is also a named defendant in the 799
lawsuit, but not the 942 lawsuit.

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




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

No matters were submitted to a vote of the Companys stockholders during
the fourth quarter of the fiscal year covered by this report.




PART II




Item 5.Market for the Registrants Common Equity and Related Stockholder Matters

The Companys initial public offering was completed on April 14, 1997 (the
Offering), and from that date to the present, the Companys common stock has
been listed on the Nasdaq National Market under the symbol MEAD. The high and
low sales prices on a per share basis for the Companys common stock during
each quarterly period for the fiscal years ended February 28, 2003 and 2002,
respectively, were:

|                              |  |      |      |     |  |                               |      |      |  |                |  |   |      |  |  |   |      |  |  | 
|----------------------------- |  | ---- | ---- | --- |  | ----------------------------- | ---- | ---- |  | -------------- |  | - | ---- |  |  | - | ---- |  |  | 
|Year Ended February 28, 2003: |  | High |      | Low |  | Year Ended February 28, 2002: |      | High |  | Low           
|                              |  |      |      |     |  |                               |      |      |  |               
|Fourth quarter                |  | $    | 3.75 |     |  | $                             | 2.75 |      |  | Fourth quarter |  | $ | 4.00 |  |  | $ | 2.22 | 
|Third quarter                 |  | $    | 4.75 |     |  | $                             | 2.56 |      |  | Third quarter  |  | $ | 5.70 |  |  | $ | 3.08 | 
|Second quarter                |  | $    | 5.87 |     |  | $                             | 3.00 |      |  | Second quarter |  | $ | 7.36 |  |  | $ | 4.15 | 
|First quarter                 |  | $    | 6.01 |     |  | $                             | 2.25 |      |  | First quarter  |  | $ | 7.50 |  |  | $ | 3.00 | 

The reported closing sales price of the Companys common stock on the
Nasdaq National Market on May 15, 2003 was $2.90. As of May 15, 2002, there
were 197 holders of record of the Companys common stock.

Other than dividends paid to the Companys ESOP in August 1996, the
Company has not paid any cash dividends on its common stock and does not
anticipate declaring or paying any cash dividends on its common stock in the
foreseeable future. Although the Company intends to make future contributions
to the ESOP upon Board approval, no cash dividends (other than dividends paid
to all holders of common stock) will be paid to the ESOP with respect to future
periods.

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Item 6.Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following data have been derived from the Companys audited
consolidated financial statements, including the consolidated balance sheets at
February 28, 2003 and 2002 and the consolidated statements of operations for
the three years ended February 28, 2003 and the notes thereto appearing
elsewhere herein.

|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |        | 
|---------------------------------------------------- | --------------------------------- | - | ------- | --------------------------------------------------- | ---- | - | ------ | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | - | ------ | ------ | 
|                                                     |                                   |   |         | Year Ended February 28,                             |      |   |        |        |      |   |         |        |  |   |        
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |        
|                                                     |                                   |   | 2003    |                                                     | 2002 |   | 2001   |        | 2000 |   | 1999   
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |        
|                                                     |                                   |   |         | (In thousands of dollars, except per share amounts) |      |   |       
|Income Statement Data:                               |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Net sales                                            |                                   | $ | 110,817 |                                                     |      | $ | 94,718 |        |      | $ | 123,000 |        |  | $ | 126,808 |        |  | $ | 76,321 |       
|Cost of sales                                        |                                   |   | 76,923  |                                                     |      |   | 70,108 |        |      |   | 82,809  |        |  |   | 75,780  |        |  |   | 44,255 |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|                                                     | Gross profit                      |   |         | 33,894                                              |      |   |        | 24,610 |      |   |         | 40,191 |  |   |         | 51,028 |  |   |        | 32,066 | 
|Selling expenses                                     |                                   |   | 14,248  |                                                     |      |   | 12,920 |        |      |   | 21,782  |        |  |   | 15,471  |        |  |   | 12,268 |       
|General and administrative expenses                  |                                   |   | 12,628  |                                                     |      |   | 9,098  |        |      |   | 8,439   |        |  |   | 10,355  |        |  |   | 7,325  |       
|ESOP contribution expense                            |                                   |   | 905     |                                                     |      |   | 1,367  |        |      |   | 2,997   |        |  |   | 1,861   |        |  |   | 1,200  |       
|Research and development expenses                    |                                   |   | 3,008   |                                                     |      |   | 2,167  |        |      |   | 2,062   |        |  |   | 1,361   |        |  |   | 978    |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|                                                     | Operating income (loss)           |   |         | 3,105                                               |      |   |        | (942   | )    |   |         | 4,911  |  |   |         | 21,980 |  |   |        | 10,295 | 
|Interest expense                                     |                                   |   | 1,137   |                                                     |      |   | 1,345  |        |      |   | 2,036   |        |  |   | 977     |        |  |   | 473    |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|                                                     | Income (loss) before income taxes |   |         | 1,968                                               |      |   |        | (2,287 | )    |   |         | 2,875  |  |   |         | 21,003 |  |   |        | 9,822  | 
|Income tax provision (benefit)                       |                                   |   | 830     |                                                     |      |   | (845   | )      |      |   | 1,589   |        |  |   | 9,048   |        |  |   | 4,223  |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Net income (loss)                                    |                                   |   | 1,138   |                                                     |      |   | (1,442 | )      |      |   | 1,286   |        |  |   | 11,955  |        |  |   | 5,599  |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Per share information:                               |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Net income (loss)  basic                            |                                   | $ | 0.07    |                                                     |      | $ | (0.10  | )      |      | $ | 0.09    |        |  | $ | 0.85    |        |  | $ | 0.41   |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Net income (loss)  diluted                          |                                   | $ | 0.07    |                                                     |      | $ | (0.10  | )      |      | $ | 0.08    |        |  | $ | 0.80    |        |  | $ | 0.40   |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Weighted average common shares
outstanding  basic   |                                   |   | 16,410  |                                                     |      |   | 15,100 |        |      |   | 14,700  |        |  |   | 14,112  |        |  |   | 13,718 |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Weighted average common shares
outstanding  diluted |                                   |   | 16,624  |                                                     |      |   | 15,100 |        |      |   | 15,600  |        |  |   | 14,944  |        |  |   | 14,070 |       
|                                                     |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Balance Sheet Data:                                  |                                   |   |         |                                                     |      |   |        |        |      |   |         |        |  |   |         |        |  |   |        |       
|Working capital                                      |                                   | $ | 50,077  |                                                     |      | $ | 41,802 |        |      | $ | 38,867  |        |  | $ | 36,553  |        |  | $ | 21,388 |       
|Total assets                                         |                                   |   | 83,797  |                                                     |      |   | 64,823 |        |      |   | 76,466  |        |  |   | 64,091  |        |  |   | 34,624 |       
|Total current liabilities                            |                                   |   | 21,403  |                                                     |      |   | 12,224 |        |      |   | 25,944  |        |  |   | 16,485  |        |  |   | 9,134  |       
|Long-term debt, net of current portion               |                                   |   | 2,139   |                                                     |      |   | 2,463  |        |      |   |        |        |  |   | 4,500   |        |  |   |       |       
|Stockholders equity                                 |                                   |   | 60,255  |                                                     |      |   | 50,108 |        |      |   | 50,351  |        |  |   | 42,665  |        |  |   | 25,267 |       




Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Companys financial condition
and results of operations is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, appearing elsewhere in this Report.

Critical Accounting Policies

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

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Revenue Recognition

Revenues are generally recorded when title transfers and the risks of
ownership are passed to customers. Under certain circumstances, the Company
accepts product returns. Material management judgments must be made and used in
connection with establishing the sales returns estimates. The Company
continuously monitors and tracks returns and records revenues net of provisions
for returns. The Companys estimate of sales returns is based upon several
factors including historical experience, current market and economic
conditions, customer demand and acceptance of the Companys products and/or any
notification received by the Company of such a return. Historically, sales
returns have been within managements estimates; however, actual returns may
differ significantly, either favorably or unfavorably, from managements
estimates depending on actual market conditions at the time of the return.

Allowance for Doubtful Accounts

Management analyzes specific customer accounts receivable, customer
credit-worthiness, historical bad debt expenses, current economic trends and
changes in customer payment terms when evaluating the adequacy of the allowance
for doubtful accounts. If the financial condition of any of the Companys
customers were to deteriorate to the point of impairing the customers ability
to make payments on its account, additional allowances would be required. While
credit losses have been generally within managements expectations and the
provisions established, significant deterioration in the liquidity or financial
position of any of the Companys major customers or any group of customers
could have a material adverse impact on the collectibility of accounts
receivable and future operating results.

Inventories

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

Results of Operations

The following table sets forth, for the periods indicated, certain items
from the Companys statements of operations as a percentage of net sales for
the periods indicated.

|                                     |                                     |                          |       |                          |      |      |       |      |      |  |       |      |      | 
|------------------------------------ | ----------------------------------- | ------------------------ | ----- | ------------------------ | ---- | ---- | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                     |                                     |                          |       | Year Ended February 28 ,
|                                     |                                     |                          |       |                         
|                                     |                                     |                          |       | 2003                     |      | 2002 |       | 2001
|                                     |                                     |                          |       |                          |      |      |       |     
|Net sales                            |                                     |                          | 100.0 | %                        |      |      | 100.0 | %    |      |  | 100.0 | %   
|Cost of sales                        |                                     |                          | 69.4  |                          |      |      | 74.0  |      |      |  | 67.3  |     
|                                     |                                     |                          |       |                          |      |      |       |      |      |  |       |     
|Gross profit                         |                                     |                          | 30.6  |                          |      |      | 26.0  |      |      |  | 32.7  |     
|Operating expenses:                  |                                     |                          |       |                          |      |      |       |      |      |  |       |     
|                                     | Selling expenses                    |                          |       | 12.9                     |      |      |       | 13.7 |      |  |       | 17.7 |     
|                                     | General and administrative expenses |                          |       | 11.4                     |      |      |       | 9.6  |      |  |       | 6.9  |     
|                                     | ESOP contribution expense           |                          |       | 0.8                      |      |      |       | 1.4  |      |  |       | 2.4  |     
|                                     | Research and development expenses   |                          |       | 2.7                      |      |      |       | 2.3  |      |  |       | 1.7  |     
|                                     |                                     |                          |       |                          |      |      |       |      |      |  |       |     
|                                     |                                     | Total operating expenses |       |                          | 27.8 |      |       |      | 27.0 |  |       |      | 28.7 | 
|                                     |                                     |                          |       |                          |      |      |       |      |      |  |       |     
|Income (loss) from operations        |                                     |                          | 2.8   |                          |      |      | (1.0  | )    |      |  | 4.0   |     
|Interest expense                     |                                     |                          | 1.0   |                          |      |      | 1.4   |      |      |  | 1.7   |     
|                                     |                                     |                          |       |                          |      |      |       |      |      |  |       |     
|Income (loss) before income taxes    |                                     |                          | 1.8   |                          |      |      | (2.4  | )    |      |  | 2.3   |     
|Provision (benefit) for income taxes |                                     |                          | 0.8   |                          |      |      | (0.9  | )    |      |  | 1.3   |     
|                                     |                                     |                          |       |                          |      |      |       |      |      |  |       |     
|Net income (loss)                    |                                     |                          | 1.0   |                          |      |      | (1.5  | )    |      |  | 1.0   |     
|                                     |                                     |                          |       |                          |      |      |       |      |      |  |       |     

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Fiscal 2003 Compared to Fiscal 2002

Net sales increased from $94.7 million in fiscal 2002 to $110.8 million in
fiscal 2003, an increase of 17.0%. Sales of the Companys binoculars, including
the digital camera/binocular, and sales of the Companys telescope products for
the more serious amateur astronomer accounted for increases of approximately
$16 million and $9 million, respectively over net sales in the prior year.
Also included in net sales for the year ended February 28, 2003 was
approximately $10 million from the Simmons subsidiary. Partially offsetting
those increases was a decrease in sales of smaller-aperture, less-expensive
telescopes.

Gross profit increased from $24.6 million (26.0% of net sales) in fiscal
2002 to $33.9 million (30.6% of net sales) in fiscal 2003, an increase of
37.7%. The increase in gross profit as a percent of net sales was due to a
change in product sales mix and covering fixed costs with higher volume. Sales
from the Simmons subsidiary contributed approximately $1.7 million to gross
profit. Gross margin on the Simmons sales was below the consolidated Company
gross margin for the year due, in part, to sales of close-out inventory on hand
at the date of the acquisition.

Selling expenses increased from $12.9 million (13.7% of net sales) in
fiscal 2002 to $14.2 million (12.9% of net sales) in fiscal 2003, an increase
of 10.3%. This increase was due, in part, to an increase of approximately $1.8
in advertising and marketing expenses with a significant portion of that
increase related to television, radio and print advertising associated with the
introduction of the Companys digital camera/binocular. Selling expenses also
include approximately $0.6 million associated with the Simmons subsidiary.
These increases were partially offset by a decrease in the Companys provision
for bad debts during the year.

General and administrative expenses increased from $9.1 million (9.6% of
net sales) in fiscal 2002 to $12.6 million (11.4% of net sales) in fiscal 2003,
an increase of 38.8%. This increase was due, in part, to an over $2.5 million
increase in legal, professional and consulting fees with a significant portion
of that increase incurred in connection with the ongoing Tasco and Celestron
patent infringement litigation and with the Companys effort to acquire certain
of the assets of Tasco and Celestron. The Company did not consummate such
proposed acquisition. Also contributing to the increase over the prior year
was approximately $0.5 million in general and administrative expenses from the
Simmons subsidiary and an increase of approximately $0.5 million in salaries,
wages and bonuses over the prior year.

ESOP contribution expense decreased from $1.4 million (1.4% of net sales)
in fiscal 2002 to $0.9 million (.8% of net sales) in fiscal 2003, a decrease of
33.8%. The decrease in this non-cash charge was due to decreases in the average
market price of the Companys stock and in the number of shares allocated to
the Employee Stock Ownership Plan during the year. The non-cash ESOP
contribution expense may fluctuate as the number of shares allocated and the
market value of the Companys common stock changes.

Research and development expenses increased from $2.2 million (2.3% of net
sales) in fiscal 2002 to $3.0 million (2.7% of net sales) in fiscal 2003, an
increase of 38.8%. In the prior year, approximately $500,000 of research and
development expenses incurred were reimbursed by a customer of the Company on a
non-contingent basis. A similar expense reimbursement did not occur during the
current year, thus accounting for most of the increase year-over-year. The
Company does not expect research and development expenses to continue to
increase by the dollar amounts or at the rate experienced in the current year.
With demand for the Companys industrial products diminished, research and
development costs associated with those product lines will be rationalized.

Interest expense decreased from $1.3 million for fiscal 2002 (1.4% of net
sales) to $1.1 million for fiscal 2003 (1.0% of net sales), a decrease of
15.5%. This decrease was principally due to lower average borrowings and lower
cost of funds as compared to the prior year.

Fiscal 2002 Compared to Fiscal 2001

Net sales decreased from $123.0 million in fiscal 2001 to $94.7 million in
fiscal 2002, a decrease of 23.0%. Management believes that the decline in net
sales for fiscal 2002 compared to fiscal 2001 was predominantly due to the
affects of the global economic recession, managements planned inventory
reduction program and competitive

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pricing pressures. For reasons just stated, coupled with product
introduction delays, sales of the Companys advanced astronomical telescopes
and related accessories were down nearly $13.0 million compared to the prior
year. Entry level telescope sales decreased nearly $19.0 million as compared to
the prior year. Partially offsetting these decreases, binocular sales increased
by more than $2.0 million over the prior year on the strength of binocular
sales in Europe.

Gross profit decreased from $40.2 million (32.7% of net sales) in fiscal
2001 to $24.6 million (26.0% of net sales) in fiscal 2002, a decrease of 38.8%.
Competitive pricing pressures in the U.S. and Europe, and lower sales of
advanced telescopes and accessories, both of which typically have higher profit
margins than many of the Companys other product lines, contributed to the
lower profit margins.

Selling expenses decreased from $21.8 million (17.7% of net sales) in
fiscal 2001 to $12.9 million (13.7% of net sales) in fiscal 2002, a decrease of
40.7%. This decrease was primarily due to a $7.9 million decrease in
advertising and marketing expenses compared to the prior year. The Company
reduced national consumer advertising spending and concentrated its efforts on
point-of-sale promotions supported by targeted advertising with its major
customers. The balance of the reduction from the prior year was concentrated in
variable sales costs which were lower in keeping with the lower sales volume
during the current year.

General and administrative expenses increased from $8.4 million (6.9% of
net sales) in fiscal 2001 to $9.1 million (9.6% of net sales) in fiscal 2002,
an increase of 7.8%. This increase was principally due to increases in
consulting and professional fees.

ESOP contribution expense decreased from $3.0 million (2.4% of net sales)
in fiscal 2001 to $1.4 million (1.4% of net sales) in fiscal 2002, a decrease
of 54.4%. The decrease in this non-cash charge was due to decreases in the
average market price of the Companys stock allocated to the Employee Stock
Ownership Plan during fiscal 2002. The non-cash ESOP contribution expense may
fluctuate as the market value of the Companys common stock changes.

Research and development expenses increased from $2.1 million (1.7% of net
sales) in fiscal 2001 to $2.2 million (2.3% of net sales) in fiscal 2002, an
increase of 5.1%. The Company continues to pursue the development of telescope
and other consumer related products as well as industrial products in the areas
of free space optics and digital imaging. During fiscal 2002, this pursuit led
to continued engineering expenditure increases over the prior year due to
increased headcount and outside consulting costs. Included as an offset to
research and development expenses incurred during fiscal 2002 is a
reimbursement of costs of approximately $500,000 received from a customer of
the Company on a non-contingent basis.

Interest expense decreased from $2.0 million for the fiscal year 2001
(1.7% of net sales) to $1.3 million for fiscal 2002 (1.4% of net sales), a
decrease of 33.9%. This decrease was principally due to lower average
borrowings on the Companys bank borrowings compared to the prior year.

The benefit for income taxes decreased to 36.9% of the loss before income
taxes for fiscal year 2002 compared to a provision of 55.3% of pre-tax income
in the prior year. The decrease in the tax rate was principally due to the
impact of non-deductible permanent differences between the Companys tax books
and its financial statements. The ESOP charge was a significant permanent
difference in the prior year. Due to lower average stock prices for the
Companys Common Stock, the effect of the ESOP charge on the current year
benefit was much less significant.

Seasonality and Quarterly Results of Operations

The Company has experienced, and expects to continue to experience,
substantial fluctuations in its sales, gross margins and profitability from
quarter to quarter. Factors that influence these fluctuations include the
volume and timing of orders received, changes in the mix of products sold,
market acceptance of the Companys products, competitive pricing pressures, the
Companys ability to meet increasing demand and delivery schedules, the timing
and extent of research and development expenses, the timing and extent of
product development costs and the timing and extent of advertising
expenditures. In addition, a substantial portion of the Companys net sales and
operating income typically occurs in the third quarter of the Companys fiscal
year primarily due to

15



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disproportionately higher customer demand for less-expensive telescopes
during the holiday season. The Company continues to experience significant
sales to mass merchandisers. Mass merchandisers, along with specialty
retailers, purchase a considerable amount of their inventories to satisfy such
seasonal customer demand. These purchasing patterns have caused the Company to
increase its level of inventory during its second and third quarters in
response to such demand or anticipated demand. As a result, the Companys
working capital requirements have correspondingly increased at such times.

The following tables (in thousands of dollars) present unaudited financial
results for each of the eight quarters in the period ended February 28, 2003.
The Company believes that all necessary adjustments have been included to
present fairly the quarterly information when read in conjunction with the
consolidated financial statements and notes included elsewhere in this Report.
The operating results for any quarter are not necessarily indicative of the
results for any subsequent quarter.

|                        |  |         |        |         |  |             |        |         |  |         |        |         |  |         |        |             |  |   |        |   |  |   |        |  |  |   |        |  |  |   |        |  
|----------------------- |  | ------- | ------ | ------- |  | ----------- | ------ | ------- |  | ------- | ------ | ------- |  | ------- | ------ | ----------- |  | - | ------ | - |  | - | ------ |  |  | - | ------ |  |  | - | ------ | -
|                        |  |         |        |         |  | Fiscal 2003 |        |         |  |         |        |         |  |         |        | Fiscal 2002 |  |   |        |  
|                        |  |         |        |         |  |             |        |         |  |         |        |         |  |         |        |             |  |  
|                        |  | First   |        | Second  |  | Third       |        | Fourth  |  | First   |        | Second  |  | Third   |        | Fourth     
|                        |  | Quarter |        | Quarter |  | Quarter     |        | Quarter |  | Quarter |        | Quarter |  | Quarter |        | Quarter    
|                        |  |         |        |         |  |             |        |         |  |         |        |         |  |         |        |            
|Net sales               |  | $       | 20,053 |         |  | $           | 24,035 |         |  | $       | 44,519 |         |  | $       | 22,210 |             |  | $ | 16,144 |   |  | $ | 27,162 |  |  | $ | 35,401 |  |  | $ | 16,011 |  
|Gross profit            |  |         | 6,187  |         |  |             | 7,382  |         |  |         | 14,961 |         |  |         | 5,364  |             |  |   | 4,652  |   |  |   | 7,902  |  |  |   | 8,692  |  |  |   | 3,364  |  
|Operating income (loss) |  |         | (595   | )       |  |             | 452    |         |  |         | 5,176  |         |  |         | (1,928 | )           |  |   | (940   | ) |  |   | 1,730  |  |  |   | 973    |  |  |   | (2,705 | )
|Net income (loss)       |  |         | (507   | )       |  |             | 134    |         |  |         | 2,896  |         |  |         | (1,385 | )           |  |   | (798   | ) |  |   | 760    |  |  |   | 365    |  |  |   | (1,769 | )

Quarterly results can be affected by a number of factors including the
timing of orders, production delays or inefficiencies, and raw materials
availability. See Business  Operations  Materials and Supplies.

Liquidity and Capital Resources

The Company funded its operations during the fiscal year with internally
generated cash flow, short-term bank borrowings and proceeds from the sale of
its common stock. Operating cash flows were generated principally by net
income, positive adjustments to net income for depreciation and amortization,
decreases in inventories, deferred taxes, prepaid expenses including prepaid
income taxes, and increased accrued liabilities. These cash flows were
partially offset by an increase in accounts receivable. For the year, cash
flows from operations totaled approximately $10.0 million. With a concentrated
effort to reduce inventories, the Company improved its inventory turns to just
under 2.5 times in fiscal 2003 compared to just under 2.0 times in fiscal 2002
(excluding the effects of the Simmons acquisition). With the reduction in
inventories, deferred tax assets related to inventories were also reduced.
Cash flows were also generated by a refund of a significant portion of the
prior years prepaid income taxes. On October 25, 2002 the Company acquired
100% of the outstanding common stock of Simmons Outdoor Corp. for
$20.8 million
cash ($16.0 million was paid at close; the balance was paid in December, 2002).
Simmons, a designer and distributor of riflescopes, binoculars and other
consumer sports optics offers products under the Simmons, Weaver and Redfield
brand names. To fund a portion of the purchase price, the Company sold
3,291,801 shares of its common stock in a private placement for net cash
proceeds of $7.3 million. The balance of the purchase price was funded through
borrowings on the Companys bank line of credit. Net working capital totaled
approximately $50.1 million at February 28, 2003, up from $41.8 million at
February 28, 2002. Working capital requirements fluctuate during the year due
to the seasonal nature of the business. These requirements are typically
financed through a combination of internally generated cash flow from operating
activities and short-term bank borrowings.

On October 25, 2002, the Company amended its credit agreement with its
U.S. bank (the U.S. credit agreement). The amendment principally involved
increasing the revolving credit facility and incorporating the Simmons
acquisition into the credit agreement. The amended agreement provides the
Company with a $35.6 million credit facility consisting of a
$34.0 million
revolving credit line (the U.S. revolving loan) and a
$1.6 million term loan
(the U.S. term loan). Amounts outstanding on the U.S. revolving loan and U.S. term loan at
February 28, 2003 were approximately $9.1 million and
$1.5 million, respectively. Availability under the U.S. revolving loan is subject
to a borrowing base with standard advance rates against eligible accounts
receivable and inventories.
Availability under the U.S. revolving loan at February 28, 2003 was
approximately $5.7 million. The U.S. term loan is secured by domestic machinery
and equipment. The U.S. term loan is collateralized by domestic
machinery and equipment. The amended facility has a three-year term, is
collateralized by substantially all of the domestic assets of the Company and
its domestic subsidiaries and contains certain financial covenants
including but not limited to, Fixed Charge Coverage Ratios. Outstanding
amounts under the U.S. revolving loan bear interest at the banks base rate or
LIBOR rate plus applicable margins. Outstanding amounts on the U.S.
revolving loan and U.S. term loan bear interest at the banks base rate or
LIBOR rate plus applicable margins (4.5% and 7.9%, respectively at February 28,
2003).

16



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##### Table of Contents



In July 2002, the Companys German subsidiary renegotiated its agreement
with a bank to provide up to approximately $3.8 million in revolving loans
(subject to a borrowing base of eligible accounts receivable and inventories)
expiring in July 2003. The German subsidiary also has an agreement with the
bank that provides a term loan expiring June 2006 collateralized by land and
buildings owned by the German subsidiary (collectively, the European Loans).
Outstanding amounts on the revolving loan and the term loan in Europe at
February 28, 2003 were approximately $12,000 and
$1.2 million, respectively. The
European Loans bear interest at the banks base rate plus or minus applicable
margins (8.75% and 6.0%, respectively at February 28, 2003).

The Company continues to depend on operating cash flow and availability
under its bank lines of credit to provide short-term liquidity. Availability
under its bank lines of credit at February 28, 2003 was approximately $9
million. In the event the Companys plans require more capital than is
presently anticipated, additional sources of liquidity such as debt or equity
financings, may be required to meet its capital needs. There can be no
assurance that such additional sources of capital will be available on
reasonable terms, if at all. However, management believes that operating cash
flow and bank borrowing capacity in connection with the Companys business
should provide sufficient liquidity for the Companys obligations for at least
the next twelve months.

Capital expenditures, including financed purchases of equipment,
aggregated $0.7 million, $0.7 million and $2.4 million for the fiscal years
ended February 28, 2003, 2002 and 2001, respectively.

Contributions to the Companys Employee Stock Ownership Plan (ESOP) are
accounted for as a contribution expense on the Companys income statement and
are accrued quarterly based upon the expected annual contribution amount. As
quarterly contributions are accrued, the corresponding number of shares are
added to the Weighted Average Common Shares Outstanding and Unearned ESOP
Shares on the Companys Balance Sheet are reduced. The ESOP uses the
contributions to repay amounts due on the ESOP Loan. The ESOP contribution
expense is a net non-cash charge which is added back to net income to arrive at
cash flows provided by operating activities. As the Company makes these
non-cash contributions to the ESOP to fund the repayment of the ESOP Loan, the
Company will realize cash tax savings equal to the product of the tax basis of
the contributions, multiplied by the applicable statutory tax rates in effect
at the time.

Under the terms of its credit agreement, the Company was required to enter
into an interest-rate swap to convert the variable interest rate on its U.S.
term loan to a fixed interest rate. The resulting cost of funds (7.9% per
annum) is currently higher than that which would have been available if the
variable rate had been applied during the period. Under the interest-rate swap
contract, the Company has agreed with the bank to exchange, at specified
intervals, the difference between variable-rate and fixed-rate interest
amounts, calculated by reference to agreed-upon notional amounts. The change in
the fair value of the interest rate swap for the period ended February 28, 2003
was a loss of $23,000 which is included in other comprehensive income for the
year ended February 28, 2003.

The following table summarizes the Companys contractual obligations as of
February 28, 2003, and the effect such obligations are expected to have on its
liquidity and cash flows in future periods:

|                                   |  |       |            |        |  |                         |           |           |  |         |           |  |  |   |           |       |  |   |        | 
|---------------------------------- |  | ----- | ---------- | ------ |  | ----------------------- | --------- | --------- |  | ------- | --------- |  |  | - | --------- | ----- |  | - | ------ | 
|                                   |  |       |            |        |  | Payments due by period:
|                                   |  |       |            |        |  |                        
|                                   |  |       |            |        |  | Up to                   |           |           |  |         |           |  |  |   |           | After
|Contractual Obligations:           |  | Total |            | 1 year |  | 1-3 years               |           | 3-5 years |  | 5 years
|                                   |  |       |            |        |  |                         |           |           |  |        
|Long-term debt                     |  | $     | 2,697,000  |        |  | $                       | 558,000   |           |  | $       | 1,360,000 |  |  | $ | 779,000   |       |  |   |       | 
|Non-cancelable operating leases    |  |       | 8,141,000  |        |  |                         | 1,881,000 |           |  |         | 3,368,000 |  |  |   | 2,853,000 |       |  | $ | 39,000 | 
|Capital lease obligations          |  |       | 26,000     |        |  |                         | 26,000    |           |  |         |          |  |  |   |          |       |  |   |       | 
|                                   |  |       |            |        |  |                         |           |           |  |         |           |  |  |   |           |       |  |   |        | 
|Total contractual cash obligations |  | $     | 10,864,000 |        |  | $                       | 2,465,000 |           |  | $       | 4,728,000 |  |  | $ | 3,632,000 |       |  | $ | 39,000 | 
|                                   |  |       |            |        |  |                         |           |           |  |        

17



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The preceding table assumes that any operating leases with renewal options
that expire during fiscal 2004 or fiscal 2005 will be renewed under the terms
of the governing lease agreement.

Inflation

The Company does not believe that inflation has had a material effect on
the results of operations during the past three years. There can be no
assurance that the Companys business will not be affected by inflation in the
future.

New Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 143. which establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company adopted the provisions of SFAS No. 143 for the year
ended February 28, 2003. The adoption of SFAS No. 143 did not have a material
effect on its financial position or results of operations upon adoption.

In October 2001, the FASB issued SFAS No. 144 which establishes a single
accounting model for the impairment or disposal of long-lived assets and new
standards for reporting discontinued operations. SFAS No. 144 is effective in
fiscal years beginning after December 15, 2001 and, in general, is to be
applied prospectively. The Company adopted the provisions of SFAS No. 144 for
the year ended February 28, 2003. The adoption of SFAS No. 144 did not have a
material effect on its financial position or results of operations upon
adoption.

In December 2002, the FASB issued SFAS 148, which provides alternative
transition methods for companies adopting a voluntary change to the fair value
method of accounting for stock-based compensation. SFAS 148 also requires
enhanced disclosure regarding the method of accounting and the effect of the
method used on reported results of operations. SFAS 148 is effective for fiscal
years ending after December 15, 2002 and interim periods beginning after
December 15, 2002. The Company adopted the disclosure provisions of SFAS 148
for the year ended February 28, 2003, and has elected to continue to account
for its stock-based compensation under the intrinsic value method.

In November 2002, the FASB issued FASB Interpretation (FIN) 45, which
requires disclosures about obligations under certain guarantees issued by the
Company, and which requires recognition of a liability for the fair value of
the obligation undertaken in issuing the guarantee. The liability recognition
provisions of FIN 45 are applicable to guarantees issued or modified after
December 31, 2002, and the disclosure provisions are effective for interim or
annual fiscal periods ending after December 15, 2002. The Company has adopted
the provisions of FIN 45 for its year ended February 28, 2003. The adoption of
FIN 45 did not have a material effect on its financial position or results of
operations.

In January 2003, the Company adopted SFAS 146, which addresses accounting
for costs associated with exit or disposal activities. In addition, the FASB
issued FIN 46, which requires that certain variable interest entities be
consolidated by the primary beneficiary of the entity if the equity investors
in the entity do not have a controlling financial interest or do not have
sufficient equity at risk. FIN 46 is effective immediately for all variable
interest entities created after January 31, 2003. For all such entities created
prior to February 1, 2003, FIN 46 is effective for interim or annual fiscal
periods ending after June 15, 2003. The Company does not expect the adoption of
these statements to have a material effect on the Companys financial position
or results of operations.

Forward-Looking Information

The preceding Managements Discussion and Analysis of Financial Condition and
Results of Operations section contains various forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities and Exchange Act of 1934, as amended, which
represent the Companys reasonable judgment concerning the future and are
subject to risks and uncertainties that could cause the Companys actual
operating results and financial position to differ materially, including the
following: the Companys ability to

18



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expand the markets for telescopes,
binoculars, riflescopes, microscope and other optical
products; the Companys ability to continue to develop and bring to market new
and innovative products; the Companys ability to integrate, develop and grow
the Simmons business; the Companys ability to further develop its wholly owned
manufacturing facility in Mexico in combination with its existing manufacturing
capabilities; the Company expanding its distribution network; the Companys
ability to further develop the business of its European subsidiary; the Company
experiencing fluctuations in its sales, gross margins and profitability from
quarter to quarter consistent with prior periods; the Companys expectation
that its contingent liabilities will not have a material effect on the
Companys financial position or results of operations; the extent to which the
Company will be able to leverage its design and manufacturing expertise in the
areas of free-space optics and digital imaging; and the Companys expectation
that it will have sufficient funds to meet any working capital requirements
during the foreseeable future with internally generated cash flow and borrowing
ability.

In addition to other information in this report, the Company cautions that
certain factors, including, without limitation, the following, should be
considered carefully in evaluating the Company and its business and that such
factors may cause the Companys actual operating results to differ materially
from those set forth in the forward looking statements described above or to
otherwise be adversely affected:

Our business is vulnerable to changing economic conditions, including:



| |  |  | a decline in general economic conditions;                                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | uncertainties affecting consumer spending; and                                                                                   
|
| |  |  | changes in interest rates causing a reduction of investment income or
in the value of market interest rate sensitive instruments.

Our intellectual property rights are subject to risks, including:



| |  |  | the potential that we may be unable to obtain and maintain patents
and copyrights to protect our computerized telescope and other product
technology;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | competitors infringement
upon Meades existing intellectual property; and                                                                           
|
| |  |  | approval of competitors patent applications that may restrict our ability to compete effectively.                                                   

Our business is subject to other risks, including:



| |  |  | a general decline in demand for the Companys products;                                                                                                                                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | an inability to continue to design and manufacture products that will
achieve and maintain commercial success;                                                                                                       
|
| |  |  | the potential that we may fail to
penetrate the binocular and riflescope
markets and achieve meaningful sales;                                                                                                       
|
| |  |  | any significant interruption of our manufacturing abilities in our
domestic or Mexican facilities or in any of our suppliers located in the
Far East;                                                                
|
| |  |  | greater than anticipated competition;                                                                                                                                                                                
|
| |  |  | discovery of facts not presently known to Meade or determinations by
judges, juries or other finders of fact which do not accord with Meades
evaluation of the possible liability or outcome of existing litigation;
|
| |  |  | any loss of, or the failure to replace, any significant portion of
the sales made to any significant customer of the Company; and                                                                                    
|
| |  |  | increasing ESOP charges in the event the market price of the
Companys stock increases.                                                                                                                              

19



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Item 7A.Quantitative and 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. Market risk is
the potential loss arising from adverse changes in market rates and prices,
such as foreign currency exchange and interest rates.

The Company conducts business in a number of foreign currencies,
principally in Europe. These currencies have been relatively stable against the
U.S. dollar for the past several years. As a result, foreign currency
fluctuations have not had a material impact historically on Meades revenues or
results of operations. There can be no assurance that European or other
currencies will remain stable relative to the U.S. dollar or that future
fluctuations in the value of foreign currencies will not have a material
adverse effect on the Companys business, operating results, revenues and
financial condition.

The Company has adopted a hedging program to manage its foreign currency
exchange rate and interest rate risks. Upon continuing evaluation and when
deemed appropriate by management, the Company may enter into hedging
instruments to manage its foreign currency exchange and interest rate risks.

Under the terms of its credit agreement, the Company was required to enter
into an interest-rate swap to convert the variable interest rate on its U.S.
Term Loan to a fixed interest rate. The resulting cost of funds (7.9% per
annum) is currently higher than that which would have been available if the
variable rate had been applied during the period. Under the interest-rate swap
contract, the Company has agreed with the bank to exchange, at specified
intervals, the difference between variable-rate and fixed-rate interest
amounts, calculated by reference to agreed-upon notional amounts. The change in
the fair value of the interest rate swap for the period ended February 28, 2003
was a loss of $23,000 which is included in other comprehensive income for the
year ended February 28, 2003.

The Companys financial instruments consist of cash, accounts receivable,
accounts payable, and long-term obligations. The Companys exposure to market
risk for changes in interest rates relates primarily to short-term investments
and short-term obligations. As a result, the Company does not expect
fluctuations in interest rates to have a material impact on the fair value of
these instruments.




Item 8.Financial Statements and Supplementary Data

Information with respect to this item is set forth in Item 16.




Item 9.Changes in and Disagreements With Accountants On Accounting and Financial Disclosure

None.




PART III




Item 10.Directors and Executive Officers of the Registrant

Information with respect to this item is incorporated by reference from
the Companys definitive Proxy Statement to be filed with the Commission within
120 days after the close of the Companys fiscal year. Information regarding
executive officers of the Company is set forth under the caption Executive
Officers of the Registrant in Item 1 hereof.




Item 11.Executive Compensation

Information with respect to this item is incorporated by reference from
the Companys definitive Proxy Statement to be filed with the Commission within
120 days after the close of the Companys fiscal year.




Item 12.Security Ownership of Certain Beneficial Owners and Management

Information with respect to this item is incorporated by reference from
the Companys definitive Proxy Statement to be filed with the Commission within
120 days after the close of the Companys fiscal year.

20



---



##### Table of Contents



Equity Compensation Plan Information

The following table provides information as of February 28, 2003 with respect
to shares of Meade common stock that may be issued under the Stock Incentive
Plan.

|                                                       |  |                  |           |                     |  |                     |       |                    |  |                     |           | 
|------------------------------------------------------ |  | ---------------- | --------- | ------------------- |  | ------------------- | ----- | ------------------ |  | ------------------- | --------- | 
|                                                       |  | A                |           | B                   |  | C                  
|                                                       |  |                  |           |                     |  |                    
|                                                       |  |                  |           |                     |  |                     |       |                    |  | Number of          
|                                                       |  |                  |           |                     |  |                     |       |                    |  | Securities         
|                                                       |  |                  |           |                     |  |                     |       |                    |  | Remaining Available
|                                                       |  |                  |           |                     |  |                     |       |                    |  | for Future Issuance
|                                                       |  | Number of        |           |                     |  |                     |       | Under Equity      
|                                                       |  | Securities to be |           |                     |  |                     |       | Compensation Plans
|                                                       |  | Issued upon      |           |                     |  |                     |       | (Excluding        
|                                                       |  | Exercise of      |           | Weighted Average    |  | Securities         
|                                                       |  | Outstanding      |           | Exercise Price of   |  | Reflected in Column
|Plan Category                                          |  | Options(1)       |           | Outstanding Options |  | A)                 
|                                                       |  |                  |           |                     |  |                    
|Equity compensation
plans approved by
shareholders     |  |                  | 3,791,842 |                     |  | $                   | 4.92  |                    |  |                     | 1,173,243 | 
|Equity compensation
plans not approved
by shareholders |  |                  | 310,000   |                     |  |                     | 25.87 |                    |  |                     | 0         | 
|                                                       |  |                  |           |                     |  |                     |       |                    |  |                     |           | 
|Total                                                  |  |                  | 3,791,842 |                     |  | $                   | 4.92  |                    |  |                     | 1,173,243 | 
|                                                       |  |                  |           |                     |  |                     |       |                    |  |                     |           | 




Item 13.Certain Relationships and Related Transactions

Information with respect to this item is incorporated by reference from
the Companys definitive Proxy Statement to be filed with the Commission within
120 days after the close of the Companys fiscal year.




Item 14.Controls and Procedures

A.     Evaluation of Disclosure Controls and Procedures.

The Companys chief executive officer and chief financial officer have
concluded that the Companys disclosure controls and procedures (as defined in
Rule 13a-14 (c), promulgated under the Securities and Exchange Act of 1934, as
amended (the Exchange Act)) are sufficiently effective to ensure that the
information required to be disclosed by the Company in the reports it files
under the Exchange Act is gathered, analyzed and disclosed with adequate
timeliness, accuracy and completeness, based on an evaluation of such controls
and procedures conducted within 90 days prior to the date hereof.

B.     Changes in internal controls.

There have been no significant changes in the Companys internal controls
or in other factors that could significantly affect these controls subsequent
to the date of the evaluation referred to above.

21



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##### Table of Contents






PART IV




Item 15.Exhibits, Financial Statement Schedules, and Reports On Form 8-K



|(a) |  | The following documents are filed as part of this report:
|--- |  | ---------------------------------------------------------

|                                                               |  |                                                                                                                                                                                                                                                                                                                                                    |  |        |     | 
|-------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | --- | 
|                                                               |  |                                                                                                                                                                                                                                                                                                                                                    |  | Page  
|                                                               |  |                                                                                                                                                                                                                                                                                                                                                    |  | Number
|                                                               |  |                                                                                                                                                                                                                                                                                                                                                    |  |       
|1. Financial Statements:                                       |  |                                                                                                                                                                                                                                                                                                                                                    |  |       
|                                                               |  | Report of Independent Accountants                                                                                                                                                                                                                                                                                                                  |  |        | F-1 | 
|                                                               |  | Consolidated Balance Sheets at February 28, 2003 and 2002                                                                                                                                                                                                                                                                                          |  |        | F-2 | 
|                                                               |  | Consolidated Statements of Operations for each of the three years in the period ended
February 28, 2003                                                                                                                                                                                                                                            |  |        | F-3 | 
|                                                               |  | Consolidated Statements of Stockholders Equity for each of the three years in the period ended
February 28, 2003                                                                                                                                                                                                                                  |  |        | F-4 | 
|                                                               |  | Consolidated Statements of Cash Flows for each of the three years in the period ended
February 28, 2003                                                                                                                                                                                                                                            |  |        | F-5 | 
|                                                               |  | Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                                         |  |        | F-6 | 
|2. Financial Statement Schedules:                              |  |                                                                                                                                                                                                                                                                                                                                                    |  |       
|                                                               |  | For each of the three years in the period ended February 28, 2003  II  Valuation and
Qualifying Accounts. All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted |  |        |     | 
|3. Exhibits included or incorporated herein: See Exhibit Index |  |                                                                                                                                                                                                                                                                                                                                                    |  |       



|(b) |  | Reports on Form 8-K:
|--- |  | --------------------



| |  | None
| |  | ----

22



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##### Table of Contents






REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Meade Instruments Corp.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) on page 22, present fairly, in all material
respects, the financial position of Meade Instruments Corp. and its
subsidiaries at February 28, 2003 and 2002, and the results of
their operations and their cash flows for each of the three years in the period
ended February 28, 2003, in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the index appearing under 15(a)(2) on
page 22, presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Companys management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

A discussed in Note 2 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets on March 1, 2002 and as a result changed its
method of accounting for goodwill.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Orange County, California
April 22, 2003

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##### Table of Contents






MEADE INSTRUMENTS CORP.

CONSOLIDATED BALANCE SHEETS

ASSETS

|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |            |  | 
|----------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ---------- | ------------ | - | ------------ | ---------- | ---------- |  | 
|                                                            |                                                                                                                                                                  |                            |            |            | February 28, |   | February 28,
|                                                            |                                                                                                                                                                  |                            |            |            | 2003         |   | 2002        
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |             
|Current assets:                                             |                                                                                                                                                                  |                            |            |            |              |   |              |           
|                                                            | Cash                                                                                                                                                             |                            | $          | 2,445,000  |              |   | $            | 1,249,000  |           
|                                                            | Accounts receivable, less allowance for doubtful accounts of
$714,000 in 2003 and $2,232,000 in 2002                                                             |                            |            | 22,364,000 |              |   |              | 12,184,000 |           
|                                                            | Inventories                                                                                                                                                      |                            |            | 40,050,000 |              |   |              | 29,803,000 |           
|                                                            | Deferred income taxes                                                                                                                                            |                            |            | 5,240,000  |              |   |              | 7,011,000  |           
|                                                            | Prepaid income taxes                                                                                                                                             |                            |            | 818,000    |              |   |              | 3,118,000  |           
|                                                            | Prepaid expenses and other current assets                                                                                                                        |                            |            | 563,000    |              |   |              | 661,000    |           
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|                                                            |                                                                                                                                                                  | Total current assets       |            |            | 71,480,000   |   |              |            | 54,026,000 | 
|Other assets, net                                           |                                                                                                                                                                  |                            | 818,000    |            |              |   | 1,377,000    |           
|Goodwill and acquisition-related intangible assets, net     |                                                                                                                                                                  |                            | 5,657,000  |            |              |   | 2,812,000    |           
|Property and equipment, net                                 |                                                                                                                                                                  |                            | 5,842,000  |            |              |   | 6,608,000    |           
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|                                                            |                                                                                                                                                                  | $                          | 83,797,000 |            |              | $ | 64,823,000   |           
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|LIABILITIES AND STOCKHOLDERS EQUITY                       
|Current liabilities:                                        |                                                                                                                                                                  |                            |            |            |              |   |              |           
|                                                            | Bank line of credit                                                                                                                                              |                            | $          | 9,063,000  |              |   | $            | 3,234,000  |           
|                                                            | Accounts payable                                                                                                                                                 |                            |            | 5,464,000  |              |   |              | 4,671,000  |           
|                                                            | Accrued liabilities                                                                                                                                              |                            |            | 6,293,000  |              |   |              | 3,601,000  |           
|                                                            | Current portion of long-term debt and capital lease obligations                                                                                                  |                            |            | 583,000    |              |   |              | 718,000    |           
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|                                                            |                                                                                                                                                                  | Total current liabilities  |            |            | 21,403,000   |   |              |            | 12,224,000 | 
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|Long-term bank debt                                         |                                                                                                                                                                  |                            | 2,139,000  |            |              |   | 2,463,000    |           
|Long-term capital lease obligations, net of current portion |                                                                                                                                                                  |                            |           |            |              |   | 28,000       |           
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|Commitments and contingencies
Stockholders equity:         |                                                                                                                                                                  |                            |            |            |              |   |              |           
|                                                            | Common stock; $0.01 par value; 50,000,000 shares authorized;
19,806,000 and 16,481,000 shares issued and outstanding at
February 28, 2003 and 2002, respectively |                            |            | 198,000    |              |   |              | 165,000    |           
|                                                            | Additional paid-in capital                                                                                                                                       |                            |            | 39,979,000 |              |   |              | 32,574,000 |           
|                                                            | Retained earnings                                                                                                                                                |                            |            | 23,439,000 |              |   |              | 22,301,000 |           
|                                                            | Accumulated
other comprehensive income (loss)                                                                                                                    |                            |            | 96,000     |              |   |              | (559,000   | )         
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|                                                            |                                                                                                                                                                  |                            | 63,712,000 |            |              |   | 54,481,000   |           
|                                                            | Unearned ESOP shares                                                                                                                                             |                            |            | (3,457,000 | )            |   |              | (4,373,000 | )         
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|                                                            |                                                                                                                                                                  | Total stockholders equity |            |            | 60,255,000   |   |              |            | 50,108,000 | 
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           
|                                                            |                                                                                                                                                                  | $                          | 83,797,000 |            |              | $ | 64,823,000   |           
|                                                            |                                                                                                                                                                  |                            |            |            |              |   |              |            |           

See accompanying notes to consolidated financial statements.

F-2



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##### Table of Contents






MEADE INSTRUMENTS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |            | 
|---------------------------------------------------- | --------------------------------- | - | ---------------------- | ---------- | ---- | - | ---------- | ---------- | - | - | ----------- | ---------- | 
|                                                     |                                   |   | Year Ended February 28
|                                                     |                                   |   |                       
|                                                     |                                   |   | 2003                   |            | 2002 |   | 2001      
|                                                     |                                   |   |                        |            |      |   |           
|Net sales                                            |                                   | $ | 110,817,000            |            |      | $ | 94,718,000 |            |   | $ | 123,000,000 |           
|Cost of sales                                        |                                   |   | 76,923,000             |            |      |   | 70,108,000 |            |   |   | 82,809,000  |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|                                                     | Gross profit                      |   |                        | 33,894,000 |      |   |            | 24,610,000 |   |   |             | 40,191,000 | 
|Selling expenses                                     |                                   |   | 14,248,000             |            |      |   | 12,920,000 |            |   |   | 21,782,000  |           
|General and administrative expenses                  |                                   |   | 12,628,000             |            |      |   | 9,098,000  |            |   |   | 8,439,000   |           
|ESOP contribution expense                            |                                   |   | 905,000                |            |      |   | 1,367,000  |            |   |   | 2,997,000   |           
|Research and development expenses                    |                                   |   | 3,008,000              |            |      |   | 2,167,000  |            |   |   | 2,062,000   |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|                                                     | Operating income (loss)           |   |                        | 3,105,000  |      |   |            | (942,000   | ) |   |             | 4,911,000  | 
|Interest expense                                     |                                   |   | 1,137,000              |            |      |   | 1,345,000  |            |   |   | 2,036,000   |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|                                                     | Income (loss) before income taxes |   |                        | 1,968,000  |      |   |            | (2,287,000 | ) |   |             | 2,875,000  | 
|Provision (benefit) for income taxes                 |                                   |   | 830,000                |            |      |   | (845,000   | )          |   |   | 1,589,000   |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|Net income (loss)                                    |                                   | $ | 1,138,000              |            |      | $ | (1,442,000 | )          |   | $ | 1,286,000   |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|Net income (loss) per share  basic                  |                                   | $ | 0.07                   |            |      | $ | (0.10      | )          |   | $ | 0.09        |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|Net income (loss) per share  diluted                |                                   | $ | 0.07                   |            |      | $ | (0.10      | )          |   | $ | 0.08        |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|Weighted average common shares outstanding  basic   |                                   |   | 16,410,000             |            |      |   | 15,100,000 |            |   |   | 14,700,000  |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           
|Weighted average common shares outstanding  diluted |                                   |   | 16,624,000             |            |      |   | 15,100,000 |            |   |   | 15,600,000  |           
|                                                     |                                   |   |                        |            |      |   |            |            |   |   |             |           

See accompanying notes to consolidated financial statements.

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##### Table of Contents






MEADE INSTRUMENTS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |            |  
|-------------------------------------- | ------------------------------- |  | ------------ | - | ---------- | - | ------------- | - | ------------- | - | ---------- | - | ----------- | - | ----------- | -------- | - | - | ---------- | ---------- | - | - | ---------- | - |  | - | ---------- | ---------- | -
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   | Accumulated |          |   |   |            |            |   |   |            |   |  |   |           
|                                       |                                 |  | Common Stock |   | Additional |   | Other         |   |               |   |            |   |             |   |             |          |   |   |           
|                                       |                                 |  |              |   | Paid-in    |   | Comprehensive |   | Retained      |   | Unearned   |   |             |   |            
|                                       |                                 |  | Shares       |   | Amount     |   | Capital       |   | Income (Loss) |   | Earnings   |   | ESOP Shares |   | Total      
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |            
|Balance at February 29, 2000           |                                 |  | 16,214,000   |   |            | $ | 162,000       |   |               | $ | 26,749,000 |   |             | $ | (333,000    | )        |   | $ | 22,457,000 |            |   | $ | (6,370,000 | ) |  | $ | 42,665,000 |           
|Exercise of stock options              |                                 |  | 258,000      |   |            |   | 3,000         |   |               |   | 1,040,000  |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 1,043,000  |           
|Tax benefit of stock options
exercised |                                 |  |             |   |            |   |              |   |               |   | 2,386,000  |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 2,386,000  |           
|Release of ESOP shares                 |                                 |  |             |   |            |   |              |   |               |   | 2,192,000  |   |             |   |            |          |   |   |           |            |   |   | 805,000    |   |  |   | 2,997,000  |           
|Comprehensive income:                  |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|                                       | Currency translation
adjustment |  |              |  |            |   |               |  |               |   |            |  |             |   |             | (26,000  | ) |   |            |           |   |   |            |  |  |   |            | (26,000    | )
|                                       | Net income                      |  |              |  |            |   |               |  |               |   |            |  |             |   |             |         |   |   |            | 1,286,000  |   |   |            |  |  |   |            | 1,286,000  |  
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|Total comprehensive income             |                                 |  |             |   |            |   |              |   |               |   |           |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 1,260,000  |           
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|Balance at February 28, 2001           |                                 |  | 16,472,000   |   |            |   | 165,000       |   |               |   | 32,367,000 |   |             |   | (359,000    | )        |   |   | 23,743,000 |            |   |   | (5,565,000 | ) |  |   | 50,351,000 |           
|Release of ESOP shares                 |                                 |  |             |   |            |   |              |   |               |   | 175,000    |   |             |   |            |          |   |   |           |            |   |   | 1,192,000  |   |  |   | 1,367,000  |           
|Shares issued as compensation          |                                 |  | 9,000        |   |            |   |              |   |               |   | 32,000     |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 32,000     |           
|Comprehensive income (loss):           |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|                                       | Currency translation
adjustment |  |              |  |            |   |               |  |               |   |            |  |             |   |             | (174,000 | ) |   |            |           |   |   |            |  |  |   |            | (174,000   | )
|                                       | Interest rate swap valuation    |  |              |  |            |   |               |  |               |   |            |  |             |   |             | (26,000  | ) |   |            |           |   |   |            |  |  |   |            | (26,000    | )
|                                       | Net loss                        |  |              |  |            |   |               |  |               |   |            |  |             |   |             |         |   |   |            | (1,442,000 | ) |   |            |  |  |   |            | (1,442,000 | )
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|Total comprehensive income             |                                 |  |             |   |            |   |              |   |               |   |           |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | (1,642,000 | )         
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|Balance at February 28, 2002           |                                 |  | 16,481,000   |   |            |   | 165,000       |   |               |   | 32,574,000 |   |             |   | (559,000    | )        |   |   | 22,301,000 |            |   |   | (4,373,000 | ) |  |   | 50,108,000 |           
|Release of ESOP shares                 |                                 |  |             |   |            |   |              |   |               |   | (11,000    | ) |             |   |            |          |   |   |           |            |   |   | 916,000    |   |  |   | 905,000    |           
|Shares issued as compensation          |                                 |  | 8,000        |   |            |   |              |   |               |   | 38,000     |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 38,000     |           
|Exercise of stock options              |                                 |  | 25,000       |   |            |   |              |   |               |   | 67,000     |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 67,000     |           
|Shares issued in common stock
offering |                                 |  | 3,292,000    |   |            |   | 33,000        |   |               |   | 7,311,000  |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 7,344,000  |           
|Comprehensive income (loss):           |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|                                       | Currency translation
adjustment |  |              |  |            |   |               |  |               |   |            |  |             |   |             | 678,000  |   |   |            |           |   |   |            |  |  |   |            | 678,000    |  
|                                       | Interest rate swap valuation    |  |              |  |            |   |               |  |               |   |            |  |             |   |             | (23,000  | ) |   |            |           |   |   |            |  |  |   |            | (23,000    | )
|                                       | Net income                      |  |              |  |            |   |               |  |               |   |            |  |             |   |             |         |   |   |            | 1,138,000  |   |   |            |  |  |   |            | 1,138,000  |  
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|Total comprehensive income             |                                 |  |             |   |            |   |              |   |               |   |           |   |             |   |            |          |   |   |           |            |   |   |           |   |  |   | 1,793,000  |           
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           
|Balance at February 28, 2003           |                                 |  | 19,806,000   |   |            | $ | 198,000       |   |               | $ | 39,979,000 |   |             | $ | 96,000      |          |   | $ | 23,439,000 |            |   | $ | (3,457,000 | ) |  | $ | 60,255,000 |           
|                                       |                                 |  |              |   |            |   |               |   |               |   |            |   |             |   |             |          |   |   |            |            |   |   |            |   |  |   |            |           

See accompanying notes to consolidated financial statements.

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MEADE INSTRUMENTS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |           |   |            |             |  
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------ | ---------------------------------------------------- | --------------------------------------------------- | --------- | ----------------------- | ----------- | --------- | - | ----------- | ----------- | --------- | - | ---------- | ----------- | -
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           | Year Ended February 28,
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                        
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           | 2003                    |             | 2002      |   | 2001       
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |            
|Cash flows from operating activities:                                                              |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Net income (loss)                                                                                  |                                                                    | $                                          | 1,138,000                                            |                                                     |           | $                       | (1,442,000  | )         |   | $           | 1,286,000   |          
|Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   | Depreciation and amortization                                      |                                            |                                                      | 2,161,000                                           |           |                         |             | 2,092,000 |   |             |             | 1,946,000 |  
|                                                                                                   | ESOP contribution                                                  |                                            |                                                      | 905,000                                             |           |                         |             | 1,367,000 |   |             |             | 2,997,000 |  
|                                                                                                   | Allowance for doubtful accounts                                    |                                            |                                                      | 163,000                                             |           |                         |             | 2,090,000 |   |             |             | 1,815,000 |  
|                                                                                                   | Changes in assets and liabilities, net of effects of
acquisitions: |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |           |  
|                                                                                                   |                                                                    |                                            | Accounts receivable                                  |                                                     |           | (5,268,000              | )           |           |   | (4,061,000  | )           |           |   | (3,646,000 | )          
|                                                                                                   |                                                                    |                                            | Inventories                                          |                                                     |           | 4,987,000               |             |           |   | 11,342,000  |             |           |   | (7,551,000 | )          
|                                                                                                   |                                                                    |                                            | Deferred income taxes                                |                                                     |           | 1,942,000               |             |           |   | (107,000    | )           |           |   | 781,000    |            
|                                                                                                   |                                                                    |                                            | Prepaid expenses and other current assets            |                                                     |           | 2,416,000               |             |           |   | 1,105,000   |             |           |   | (5,151,000 | )          
|                                                                                                   |                                                                    |                                            | Other assets                                         |                                                     |           | 595,000                 |             |           |   | (581,000    | )           |           |   | 64,000     |            
|                                                                                                   |                                                                    |                                            | Accounts payable                                     |                                                     |           | (265,000                | )           |           |   | 2,166,000   |             |           |   | (1,338,000 | )          
|                                                                                                   |                                                                    |                                            | Accrued liabilities                                  |                                                     |           | 1,192,000               |             |           |   | (543,000    | )           |           |   | (2,310,000 | )          
|                                                                                                   |                                                                    |                                            | Income taxes payable                                 |                                                     |           |                        |             |           |   |            |             |           |   | 386,000    |            
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   |                                                                    |                                            |                                                      | Net cash provided by (used in) operating activities |           |                         | 9,966,000   |           |   |             | 13,428,000  |           |   |            | (10,721,000 | )
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Cash flows from investing activities:                                                              |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   |                                                                    |                                            | Capital expenditures                                 |                                                     |           | (734,000                | )           |           |   | (731,000    | )           |           |   | (2,428,000 | )          
|                                                                                                   |                                                                    |                                            | Acquisition of Simmons, net of cash acquired         |                                                     |           | (20,826,000             | )           |           |   |            |             |           |   |           |            
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   |                                                                    |                                            |                                                      | Net cash used in investing activities               |           |                         | (21,560,000 | )         |   |             | (731,000    | )         |   |            | (2,428,000  | )
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Cash flows from financing activities:                                                              |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   |                                                                    |                                            | Payments on long-term debt                           |                                                     |           | (565,000                | )           |           |   | (2,575,000  | )           |           |   | (500,000   | )          
|                                                                                                   |                                                                    | Net proceeds from the sale of common stock |                                                      |                                                     | 7,344,000 |                         |             |           |  |             |             |           |  |           
|                                                                                                   |                                                                    |                                            | Proceeds from long-term loan                         |                                                     |           |                        |             |           |   | 1,075,000   |             |           |   |           |            
|                                                                                                   |                                                                    |                                            | Net (payments) borrowings under bank lines of credit |                                                     |           | 5,710,000               |             |           |   | (11,243,000 | )           |           |   | 11,922,000 |            
|                                                                                                   |                                                                    |                                            | Exercise of stock options                            |                                                     |           | 67,000                  |             |           |   |            |             |           |   | 1,043,000  |            
|                                                                                                   |                                                                    |                                            | Payments under capital lease obligations             |                                                     |           | (190,000                | )           |           |   | (242,000    | )           |           |   | (268,000   | )          
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   |                                                                    |                                            |                                                      | Net cash provided by (used in) financing activities |           |                         | 12,366,000  |           |   |             | (12,985,000 | )         |   |            | 12,197,000  |  
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Effect of exchange rate changes on cash                                                            |                                                                    |                                            | 477,000                                              |                                                     |           |                         | 351,000     |           |   |             | (42,000     | )        
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Net increase (decrease) in cash                                                                    |                                                                    |                                            | 1,196,000                                            |                                                     |           |                         | 63,000      |           |   |             | (994,000    | )        
|Cash at beginning of year                                                                          |                                                                    |                                            | 1,249,000                                            |                                                     |           |                         | 1,186,000   |           |   |             | 2,180,000   |          
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Cash at end of year                                                                                |                                                                    | $                                          | 2,445,000                                            |                                                     |           | $                       | 1,249,000   |           |   | $           | 1,186,000   |          
|                                                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Supplemental disclosures of cash flow information:                                                 |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|Cash paid during the period for:                                                                   |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   |                                                                    |                                            |                                                      | Interest                                            |           | $                       | 1,141,000   |           |   | $           | 1,364,000   |           |   | $          | 2,036,000   |  
|                                                                                                   |                                                                    |                                            |                                                      | Income taxes                                        |           | $                       | 250,000     |           |   | $           | 350,000     |           |   | $          | 5,050,000   |  
|Non-cash financing activities:                                                                     |                                                                    |                                            |                                                      |                                                     |           |                         |             |           |   |             |             |          
|                                                                                                   |                                                                    |                                            |                                                      | Capital lease obligations                           |           | $                       |            |           |   | $           |            |           |   | $          | 24,000      |  

See accompanying notes to consolidated financial statements.

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Operations

The Company

Meade Instruments Corp. (the Company), a Delaware corporation, is a
multinational consumer and industrial optics company that designs,
manufactures, imports and distributes telescopes, telescope accessories,
binoculars, riflescopes, microscopes and other optical and digital imaging products. The
Company has operations in the United States, Germany and Mexico.

2. Summary of Significant Accounting Policies

Principles of consolidation

The accompanying consolidated financial statements include the accounts of
the Company and all of its subsidiaries and reflect the elimination
of all significant intercompany account balances and transactions.

Revenue recognition

Revenues are generally recorded when title transfers and the risks of
ownership are passed to customers. Under certain circumstances, the Company
accepts product returns. Material management judgments must be made and used in
connection with establishing the sales returns estimates. The Company
continuously monitors and tracks returns and records revenues net of provisions
for returns. The Companys estimate of sales returns is based upon several
factors including historical experience, current market and economic
conditions, customer demand and acceptance of the Companys products and/or any
notification received by the Company of such a return. Historically, sales
returns have been within managements estimates; however, actual returns may
differ significantly, either favorably or unfavorably, from managements
estimates depending on actual market conditions at the time of the return.

Foreign currency translation

The assets and liabilities of the Companys foreign operations are
translated at end of period exchange rates. Revenues and expenses are
translated at the average exchange rates prevailing during the period. The
effects of unrealized exchange rate fluctuations on translating foreign
currency assets and liabilities into U.S. dollars are accumulated in
stockholders equity as a component of other comprehensive income.

Allowance for doubtful accounts

Management analyzes specific customer accounts receivable, customer
credit-worthiness, historical bad debt expenses, current economic trends and
changes in customer payment terms when evaluating the adequacy of the allowance
for doubtful accounts. If the financial condition of any of the Companys
customers were to deteriorate to the point of impairing the customers ability
to make payments on its account, additional allowances may be required. While
credit losses have historically been within managements expectations and the
provisions established, significant deterioration in the liquidity or financial
position of any of the Companys major customers or any group of customers
could have a material adverse impact on the collectibility of accounts
receivable and future operating results.

Inventories

Inventories are stated at the lower of cost, as determined using the
first-in, first-out (FIFO) method, or market. Costs include materials, labor
and manufacturing overhead. The Company evaluates the carrying value of its
inventories taking into account such factors as historical and anticipated
future sales compared with quantities on hand and the price the Company expects
to obtain for its products in their respective markets. The Company also

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

evaluates the composition of its inventories to identify any slow-moving or
obsolete product. These evaluations require material management judgments,
including estimates of future sales, continuing market acceptance of the
Companys products, and current market and economic conditions. Inventory
reserves are established, based on such judgments, for any inventories that are
identified as having a net realizable value less than its cost. Historically,
the net realizable value of the Companys inventories has been within
managements estimates. However, if the Company is not able to meet its sales
expectations; or if market conditions deteriorate significantly from
managements estimates, reductions in the net realizable value of the Companys
inventories could have a material adverse impact on future operating results.

Property and equipment

Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. Buildings
and related improvements are depreciated over seven to twenty-five years. All
other property and equipment, except property held under capital leases, is
depreciated over three to seven years. Properties held under capital leases are
recorded at the present value of the noncancellable lease payments over the
term of the lease and are amortized over the shorter of the lease term or the
estimated useful lives of the assets.

Goodwill and acquisition-related intangible assets

In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001,
and establishes specific criteria for the recognition of goodwill separate from
other intangible assets. SFAS No. 142 requires that goodwill and identifiable
intangible assets determined to have an indefinite life no longer be amortized,
but instead be tested for impairment at least annually. The Company adopted
SFAS No. 142 effective March 1, 2002.

The
difference between the purchase price and the fair value of net
tangible assets
at the date of acquisition is included in the accompanying consolidated balance
sheet as goodwill and acquisition-related intangible assets. Amortization
periods for the intangible assets subject to amortization, range from seven to
fifteen years, depending on the nature of the assets acquired. The carrying
value of goodwill and acquisition-related intangible assets, including the
related amortization period, are evaluated in the fourth quarter of each fiscal
year.

The Companys reporting units for purposes of applying the provisions of
SFAS 142 are Bresser and Simmons. SFAS 142 requires the Company to compare the
fair value of the reporting unit to its carrying amount on an annual basis to
determine if there is potential impairment. If the fair value of the reporting
unit is less than its carrying value, an impairment loss is recorded to the
extent that the fair value of the goodwill within the reporting unit is less
than its carrying value. If the carrying amount of the goodwill exceeds its
fair value, an impairment loss is recognized. Fair value is determined based on
discounted cash flows. As of February 28, 2003, the Company does not believe
any impairment of goodwill has occurred.

Acquisition-related intangible assets are reviewed whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The Company reviews the recoverability by comparing the
estimated future cash flows on an undiscounted basis to the net book value of
the assets. In the event that projected undiscounted cash flows are less than
the net book value of the assets, the carrying value of the assets are written
down to their fair value, less costs to sell. Fair value is generally based on
a discounted cash flow analysis. Assets that are to be disposed of are measured
at the lower of cost or fair value, less costs to sell.

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At February 28, 2003 and 2002, goodwill and acquisition-related intangible
assets included the following:

|                                                         |                                        |      |                      |      |                |           |              |           |                |   |              |          |           |   |           |           |          |   |          |          |  
|-------------------------------------------------------- | -------------------------------------- | ---- | -------------------- | ---- | -------------- | --------- | ------------ | --------- | -------------- | - | ------------ | -------- | --------- | - | --------- | --------- | -------- | - | -------- | -------- | -
|                                                         |                                        |      |                      |      |                |           | February 28,
|                                                         |                                        |      |                      |      |                |           |             
|                                                         |                                        |      |                      |      |                |           | 2003         |           | 2002          
|                                                         |                                        |      |                      |      |                |           |              |           |               
|                                                         |                                        |      | Amortization Periods |      | Gross Carrying |           | Accumulated  |           | Gross Carrying |   | Accumulated 
|                                                         |                                        |      | (Years)              |      | Amount         |           | Amortization |           | Amount         |   | Amortization
|                                                         |                                        |      |                      |      |                |           |              |           |                |   |             
|Goodwill                                                 |                                        | none |                      | $    | 1,966,000      |           |              | $         | (418,000       | ) |              | $        | 2,325,000 |   |           | $         | (418,000 | )
|Acquisition-related intangible assets:                   |                                        |      |                      |      |                |           |              |           |                |   |              |          |           |   |           |           |          |   |          |         
|                                                         | Brand names and customer
relationships |      | none                 |      |                | 3,431,000 |              |           |                |  |              |          |           |  |           |           |          |  |         
|                                                         | Trademarks                             |      |                      | 7-15 |                |           |              | 1,398,000 |                |   |              | (720,000 | )         |   |           | 1,398,000 |          |   |          | (493,000 | )
|                                                         |                                        |      |                      |      |                |           |              |           |                |   |              |          |           |   |           |           |          |   |          |         
|Total acquisition-related intangible
assets              |                                        |      |                      |      |                |           | 4,829,000    |           |                |   | (720,000     | )        |           |   | 1,398,000 |           |          |   | (493,000 | )       
|                                                         |                                        |      |                      |      |                |           |              |           |                |   |              |          |           |   |           |           |          |   |          |         
|Total goodwill and
acquisition-related intangible assets |                                        |      |                      |      |                | $         | 6,795,000    |           |                | $ | (1,138,000   | )        |           | $ | 3,723,000 |           |          | $ | (911,000 | )       
|                                                         |                                        |      |                      |      |                |           |              |           |                |   |              |          |           |   |           |           |          |   |          |         

The changes in the carrying amount of goodwill and acquisition-related
intangible assets for the years ended February 28, 2003 and 2002 are as
follows:

|                                |  |                   |           |                   |  |   |           |  
|------------------------------- |  | ----------------- | --------- | ----------------- |  | - | --------- | -
|                                |  | Non-amortizing    |           | Amortizing       
|                                |  | intangible assets |           | intangible assets
|                                |  |                   |           |                  
|Balance, net, February 28, 2001 |  | $                 | 2,075,000 |                   |  | $ | 1,133,000 |  
|Amortization                    |  |                   | (168,000  | )                 |  |   | (228,000  | )
|                                |  |                   |           |                   |  |   |           |  
|Balance, net, February 28, 2002 |  |                   | 1,907,000 |                   |  |   | 905,000   |  
|New assets acquired             |  |                   | 3,431,000 |                   |  |   |          |  
|Adjustment to goodwill          |  |                   | (359,000  | )                 |  |   |          |  
|Amortization                    |  |                   |          |                   |  |   | (227,000  | )
|                                |  |                   |           |                   |  |   |           |  
|Balance, net, February 28, 2003 |  | $                 | 4,979,000 |                   |  | $ | 678,000   |  
|                                |  |                   |           |                   |  |   |           |  

As of February 28, 2003, estimated amortization expense for the next five
fiscal years is approximately $228,000 per year.

The following pro forma summary presents the Companys net income (loss)
and per share information as if the Company had been accounting for its
goodwill under SFAS No. 142 for the three years ended February 28, 2003.

|                                                     |  |                         |           |      |  |      |            |   |  |   |           | 
|---------------------------------------------------- |  | ----------------------- | --------- | ---- |  | ---- | ---------- | - |  | - | --------- | 
|                                                     |  | Year ended February 28,
|                                                     |  |                        
|                                                     |  | 2003                    |           | 2002 |  | 2001
|                                                     |  |                         |           |      |  |     
|Reported net income (loss)                           |  | $                       | 1,138,000 |      |  | $    | (1,442,000 | ) |  | $ | 1,286,000 | 
|Add back goodwill
amortization, net of tax           |  |                         |          |      |  |      | 101,000    |   |  |   | 97,000    | 
|                                                     |  |                         |           |      |  |      |            |   |  |   |           | 
|Adjusted net income (loss)                           |  | $                       | 1,138,000 |      |  | $    | (1,341,000 | ) |  | $ | 1,383,000 | 
|                                                     |  |                         |           |      |  |      |            |   |  |   |           | 
|Reported basic earnings
(loss) per share             |  | $                       | 0.07      |      |  | $    | (0.10      | ) |  | $ | 0.09      | 
|                                                     |  |                         |           |      |  |      |            |   |  |   |           | 
|Reported diluted
earnings (loss) per share           |  | $                       | 0.07      |      |  | $    | (0.10      | ) |  | $ | 0.08      | 
|                                                     |  |                         |           |      |  |      |            |   |  |   |           | 
|Adjusted
basic and diluted earnings
(loss) per share |  | $                       | 0.07      |      |  | $    | (0.09      | ) |  | $ | 0.09      | 
|                                                     |  |                         |           |      |  |      |            |   |  |   |           | 

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##### Table of Contents



MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income taxes

The Company uses the liability method of accounting for income taxes.
Under this method deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates that will be in effect when the
differences are expected to reverse. The Company files its tax return for the
year ending August 31, rather than for the financial reporting period ending
the last day of February.

Advertising

The Company expenses the production costs of advertising as incurred. For
the years ended February 28, 2003, 2002 and 2001, the Company incurred
advertising and marketing expenses of approximately $4,406,000,
$2,857,000 and
$10,800,000, respectively.

Research and development

Expenditures for research and development costs are charged to expense as
incurred.

Earnings (loss) per share

Basic earnings (loss) per share amounts exclude the dilutive effect of
potential shares of common stock. Basic earnings (loss) per share is based upon
the weighted-average number of shares of common stock outstanding, which excludes unallocated ESOP shares. Diluted
earnings (loss) per share is based upon the weighted-average number of shares
of common stock and dilutive potential shares of common stock outstanding for
each period presented. Potential shares of common stock include outstanding
stock options which are included under the treasury stock method. Potential
shares of common stock of 65,000 have been excluded from diluted weighted
average shares of common stock for fiscal 2002, as the effect would be
anti-dilutive.

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following is a reconciliation of the denominators of the basic and
diluted earnings (loss) per share computations for the fiscal years ended
February 28, 2003, 2002 and 2001.

|                               |               |   |                          |         |      |   |            |   |  |   |            |         | 
|------------------------------ | ------------- | - | ------------------------ | ------- | ---- | - | ---------- | - |  | - | ---------- | ------- | 
|                               |               |   | Year Ended February 28 ,
|                               |               |   |                         
|                               |               |   | 2003                     |         | 2002 |   | 2001      
|                               |               |   |                          |         |      |   |           
|Net income (loss)              |               | $ | 1,138,000                |         |      | $ | (1,442,000 | ) |  | $ | 1,286,000  |        
|                               |               |   |                          |         |      |   |            |   |  |   |            |        
|Shares outstanding  basic     |               |   | 16,410,000               |         |      |   | 15,100,000 |   |  |   | 14,700,000 |        
|Effect of dilutive securities: |               |   |                          |         |      |   |            |   |  |   |            |        
|                               | Stock options |   |                          | 214,000 |      |   |            |  |  |   |            | 900,000 | 
|                               |               |   |                          |         |      |   |            |   |  |   |            |        
|Shares outstanding  diluted   |               |   | 16,624,000               |         |      |   | 15,100,000 |   |  |   | 15,600,000 |        
|                               |               |   |                          |         |      |   |            |   |  |   |            |        
|Net income  basic             |               | $ | 0.07                     |         |      | $ | (0.10      | ) |  | $ | 0.09       |        
|                               |               |   |                          |         |      |   |            |   |  |   |            |        
|Net income  diluted           |               | $ | 0.07                     |         |      | $ | (0.10      | ) |  | $ | 0.08       |        
|                               |               |   |                          |         |      |   |            |   |  |   |            |        

On May 5, 2000, the Company declared a two-for-one stock split of the
Companys common stock, which was effected in the form of a stock dividend. The
dividend was paid on June 19, 2000 to stockholders of record on May 22, 2000.
All share and per share amounts in the accompanying consolidated financial
statements and notes thereto have been adjusted to reflect the stock split.

Comprehensive income

Comprehensive income is defined as a change in the equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources and, at February 28, 2003, consists of foreign currency
translation and unrealized net gains and losses on interest rate swaps. As of
February 28, 2003 and 2002, accumulated other comprehensive income consists of
foreign currency translation adjustments of $145,000 and ($533,000),
respectively, and unrealized losses on interest rate swap of ($49,000) and
($26,000), respectively.

Concentration of credit risk

Financial instruments which potentially subject the Company to
concentration of credit risk are principally accounts receivable. The Company
maintains an allowance for doubtful accounts at a level deemed appropriate by
management based on historical and other factors that affect collectibility.
One of the Companys significant customers and several smaller customers filed
bankruptcy during fiscal 2001. Several customers filed for bankruptcy during
fiscal 2002 as well. Based upon the Companys assessment of the recoverability
of the receivables from these customers and in the opinion of management, the
Company has established adequate provisions related to these receivables.

Fair value of financial instruments

The carrying amounts of accounts receivable, prepaid expenses and
other current assets, accounts payable, accrued liabilities, and short-term
loans approximate fair value due to the short maturity of these instruments.
The carrying value long-term debt approximates its fair value.

Derivative Instruments and Hedging Activities

The Company may enter into interest rate swap agreements or foreign
exchange contracts to offset certain operational and balance sheet exposures
and to manage its exposure to interest and exchange rate movements. These
contracts are entered into to support product sales, purchases and financing
transactions made in the normal course of business, and accordingly, are not
speculative in nature. The Company uses interest rate swaps to convert
floating-rate debt to fixed-rate debt. Interest rate swap agreements are
executed as an integral part of specific debt transactions and involve payment
of a fixed rate and receipt of a floating rate and specified intervals. The
Company may enter into foreign exchange contracts to manage risk associated
with fluctuations on certain firm sales and purchase commitments denominated in
foreign currencies.

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All derivatives are recognized on the balance sheet at their fair value.
On the date that the Company enters into a derivative contract, it designates
the derivative as either (a) a hedge of a forecasted transaction or the
variability of cash flows that are to be received or paid in connection with a
recognized asset or liability (a cash flow hedge), or
(b) a hedge of an exposure to changes in the fair value of an asset,
liability, or an unrecognized firm commitment (a fair value hedge). Changes
in the fair value of a derivative that is highly effective, and that is
designated and qualifies as a cash flow hedge to the extent that the hedge is
effective, are recorded in Other Comprehensive Income until earnings are
affected by the variability of cash flows of the hedged transaction (e.g.,
until periodic settlements of a variable asset or liability are recorded in
earnings). Any hedge ineffectiveness (which represents the amount by which the
changes in the fair value of the derivative exceed the variability in the cash
flows of the forecasted transaction) is recorded in current-period earnings.
Changes in the fair value of a derivative that is highly effective, and that is
designated and qualifies as a foreign-currency hedge, are recorded in either
current-period earnings or Other Comprehensive Income, depending on whether the
hedging relationship satisfies the criteria for a fair-value or cash-flow
hedge.

The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk-management objective and
strategy for undertaking various hedge transactions. This process includes
linking all derivatives that are designated as cash flow hedges or specific
firm commitments or forecasted transactions. The Company also formally assesses
(both at the hedges inception and on an ongoing basis) whether the derivatives
that are used in hedging transactions have been highly effective in offsetting
changes in the cash flows of hedged items and whether those derivatives may be
expected to remain highly effective in future periods. All components of each
derivatives gain or loss are included in the assessment of hedge
effectiveness.

When it is determined that a derivative is not, or has ceased to be,
highly effective as a hedge, the Company discontinues hedge accounting
prospectively. A derivative ceases to be highly effective when (a) the Company
determines that the derivative is no longer effective in offsetting changes in
the cash flows of a hedged item such as firm commitments or forecasted
transactions, (b) it is no longer probable that the forecasted transaction will
occur, (c) the derivative expires or is sold, terminated or exercised, or (d)
management determines that designating the derivative as a hedging instrument
is no longer appropriate.

When the Company discontinues hedge accounting because it is no longer
probable that the forecasted transaction will occur in the originally expected
period, the gain or loss on the derivative remains in Accumulated Other
Comprehensive Income and is reclassified into earnings when the forecasted
transaction affects earnings. However, if it is probable that a forecasted
transaction will not occur by the end of the originally specified time period
or within an additional two-month period of time thereafter, the gains and
losses that were accumulated in Accumulated Other Comprehensive Income will be
recognized immediately in earnings. In a situation in which hedge accounting is
discontinued and the derivative remains outstanding, the Company will carry the
derivative at its fair value on the balance sheet, recognizing changes in the
fair value in current-period earnings.

Use of estimates in the preparation of financial statements

The preparation of consolidated financial statements, in conformity with
accounting principles generally accepted in the United States, requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the respective reporting periods. Actual results could
differ from those estimates.

Product warranties

The Company provides reserves for the estimated cost of product
warranty-related claims at the time of sale, and periodically adjusts the
provision to reflect actual experience. The amount of warranty liability
accrued reflects managements best estimate of the expected future cost of
honoring Company obligations under its warranty plans. Additionally, from time
to time, specific warranty accruals may be made if unforeseen technical
problems arise.

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Meade and Bresser branded products are generally covered by a
one-year limited warranty. Many of the Simmons products have lifetime limited
warranties. Changes in the warranty liability, which is included as a component
of accrued liabilities on the accompanying Consolidated Balance Sheet, follows.

|                                   |  |              |            |      |  |   |          |  
|---------------------------------- |  | ------------ | ---------- | ---- |  | - | -------- | -
|                                   |  | February 28,
|                                   |  |             
|                                   |  | 2003         |            | 2002
|                                   |  |              |            |     
|Beginning balance                  |  | $            | 461,000    |      |  | $ | 466,000  |  
|Warranty accrual                   |  |              | 1,731,000  |      |  |   | 428,000  |  
|Labor and material usage           |  |              | (1,154,000 | )    |  |   | (433,000 | )
|Simmons warranty liability assumed |  |              | 756,000    |      |  |   |         |  
|                                   |  |              |            |      |  |   |          |  
|Ending balance                     |  | $            | 1,794,000  |      |  | $ | 461,000  |  
|                                   |  |              |            |      |  |   |          |  

Stock-based compensation

The Company accounts for employee stock-based compensation in accordance
with the intrinsic value method described in Accounting Principles Board
Opinion No. 25 and related interpretations. The Company has adopted the
disclosure only provisions of SFAS No. 123. Accordingly, no compensation cost
has been recognized for the fixed stock option plans. Had compensation cost for
the Companys stock-based compensation plans been determined based on the fair
value at the grant dates for awards under those plans, consistent with the
method prescribed by SFAS No. 123, the Companys net income (loss) and earnings
(loss) per share would have been reduced to the pro forma amounts indicated
below.

|                                                        |  |                         |            |      |  |      |            |   |  |   |            |  
|------------------------------------------------------- |  | ----------------------- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|                                                        |  | Year Ended February 28,
|                                                        |  |                        
|                                                        |  | 2003                    |            | 2002 |  | 2001
|                                                        |  |                         |            |      |  |     
|Reported net income (loss)                              |  | $                       | 1,138,000  |      |  | $    | (1,442,000 | ) |  | $ | 1,286,000  |  
|Pro forma compensation cost                             |  |                         | (1,587,000 | )    |  |      | (2,079,000 | ) |  |   | (1,976,000 | )
|                                                        |  |                         |            |      |  |      |            |   |  |   |            |  
|Pro forma net loss                                      |  | $                       | (449,000   | )    |  | $    | (3,521,000 | ) |  | $ | (690,000   | )
|                                                        |  |                         |            |      |  |      |            |   |  |   |            |  
|Reported earnings (loss) per share  basic              |  | $                       | 0.07       |      |  | $    | (0.10      | ) |  | $ | 0.09       |  
|Reported earnings (loss) per share  diluted            |  | $                       | 0.07       |      |  | $    | (0.10      | ) |  | $ | 0.08       |  
|Pro
forma earnings (loss) per share  basic and diluted |  | $                       | (0.03      | )    |  | $    | (0.23      | ) |  | $ | (0.05      | )

Accounting pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 143. which establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company adopted the provisions of SFAS No. 143 for the year
ended February 28, 2003. The adoption of SFAS No. 143 did not have a material
effect on its financial position or results of operations upon adoption.

In October 2001, the FASB issued SFAS No. 144 which establishes a single
accounting model for the impairment or disposal of long-lived assets and new
standards for reporting discontinued operations. SFAS No. 144 is effective in
fiscal years beginning after December 15, 2001 and, in general, is to be
applied prospectively. The Company adopted the provisions of SFAS No. 144 for
the year ended February 28, 2003. The adoption of SFAS No. 144 did not have a
material effect on its financial position or results of operations upon
adoption.

In December 2002, the FASB issued SFAS 148, which provides alternative
transition methods for companies adopting a voluntary change to the fair value
method of accounting for stock-based compensation. SFAS 148 also requires
enhanced disclosure regarding the method of accounting and the effect of the
method used on reported results of operations. SFAS 148 is effective for fiscal
years ending after December 15, 2002 and interim periods

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##### Table of Contents



MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

beginning after December 15, 2002. The Company adopted the disclosure
provisions of SFAS 148 for the year ended February 28, 2003, and has elected to
continue to account for its stock-based compensation under the intrinsic value
method.

In November 2002, the FASB issued FASB Interpretation (FIN) 45, which
requires disclosures about obligations under certain guarantees issued by the
Company, and which requires recognition of a liability for the fair value of
the obligation undertaken in issuing the guarantee. The liability recognition
provisions of FIN 45 are applicable to guarantees issued or modified after
December 31, 2002, and the disclosure provisions are effective for interim or
annual fiscal periods ending after December 15, 2002. The Company has adopted
the provisions of FIN 45 for its year ended February 28, 2003. The adoption of
FIN 45 did not have a material effect on its financial position or results of
operations.

In January 2003, the Company adopted SFAS 146, which addresses accounting
for costs associated with exit or disposal activities. In addition, the FASB
issued FIN 46, which requires that certain variable interest entities be
consolidated by the primary beneficiary of the entity if the equity investors
in the entity do not have a controlling financial interest or do not have
sufficient equity at risk. FIN 46 is effective immediately for all variable
interest entities created after January 31, 2003. For all such entities created
prior to February 1, 2003, FIN 46 is effective for interim or annual fiscal
periods ending after June 15, 2003. The Company does not expect the adoption of
these statements to have a material effect on the Companys financial position
or results of operations.

Reclassifications

Certain reclassifications have been made to conform prior year information
to the fiscal 2003 presentation.

3. Acquisition of Simmons Outdoor Corp.

On October 25, 2002 the Company acquired 100% of the outstanding common
stock of Simmons Outdoor Corp. (Simmons) for $20,829,000 cash ($16,000,000
was paid at close; the balance, $4,829,000 was paid in December, 2002).
Simmons is a designer and distributor of riflescopes, binoculars and other
consumer sports optics offering products under the Simmons, Weaver and Redfield
brand names. The acquisition of Simmons presents the Company with
opportunities to enter into the consumer sports optics marketplace with brand
names that management believes are highly recognized and well regarded. To
fund a portion of the purchase price, the Company sold 3,291,801 shares of its
common stock in a private placement for net cash proceeds of $7,344,000. The
balance of the purchase price was funded through borrowings on the Companys
bank line of credit. The acquisition of Simmons was accounted for as a
purchase as prescribed by Statement of Financial Accounting Standards No. 141,
Business Combinations.The purchase price allocation is based upon evaluations
and other studies of the fair value of the assets acquired. The excess of the
purchase price over the estimated fair value of the net tangible assets
acquired is included in goodwill and acquisition related intangible
assets at February 28, 2003, and has been
allocated to the value of the brand names and customer relationships acquired;
both of which have been assigned indefinite lives.

A summary of the purchase price allocation of the acquisition is as
follows:

|                                          |                      |   |            |            | 
|----------------------------------------- | -------------------- | - | ---------- | ---------- | 
|Current assets (excluding cash of $3,000) |                      | $ | 19,227,000 |           
|Property, plant and equipment             |                      |   | 239,000    |           
|Intangible assets                         |                      |   | 3,431,000  |           
|Current liabilities                       |                      |   | (2,071,000 | )         
|                                          |                      |   |            |           
|                                          | Total purchase price |   | $          | 20,826,000 | 
|                                          |                      |   |            |           

As of December 6, 2001, Simmons was a wholly owned subsidiary of Blount
International, Inc. (Blount). On December 7, 2001, Blount sold Simmons to
Alliant Techsystems, Inc. (ATK). The accompanying unaudited pro forma
consolidated condensed financial information reflects Blounts (predecessor)
basis for periods prior to December 7, 2001 and ATKs (successor) basis for
periods subsequent to December 6, 2001.

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents unaudited pro forma condensed consolidated
financial information for the years ended February 28, 2003 and 2002,
respectively, as though the acquisition occurred on March 1, 2001. The pro
forma information for the year ended February 28, 2003 has been prepared by
combining the statement of operations of Meade for the year ended February 28,
2003 and the statement of operations of Simmons (successor) for
the eight months
ended October 2002. The pro forma information for the year ended February 28,
2002 has been prepared by combining the statement of operations Meade for the
year ended February 28, 2002 and the statement of operations of Simmons
(predecessor) for the year ended December, 2001.

|                                            |  |  |              |  |      |   |             |  |  |   |             |   | 
|------------------------------------------- |  |  | ------------ |  | ---- | - | ----------- |  |  | - | ----------- | - | 
|                                            |  |  | Year Ended  
|                                            |  |  | February 28,
|                                            |  |  |             
|                                            |  |  | 2003         |  | 2002
|                                            |  |  |              |  |     
|Net sales                                   |  |  |              |  |      | $ | 128,441,000 |  |  | $ | 121,644,000 |  
|Operating income (loss)                     |  |  |              |  |      | $ | 4,258,000   |  |  | $ | (3,274,000  | )
|Net income (loss)                           |  |  |              |  |      | $ | 982,000     |  |  | $ | (4,496,000  | )
|Basic
and diluted earnings (loss) per share |  |  |              |  |      | $ | 0.05        |  |  | $ | (0.24       | )

The unaudited pro forma financial information is presented for information
purposes only and is not necessarily indicative of the operating results that
would have occurred had the acquisitions taken place on March 1, 2001. In
addition, the pro forma results are not intended to be a projection of the
future results and do not reflect any synergies that might be achieved from the
combined operations.

4. Bank Debt

On October 25, 2002, the Company amended its credit agreement with its
U.S. bank (the U.S. credit agreement). The amendment principally involved
increasing the revolving credit facility and incorporating the Simmons
acquisition into the credit agreement. The amended agreement provides the
Company with a $35,645,000 credit facility consisting of a $34,000,000
revolving credit line (the U.S. revolving loan) and a $1,645,000 term loan
(the U.S. term loan). Availability under the U.S. revolving loan is subject
to a borrowing base with standard advance rates against eligible accounts
receivable and inventories. The U.S. term loan is collateralized by domestic
machinery and equipment. The amended facility has a three-year term, is
collateralized by substantially all of the domestic assets of the Company and
its domestic subsidiaries and contains certain financial covenants. Outstanding
amounts under the U.S. revolving loan bear interest at the banks base rate or
LIBOR rate plus applicable margins. Amounts outstanding under the U.S. term
loan bear interest at a fixed rate of approximately 7.9% pursuant to an
interest rate swap agreement in place between the Company and the bank.

The Company continues to depend on operating cash flow and availability
under its bank lines of credit to provide short-term liquidity. In the event
the Companys plans require more capital than is presently anticipated,
additional sources of liquidity such as debt or equity financings, may be
required to meet its capital needs. There can be no assurance that such
additional sources of capital will be available on reasonable terms, if at all.
However, management believes that operating cash flow and bank borrowing
capacity in connection with the Companys business should provide sufficient
liquidity for the Companys obligations for at least the next twelve months.

Amounts outstanding on the U.S. revolving loan and U.S. term loan at
February 28, 2003 were approximately $9,051,000 and $1,505,000, respectively.
Availability under the U.S. revolving loan at February 28, 2003 was
approximately $5,700,000. The U.S. term loan is collateralized by domestic machinery
and equipment. The credit facility has a three-year term, is collateralized by
substantially all of the domestic assets of the Company and its domestic
subsidiaries and contains certain financial covenants including, but not
limited to, fixed charge coverage ratios. Outstanding amounts on the U.S.
revolving loan and U.S. term loan bear interest at the banks base rate or
LIBOR rate plus applicable margins (4.5% and 7.9%, respectively at February 28,
2003).

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Under the terms of the U.S. credit agreement, the Company was required to
enter into an interest-rate swap to convert the variable interest rate on its
U.S. term loan to a fixed interest rate. The resulting cost of funds (7.9% per
annum) is currently higher than that which would have been available if the
variable rate had been applied during
the period. Under the interest-rate swap contract, the Company has agreed
with the bank to exchange, at specified intervals, the difference between
variable-rate and fixed-rate interest amounts, calculated by reference to
agreed-upon notional amounts. The change in the fair value of the interest rate
swap for the period ended February 28, 2003 was a loss of $23,000 which is
included in other comprehensive income for the year ended February 28, 2003.

In July 2002, the Companys German subsidiary renegotiated its agreement
with a bank to provide up to approximately $3,800,000 in revolving loans
(subject to a borrowing base of eligible accounts receivable and inventories)
expiring in July 2003. The German subsidiary also has an agreement with the
bank that provides a term loan expiring June 2006 collateralized by land and
buildings owned by the German subsidiary (collectively, the European Loans).
The European Loans are guaranteed by the U.S. parent company up to
approximately $2,600,000. The guarantee expires in July 2003. Outstanding amounts on the
revolving loan and the term loan in Europe at February 28, 2003 were
approximately $12,000 and $1,192,000, respectively. The European Loans bear
interest at the banks base rate plus or minus applicable margins (8.75% and
6.0%, respectively at February 28, 2003).

Aggregate maturities of long-term debt at February 28, 2003 are as follows:

|             |  |        |           | 
|------------ |  | ------ | --------- | 
|Fiscal Year: |  | Amount
|             |  |       
|2004         |  | $      | 558,000   | 
|2005         |  |        | 558,000   | 
|2006         |  |        | 802,000   | 
|2007         |  |        | 779,000   | 
|             |  |        |           | 
|Total        |  | $      | 2,697,000 | 
|             |  |        |           | 

5. Commitments and Contingencies

In December 1996 the Company executed a lease commencing October 1, 1997
for its corporate office and manufacturing facilities in California. The lease
term is ten years, extendable for an additional ten years (two terms of five
years each) at the Companys option. Lease commitments for this lease are
subject to 9% increases at the beginning of the months 31, 61 and 91. In
February 2000, the Company entered into a lease for warehouse space located
near the Companys corporate headquarters. That warehouse lease
expired in March, 2003 and the Company vacated the premise on
April 1, 2003. In July 2002, the Company leased office
space in Florida. The Florida lease term is one year. The Simmons subsidiary
operates in a leased facility in Georgia. The Simmons facility lease term is
eight years expiring in December 2007, with an option to renew for four
additional four-year terms. Monthly rentals are adjusted at prescribed dates
generally based on changes in the consumer price index. In November 2002, the
Company leased warehouse space in Mississippi. The Mississippi facility lease
is on a month-to-month basis.

In August 1999, the Company entered into a lease for an assembly facility
in Tijuana, Mexico. The lease term is five years with three, five-year renewal
options. In January 2000, the Company entered into a lease for an office,
repair and distribution facility in Graefelfing, Germany. During fiscal 2003,
the Graefelfing space was reduced to office space only.

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Aggregate future minimum commitments under noncancellable leases and other
agreements at February 28, 2003 that have remaining terms in excess of one year
are as follows:

|                                  |  |         |        |           |  |   |           | 
|--------------------------------- |  | ------- | ------ | --------- |  | - | --------- | 
|Fiscal Year                       |  | Capital |        | Operating
|                                  |  |         |        |          
|2004                              |  | $       | 26,000 |           |  | $ | 1,881,000 | 
|2005                              |  |         |       |           |  |   | 1,682,000 | 
|2006                              |  |         |       |           |  |   | 1,686,000 | 
|2007                              |  |         |       |           |  |   | 1,787,000 | 
|2008                              |  |         |       |           |  |   | 1,066,000 | 
|Thereafter                        |  |         |       |           |  |   | 39,000    | 
|                                  |  |         |        |           |  |   |           | 
|Net minimum lease payments        |  |         | 26,000 |           |  | $ | 8,141,000 | 
|                                  |  |         |        |           |  |   |           | 
|Less amount representing interest |  |         | 1,000  |           |  |   |           | 
|                                  |  |         |        |           |  |   |           | 
|Capital lease obligations         |  | $       | 25,000 |           |  |   |           | 
|                                  |  |         |        |           |  |   |           | 

The preceding table assumes that any operating leases with renewal options
that expire during fiscal 2004 or fiscal 2005 will be renewed under the terms
of the governing lease agreement. For the fiscal years ended February 28,
2003, 2002 and 2001, the Company incurred rent expense of $2,731,000,
$2,312,000 and $2,294,000, respectively.

In 2001
and 2002, the Company filed suits against Tasco Sales, Inc.
(Tasco) and Celestron International, Inc. (Celestron), charging the two
companies with patent infringement and unfair competition. The
complaints
allege that a number of Tascos and Celestrons consumer telescopes willfully
infringe certain of the Companys U.S. patents. In addition to seeking compensation
for damages incurred, the suits seek to enjoin Tasco and Celestron from
continuing to manufacture or sell products that infringe certain of
the Companys patents.
Tasco and Celestron filed answers and certain counterclaims which deny the Companys
allegations. The counterclaim also alleges, among other things, that the
Company is infringing a Celestron design patent. In February and May
2003, Celestron prevailed on partial Summary Judgments in which the
court held that Celestron did not literally or equivalently infringe
one of the Companys patents. Due to the uncertainties of
litigation, the Company is unable to provide an evaluation of the likelihood of
either a favorable or unfavorable outcome in these matters.

The Company is involved from time to time in litigation incidental to its
business. Management believes that the outcome of current litigation will not
have a material adverse effect on the Company.

6. Employee Stock Ownership Plan

Adoption of the ESOP was effective March 1, 1996 and covers all employees
of the Company who meet certain service and eligibility requirements. A
participant becomes 100% vested in his ESOP account if, while employed at the
Company, the participant (i) reaches his 60th birthday, (ii) becomes disabled
(as defined), (iii) dies, or (iv) achieves three years of credited service (as
defined). Distributions of a participants vested account are directed by the
ESOPs Administrative Committee. The Company provides a put option to any
participant who receives a distribution of Company stock, unless the stock is
readily tradable on an established market.

In April 1996, the ESOP purchased 3,000,000 shares of common stock held by
the existing stockholders for $11,000,000. The ESOP financed the purchase of
the common stock (the financed shares) with the proceeds of an $11,000,000
term loan (the acquisition loan) from the Company. The financed shares are
held by the Meade Instruments Corp. Employee Stock Ownership Trust (the ESOP
trust). The ESOP pledged the financed shares to the Company as
collateral for
the acquisition loan. The financed shares were initially credited to a suspense
account on the books of the ESOP and will be allocated to the accounts of
individual ESOP participants, as of each plan year end, for payments made on
the acquisition loan. The acquisition loan has a twenty-year term and bears
interest at 6% per annum. Principal and interest is due annually, subject to
the Company making contributions to the ESOP to fund the principal and interest
payments. The release of financed shares from collateral is based on a formula
defined in the plan. The Company accounts for its ESOP in accordance with
Statement of Position 93-6. Accordingly, the shares pledged as collateral are
reported as unearned ESOP shares in the balance sheet. As shares are committed
to be released from collateral, the Company records compensation expense, and
the shares become outstanding for net

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

income per share purposes. Any dividends on allocated shares are recorded
as a reduction of retained earnings; any dividends on unallocated ESOP shares
are recorded as a reduction of debt and accrued interest.

For the years ended February 28, 2003, 2002 and 2001, the Company
recognized ESOP contribution expense of $905,000, $1,367,000 and $2,997,000,
respectively.

As of February 28, 2003, approximately 1,751,000 shares in the ESOP trust
have been allocated to individual participants. Allocations to individual
participant accounts are generally made in the ratio that the compensation of
each participant bears to the total compensation of all such participants.
There are approximately 1,249,000 shares in suspense at February 28, 2003,
including approximately 250,000 shares committed to be released as of February
28, 2003.

The fair value of the common stock upon purchase from the existing
stockholders in April 1996 was determined to be $3.67 per share. Under the
terms of the ESOP, the fair value of the common stock at any plan year end is
to be determined by an independent appraiser so long as the stock is not
readily tradable on an established market. The fair value of the shares held by
the ESOP at February 28, 2003 was $2.94 per share, the market price as
determined by the Nasdaq National Market. At February 28, 2003 there was no
repurchase obligation.

7. Income Taxes

Pretax income (loss) from continuing operations for each of the three
years ended February 28, 2003, 2002 and 2001 consists of the following:

|         |  |                         |           |      |  |      |            |   |  |   |           | 
|-------- |  | ----------------------- | --------- | ---- |  | ---- | ---------- | - |  | - | --------- | 
|         |  | Year Ended February 28,
|         |  |                        
|         |  | 2003                    |           | 2002 |  | 2001
|         |  |                         |           |      |  |     
|Domestic |  | $                       | 1,045,000 |      |  | $    | (2,496,000 | ) |  | $ | 2,847,000 | 
|Foreign  |  |                         | 923,000   |      |  |      | 209,000    |   |  |   | 28,000    | 
|         |  |                         |           |      |  |      |            |   |  |   |           | 
|         |  | $                       | 1,968,000 |      |  | $    | (2,287,000 | ) |  | $ | 2,875,000 | 
|         |  |                         |           |      |  |      |            |   |  |   |           | 

Significant components of the provision for income taxes are as follows:

|          |         |   |                         |           |      |   |          |          |   |   |           |         | 
|--------- | ------- | - | ----------------------- | --------- | ---- | - | -------- | -------- | - | - | --------- | ------- | 
|          |         |   | Year Ended February 28,
|          |         |   |                        
|          |         |   | 2003                    |           | 2002 |   | 2001    
|          |         |   |                         |           |      |   |         
|Current:  |         |   |                         |           |      |   |          |          |   |   |           |        
|          | Federal |   | $                       | (785,000  | )    |   | $        | (609,000 | ) |   | $         | 766,000 | 
|          | State   |   |                         | (262,000  | )    |   |          | (84,000  | ) |   |           | 266,000 | 
|          | Foreign |   |                         | 97,000    |      |   |          | (168,000 | ) |   |           |        | 
|          |         |   |                         |           |      |   |          |          |   |   |           |         | 
|          |         |   | (950,000                | )         |      |   | (861,000 | )        |   |   | 1,032,000 |        
|          |         |   |                         |           |      |   |          |          |   |   |           |         | 
|Deferred: |         |   |                         |           |      |   |          |          |   |   |           |        
|          | Federal |   |                         | 1,130,000 |      |   |          | 51,000   |   |   |           | 508,000 | 
|          | State   |   |                         | 356,000   |      |   |          | (51,000  | ) |   |           | 49,000  | 
|          | Foreign |   |                         | 294,000   |      |   |          | 16,000   |   |   |           |        | 
|          |         |   |                         |           |      |   |          |          |   |   |           |         | 
|          |         |   | 1,780,000               |           |      |   | 16,000   |          |   |   | 557,000   |        
|          |         |   |                         |           |      |   |          |          |   |   |           |         | 
|          |         | $ | 830,000                 |           |      | $ | (845,000 | )        |   | $ | 1,589,000 |        
|          |         |   |                         |           |      |   |          |          |   |   |           |         | 

The provision for income taxes differed from the amount computed by
applying the U.S. federal statutory rate to income before income taxes due to
the effects of the following:

|                                                  |  |              |      |      |  |      |       |    |  |  |      |  
|------------------------------------------------- |  | ------------ | ---- | ---- |  | ---- | ----- | -- |  |  | ---- | -
|                                                  |  | Year Ended  
|                                                  |  | February 28,
|                                                  |  |             
|                                                  |  | 2003         |      | 2002 |  | 2001
|                                                  |  |              |      |      |  |     
|Federal income tax rate                           |  |              | 34.0 | %    |  |      | (34.0 | )% |  |  | 34.0 | %
|State income taxes, of federal income tax benefit |  |              | 3.4  |      |  |      | (8.1  | )  |  |  | 12.3 |  
|Non-deductible ESOP charge                        |  |              |     |      |  |      | 2.6   |    |  |  | 26.3 |  

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

|                                   |  |              |      |      |  |      |       |    |  |  |       |  
|---------------------------------- |  | ------------ | ---- | ---- |  | ---- | ----- | -- |  |  | ----- | -
|                                   |  | Year Ended  
|                                   |  | February 28,
|                                   |  |             
|                                   |  | 2003         |      | 2002 |  | 2001
|                                   |  |              |      |      |  |     
|Foreign income                     |  |              | 4.6  |      |  |      | 3.0   |    |  |  | 0.3   |  
|Favorable resolution of tax issues |  |              |     |      |  |      |      |    |  |  | (15.7 | )
|Other                              |  |              | 0.2  |      |  |      | (0.4  | )  |  |  | (1.9  | )
|                                   |  |              |      |      |  |      |       |    |  |  |       |  
|                                   |  |              | 42.2 | %    |  |      | (36.9 | )% |  |  | 55.3  | %
|                                   |  |              |      |      |  |      |       |    |  |  |       |  

The significant components of the net deferred tax asset were as follows:

|                                  |  |              |           |              |  |   |           | 
|--------------------------------- |  | ------------ | --------- | ------------ |  | - | --------- | 
|                                  |  | February 28, |           | February 28,
|                                  |  | 2003         |           | 2002        
|                                  |  |              |           |             
|Sales returns                     |  | $            | 1,038,000 |              |  | $ | 1,733,000 | 
|Inventory and accounts receivable |  |              | 3,126,000 |              |  |   | 4,023,000 | 
|Accrued liabilities               |  |              | 1,073,000 |              |  |   | 955,000   | 
|Other                             |  |              | 3,000     |              |  |   | 300,000   | 
|                                  |  |              |           |              |  |   |           | 
|                                  |  | $            | 5,240,000 |              |  | $ | 7,011,000 | 
|                                  |  |              |           |              |  |   |           | 

As of February 28, 2003,
Meade had approximately $1,590,000 of state net operating loss carry
forwards available to offset future taxable income, which begin to
expire in 2007.

8. Business Segments, Geographic Data and Major Customers

The Company is a multinational consumer optics company that designs,
manufactures, imports and distributes telescopes, telescope accessories,
binoculars, riflescopes and other optical products. The Company is organized
and operates as one segment in two principal geographic locations  North
America and Europe. The following tables present information about product
sales and geographic data for the fiscal years ended February 28, 2003, 2002
and 2001.

|                                    |  |                         |             |      |  |      |            |  |  |   |             | 
|----------------------------------- |  | ----------------------- | ----------- | ---- |  | ---- | ---------- |  |  | - | ----------- | 
|                                    |  | Year Ended February 28,
|                                    |  |                        
|                                    |  | 2003                    |             | 2002 |  | 2001
|                                    |  |                         |             |      |  |     
|Product sales:                      |  |                         |             |      |  |      |            |  |  |   |             | 
|Telescope and telescope accessories |  | $                       | 73,489,000  |      |  | $    | 81,864,000 |  |  | $ | 113,610,000 | 
|Binoculars                          |  |                         | 26,611,000  |      |  |      | 9,960,000  |  |  |   | 7,732,000   | 
|Riflescopes                         |  |                         | 8,300,000   |      |  |      |           |  |  |   |            | 
|Other                               |  |                         | 2,417,000   |      |  |      | 2,894,000  |  |  |   | 1,658,000   | 
|                                    |  |                         |             |      |  |      |            |  |  |   |             | 
|                                    |  | $                       | 110,817,000 |      |  | $    | 94,718,000 |  |  | $ | 123,000,000 | 
|                                    |  |                         |             |      |  |      |            |  |  |   |             | 

|                                 |  |                         |             |      |  |      |            |  |  |   |             | 
|-------------------------------- |  | ----------------------- | ----------- | ---- |  | ---- | ---------- |  |  | - | ----------- | 
|                                 |  | Year Ended February 28,
|                                 |  |                        
|                                 |  | 2003                    |             | 2002 |  | 2001
|                                 |  |                         |             |      |  |     
|Geographic data  product sales: |  |                         |             |      |  |      |            |  |  |   |             | 
|North America                    |  | $                       | 83,628,000  |      |  | $    | 69,290,000 |  |  | $ | 97,300,000  | 
|Germany                          |  |                         | 18,120,000  |      |  |      | 16,631,000 |  |  |   | 13,751,000  | 
|Other foreign                    |  |                         | 9,069,000   |      |  |      | 8,797,000  |  |  |   | 11,949,000  | 
|                                 |  |                         |             |      |  |      |            |  |  |   |             | 
|                                 |  | $                       | 110,817,000 |      |  | $    | 94,718,000 |  |  | $ | 123,000,000 | 
|                                 |  |                         |             |      |  |      |            |  |  |   |             | 

|                                     |  |              |            |      |  |      |            |  |  |   |            | 
|------------------------------------ |  | ------------ | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                                     |  | February 28,
|                                     |  |             
|                                     |  | 2003         |            | 2002 |  | 2001
|                                     |  |              |            |      |  |     
|Geographic data  long-lived assets: |  |              |            |      |  |      |            |  |  |   |            | 
|North America                        |  | $            | 8,701,000  |      |  | $    | 6,218,000  |  |  | $ | 6,666,000  | 
|Germany                              |  |              | 3,616,000  |      |  |      | 4,579,000  |  |  |   | 4,989,000  | 
|                                     |  |              |            |      |  |      |            |  |  |   |            | 
|                                     |  | $            | 12,317,000 |      |  | $    | 10,797,000 |  |  | $ | 11,655,000 | 
|                                     |  |              |            |      |  |      |            |  |  |   |            | 

The Company generated 15% and 13% of its revenue from one customer during
the years ended February 28, 2003 and 2002, respectively. The Company
generated 11%, 11% and 13% of its revenue from another customer during the
years ended February 28, 2003, 2002 and 2001, respectively.

9. Stock Incentive Plan

In February 1997, the Companys Board of Directors adopted the 1997 Stock
Incentive Plan (the Plan). The Plan provides for the grant of incentive and
non-qualified stock options, restricted stock, stock appreciation rights

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MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(SARs), and performance share awards to certain key employees (including
officers, whether or not directors) of the Company or its subsidiaries. The
Company has received director and stockholder approval to grant options and
other awards with respect to 5,500,000 shares of common stock under the Plan.
Awards under the Plan generally vest after six months and become exercisable
over a two to four-year period, or as determined by the Compensation
Committee of the Board of Directors. Stock options generally remain exercisable
for a period of ten years from the date of grant. The Board of Directors has
also granted non-qualified stock options to purchase common stock to each of
the Companys non-employee directors. The non-employee directors are granted
5,000 options each when elected and 5,000 each upon their re-election to the
Board of Directors at the Companys Annual Meeting each year. The directors
options generally become exercisable in equal annual amounts over three years. Option
activity under the Plan during
fiscal years 2003, 2002 and 2001 was as follows:

|                                         |  |        |           |                |  |          |       | 
|---------------------------------------- |  | ------ | --------- | -------------- |  | -------- | ----- | 
|                                         |  |        |           |                |  | Weighted
|                                         |  | Option |           | Average       
|                                         |  | Shares |           | Exercise Price
|                                         |  |        |           |               
|Options outstanding at February 28, 2000 |  |        | 2,426,000 |                |  |          | 4.92  | 
|Granted                                  |  |        | 1,266,000 |                |  |          | 8.78  | 
|Exercised                                |  |        | (258,000  | )              |  |          | 4.20  | 
|Forfeited                                |  |        | (11,000   | )              |  |          | 6.94  | 
|                                         |  |        |           |                |  |          |       | 
|Options outstanding at February 29, 2001 |  |        | 3,423,000 |                |  |          | 6.41  | 
|Granted                                  |  |        | 43,000    |                |  |          | 5.33  | 
|Exercised                                |  |        |          |                |  |          |      | 
|Forfeited                                |  |        | (9,000    | )              |  |          | 6.51  | 
|                                         |  |        |           |                |  |          |       | 
|Options outstanding at February 28, 2002 |  |        | 3,457,000 |                |  |          | 6.39  | 
|Granted                                  |  |        | 918,000   |                |  |          | 2.41  | 
|Exercised                                |  |        | (25,000   | )              |  |          | 2.31  | 
|Cancelled                                |  |        | (450,000  | )              |  |          | 11.17 | 
|Forfeited                                |  |        | (108,000  | )              |  |          | 5.15  | 
|                                         |  |        |           |                |  |          |       | 
|Options outstanding at February 28, 2003 |  |        | 3,792,000 |                |  |          | 4.92  | 
|                                         |  |        |           |                |  |          |       | 

|                    |                |                     |  |                  |           |                |  |                  |  |                |       |  |  |  |           |          |           |   |       |  |  | 
|------------------- | -------------- | ------------------- |  | ---------------- | --------- | -------------- |  | ---------------- |  | -------------- | ----- |  |  |  | --------- | -------- | --------- | - | ----- |  |  | 
|Options Outstanding |                | Options Exercisable
|                    |                |                    
|                    |                |                     |  |                  |           |                |  | Weighted Average |  | Weighted       |       |  |  |  |           | Weighted
|                    |                |                     |  |                  |           |                |  | Remaining        |  | Average        |       |  |  |  |           | Average 
|Exercise Prices     |                | Shares              |  | Contractual Life |           | Exercise Price |  | Shares           |  | Exercise Price
|                    |                |                     |  |                  |           |                |  |                  |  |               
|$                   | 2.31  $3.81   |                     |  |                  | 1,191,000 |                |  | 7.6 years        |  | $              | 2.71  |  |  |  | 755,000   |          |           | $ | 2.90  | 
|$                   | 4.44  $5.59   |                     |  |                  | 2,249,000 |                |  | 6.2 years        |  | $              | 4.92  |  |  |  | 2,086,000 |          |           |   | 4.91  | 
|$                   | 6.25  $10.31  |                     |  |                  | 56,000    |                |  | 6.9 years        |  | $              | 8.21  |  |  |  | 39,000    |          |           |   | 8.65  | 
|$                   | 11.06  $12.13 |                     |  |                  | 237,000   |                |  | 7.9 years        |  | $              | 11.25 |  |  |  | 181,000   |          |           |   | 11.27 | 
|$                   | 17.13  $27.75 |                     |  |                  | 59,000    |                |  | 7.3 years        |  | $              | 21.29 |  |  |  | 41,000    |          |           |   | 21.20 | 
|                    |                |                     |  |                  |           |                |  |                  |  |                |       |  |  |  |           |          |           |   |       |  |  | 
|                    |                |                     |  |                  | 3,792,000 |                |  |                  |  |                |       |  |  |  |           |          | 3,102,000 |   |       |  |  | 
|                    |                |                     |  |                  |           |                |  |                  |  |                |       |  |  |  |           |          |           |   |       |  |  | 

The exercise price of options granted to employees was equal to the market
price at the grant date. Options granted to employees generally become
exercisable 25% after one year and ratably over the following 36 months or as
otherwise determined by the Board of Directors. At February 28, 2003, 3,772,000
outstanding options for common stock were vested under the Plan. The option prices
under the Plan range from
$2.31 to $27.75 per share and are exercisable over periods ending no later than
2013.

The Company has adopted the disclosure only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the fixed stock
option plans. Had compensation cost for the Companys stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under those plans, consistent with the method prescribed by SFAS No. 123, the
Companys net income (loss) and earnings (loss) per share would have been
reduced to the pro forma amounts indicated in Note 1 to the consolidated
financial statements.

F-19



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##### Table of Contents



MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of the Companys stock options used to compute pro forma
net income and earnings per share disclosures is the estimated present value at
grant date using the Black-Scholes option-pricing model with the following
assumptions:

|                                               |  |                         |       |      |  |      |      |   |  |   |      |  
|---------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                               |  | Year Ended February 28,
|                                               |  |                        
|                                               |  | 2003                    |       | 2002 |  | 2001
|                                               |  |                         |       |      |  |     
|Weighted average expected life (years)         |  |                         | 6.0   |      |  |      | 4.0  |   |  |   | 4.0  |  
|Volatility                                     |  |                         | 100.9 | %    |  |      | 93.8 | % |  |   | 83.5 | %
|Risk-free interest rate                        |  |                         | 3.75  | %    |  |      | 4.18 | % |  |   | 5.01 | %
|Expected dividends                             |  | None                    |       | None |  | None
|Weighted average fair value of options granted |  | $                       | 2.19  |      |  | $    | 3.62 |   |  | $ | 5.64 |  

10. Composition of Certain Balance Sheet Accounts

The composition of inventories is as follows:

|                |  |              |            |              |  |   |            | 
|--------------- |  | ------------ | ---------- | ------------ |  | - | ---------- | 
|                |  | February 28, |            | February 28,
|                |  | 2003         |            | 2002        
|                |  |              |            |             
|Raw materials   |  | $            | 7,442,000  |              |  | $ | 8,529,000  | 
|Work in process |  |              | 4,972,000  |              |  |   | 4,997,000  | 
|Finished goods  |  |              | 27,636,000 |              |  |   | 16,277,000 | 
|                |  |              |            |              |  |   |            | 
|                |  | $            | 40,050,000 |              |  | $ | 29,803,000 | 
|                |  |              |            |              |  |   |            | 

The composition of property and equipment is as follows:

|                                               |  |              |            |              |  |   |            |  
|---------------------------------------------- |  | ------------ | ---------- | ------------ |  | - | ---------- | -
|                                               |  | February 28, |            | February 28,
|                                               |  | 2003         |            | 2002        
|                                               |  |              |            |             
|Land                                           |  | $            | 180,000    |              |  | $ | 158,000    |  
|Buildings                                      |  |              | 1,891,000  |              |  |   | 1,634,000  |  
|Molds and dies                                 |  |              | 5,770,000  |              |  |   | 5,540,000  |  
|Machinery and equipment                        |  |              | 3,426,000  |              |  |   | 3,325,000  |  
|Furniture and fixtures                         |  |              | 2,426,000  |              |  |   | 1,900,000  |  
|Autos and trucks                               |  |              | 176,000    |              |  |   | 176,000    |  
|Leasehold improvements                         |  |              | 1,259,000  |              |  |   | 1,131,000  |  
|                                               |  |              |            |              |  |   |            |  
|                                               |  |              | 15,128,000 |              |  |   | 13,864,000 |  
|Less accumulated depreciation and amortization |  |              | (9,286,000 | )            |  |   | (7,256,000 | )
|                                               |  |              |            |              |  |   |            |  
|                                               |  | $            | 5,842,000  |              |  | $ | 6,608,000  |  
|                                               |  |              |            |              |  |   |            |  

The gross value of assets under capital leases included above is $589,000
and $636,000 at February 28, 2003, and February 28, 2002, respectively. For the
fiscal years ended February 28, 2003, 2002 and 2001, the Company incurred
depreciation expense of $2,030,000, $1,790,000 and $1,551,000, respectively.

F-20



---



##### Table of Contents



MEADE INSTRUMENTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The composition of accrued liabilities is as follows:

|                                                                    |  |              |           |              |  |   |           | 
|------------------------------------------------------------------- |  | ------------ | --------- | ------------ |  | - | --------- | 
|                                                                    |  | February 28, |           | February 28,
|                                                                    |  | 2003         |           | 2002        
|                                                                    |  |              |           |             
|Salaries, wages, bonuses and other associated payroll costs         |  | $            | 1,950,000 |              |  | $ | 1,254,000 | 
|Advertising, cooperative advertising, shows and convention expenses |  |              | 351,000   |              |  |   | 759,000   | 
|Professional fees                                                   |  |              | 745,000   |              |  |   | 758,000   | 
|Warranty costs                                                      |  |              | 1,794,000 |              |  |   | 461,000   | 
|Other                                                               |  |              | 1,453,000 |              |  |   | 369,000   | 
|                                                                    |  |              |           |              |  |   |           | 
|                                                                    |  | $            | 6,293,000 |              |  | $ | 3,601,000 | 
|                                                                    |  |              |           |              |  |   |           | 

F-21



---



##### Table of Contents






SIGNATURES

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

|                    |  |                         |  |                                                                                                         
|------------------- |  | ----------------------- |  | --------------------------------------------------------------------------------------------------------
|Dated: May 29, 2003 |  | MEADE INSTRUMENTS CORP.
|                    |  |                         |  |                                                                                                         
|                    |  | By:                     |  | /s/ JOHN C. DIEBEL

John C. DiebelChairman of the Board
and Chief Executive Office                      
|                    |  |                         |  |                                                                                                         
|                    |  | By:                     |  | /s/ BRENT W. CHRISTENSEN

Brent W. ChristensenSenior Vice President, Finance
and Chief Financial Officer

F-22



---



##### Table of Contents






CERTIFICATIONS

I, John C. Diebel, certify that:

1. I have reviewed this annual report on Form 10-K of Meade Instruments
Corp.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;



| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the Evaluation Date); and



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6. The registrants other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 29, 2003

By: /s/ JOHN C. DIEBEL, CHAIRMAN AND CEO





---



##### Table of Contents



CERTIFICATIONS

I, Brent W. Christensen, certify that:

1. I have reviewed this annual report on Form 10-K of Meade Instruments
Corp.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;



| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the Evaluation Date); and



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6. The registrants other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 29, 2003

By: /s/ BRENT W. CHRISTENSEN, SENIOR VICE PRESIDENT AND CFO





---



##### Table of Contents



II  VALUATION AND QUALIFYING ACCOUNTS

|                                |  |              |           |                  |  |                  |           |               |  |           |  |                |  |   |           |  |  |   |           | 
|------------------------------- |  | ------------ | --------- | ---------------- |  | ---------------- | --------- | ------------- |  | --------- |  | -------------- |  | - | --------- |  |  | - | --------- | 
|                                |  | Balance At   |           |                  |  |                  |           |               |  |           |  |                |  |   |           |  |  |  
|                                |  | Beginning of |           | Charged to Costs |  | Charged to Other |           |               |  |           |  | Balance At End
|Allowance for Doubtful Accounts |  | Period       |           | and Expenses     |  | Accounts         |           | Deductions(1) |  | of Period
|                                |  |              |           |                  |  |                  |           |               |  |          
|Year ended February 28, 2001    |  | $            | 3,861,000 |                  |  | $                | 1,815,000 |               |  |           |  |                |  | $ | 3,501,000 |  |  | $ | 2,175,000 | 
|Year ended February 28, 2002    |  | $            | 2,175,000 |                  |  | $                | 2,090,000 |               |  |           |  |                |  | $ | 2,033,000 |  |  | $ | 2,232,000 | 
|Year ended February 28, 2003    |  | $            | 2,232,000 |                  |  | $                | 163,000   |               |  |           |  |                |  | $ | 1,681,000 |  |  | $ | 714,000   | 

|                                 |  |              |           |                  |  |                  |           |               |  |           |  |                |  |   |           |  |  |   |           | 
|-------------------------------- |  | ------------ | --------- | ---------------- |  | ---------------- | --------- | ------------- |  | --------- |  | -------------- |  | - | --------- |  |  | - | --------- | 
|                                 |  | Balance At   |           |                  |  |                  |           |               |  |           |  |                |  |   |           |  |  |  
|                                 |  | Beginning of |           | Charged to Costs |  | Charged to Other |           |               |  |           |  | Balance At End
|Allowance for Excess Inventories |  | Period       |           | and Expenses     |  | Accounts         |           | Deductions(2) |  | of Period
|                                 |  |              |           |                  |  |                  |           |               |  |          
|Year ended February 28, 2001     |  | $            | 2,584,000 |                  |  | $                | 6,522,000 |               |  |           |  |                |  |   |           |  |  | $ | 9,106,000 | 
|Year ended February 28, 2002     |  | $            | 9,106,000 |                  |  | $                | 281,000   |               |  |           |  |                |  | $ | 288,000   |  |  | $ | 9,099,000 | 
|Year ended February 28, 2003     |  | $            | 9,099,000 |                  |  |                  |           |               |  |           |  |                |  | $ | 1,590,000 |  |  | $ | 7,509,000 | 



---

|(1) |  | Principally write-off of delinquent accounts                    
|--- |  | ----------------------------------------------------------------
|(2) |  | Principally sale or destruction of previously reserved inventory





---



##### Table of Contents



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  | Incorporation
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                     |  | Reference    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|2.1    |  | Interest Purchase Agreement, dated as of July 15-16, 1999, by and
among Bresser Optik GmbH & Co. KG, a German limited partnership,
Bresser Optik Geschaftsfuhrung und Verwaltungs GmbH, a German
limited liability company, Rudolph Bresser, the Company and Meade
Instruments Europe Corp., a California corporation (excluding
Exhibits and Schedules thereto)                                |  | (h)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|2.2    |  | Stock Purchase Agreement, dated as of September 14, 2002, by and
among Alliant Techsystems, Inc., a Delaware corporation, ATK
Commercial Ammunition Company Inc., a Delaware corporation, Meade
Instruments Corp., a Delaware corporation, and MTSC Holdings Corp., a
California corporation and wholly-owned subsidiary of Meade
Instruments Corp. (excluding Exhibits and Schedules thereto). |  | (o)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|2.3    |  | First Amendment to Stock Purchase Agreement, dated as of
October 4, 2002, by and among Alliant Techsystems, Inc., a
Delaware corporation, ATK Commercial Ammunition Company Inc., a
Delaware corporation, Meade Instruments Corp., a Delaware
corporation, and MTSC Holdings Corp., a California Corporation and
wholly-owned subsidiary of Meade Instruments Corp.                             |  | (o)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|2.4    |  | Second Amendment to Stock Purchase Agreement, dated as of
October 24, 2002, by and among Alliant Techsystems, Inc., a
Delaware corporation, ATK Commercial Ammunition Company Inc., a
Delaware corporation, Meade Instruments Corp., a Delaware
corporation, and MTSC Holdings Corp., a California corporation and
wholly-owned subsidiary of Meade Instruments Corp.                           |  | (o)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|3.1    |  | Certificate of Incorporation of the Company, as amended                                                                                                                                                                                                                                                                                                                                         |  | (c)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|3.2    |  | Amended and Restated Bylaws of the Company                                                                                                                                                                                                                                                                                                                                                      |  | (i)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|3.3    |  | Amendment to Amended and Restated Bylaws of the Company                                                                                                                                                                                                                                                                                                                                         |  | (j)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|3.6     |  | Amendment to Amended and Restated Bylaws of the Company                                                                                                                                                                                                                                                                                                                                         |  |              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|4.1    |  | Specimen stock certificate                                                                                                                                                                                                                                                                                                                                                                      |  | (d)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.7   |  | Industrial Lease (Single Tenant; Net; Stand-Alone), dated December
20, 1996, between The Irvine Company and the Company                                                                                                                                                                                                                                                                         |  | (a)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.13  |  | Meade Instruments Corp. Employee Stock Ownership Plan (the ESOP),
as amended and restated effective as of January 1, 1999.                                                                                                                                                                                                                                                                    |  | (f)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.14  |  | Employee Stock Ownership Trust Agreement, as Amended and Restated as
of April 9, 1997, between the Company and Wells Fargo Bank, N.A                                                                                                                                                                                                                                                            |  | (e)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.15  |  | Employee Stock Ownership Plan Loan and Pledge Agreement, dated April
23, 1996, between the ESOP and the Company, as amended                                                                                                                                                                                                                                                                     |  | (a)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.20  |  | Form of Trademark Distribution Agreement for EEC Countries                                                                                                                                                                                                                                                                                                                                      |  | (a)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.21  |  | Form of Trademark Distribution Agreement for Non-EEC Countries                                                                                                                                                                                                                                                                                                                                  |  | (a)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.24  |  | Celtic Master Lease, dated as of February 23, 1995, by and between
the Company and Celtic Leasing Corp.                                                                                                                                                                                                                                                                                         |  | (b)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.29  |  | Meade Instruments Corp. 1997 Stock Incentive Plan, as amended                                                                                                                                                                                                                                                                                                                                   |  | (m)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.30  |  | Form of Agreement of Merger, by and between the Company and the
predecessor of the Company                                                                                                                                                                                                                                                                                                      |  | (b)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.33  |  | Agreement, dated as of May 5, 1998, by and between the Company and
Weidy Optical Co., Ltd.                                                                                                                                                                                                                                                                                                      |  | (e)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.35  |  | Form Indemnification Agreement, by and between the Company and each
member of the Board of Directors and certain executive officers                                                                                                                                                                                                                                                             |  | (e)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.42  |  | Form Employment Agreement, by and between the Company and current
executive officers of the Company                                                                                                                                                                                                                                                                                             |  | (j)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.43  |  | Lease Agreement, dated as of August 16, 1999, as amended, by and
among Refugio Geffroy De Flourie, Meade Instruments Mexico, S. De R. L. De C.V. and Meade Instruments Holding Corp.                                                                                                                                                                                                            |  | (j)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.44  |  | Amendment No. 1 to Amended and Restated Employee Stock Ownership Plan                                                                                                                                                                                                                                                                                                                           |  | (k)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.45  |  | Credit Agreement, dated as of September 24, 2001, between Bank of
America, N.A. as the Lender and Meade Instruments Corp. as the
Borrower (excluding Exhibits and Schedules thereto)                                                                                                                                                                                                            |  | (l)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.46  |  | Amendment No. 1 to Credit Agreement, dated as of April 15, 2002,
between Bank of America, N.A. as the Lender and Meade Instruments
Corp. as the Borrower (excluding Exhibits and Schedules thereto)                                                                                                                                                                                             |  | (n)          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|10.47  |  | Amended and Restated Credit Agreement, dated as of October 25, 2002,
by and among Bank of America, N.A., as the Lender, and Meade
Instruments Corp. and Simmons Outdoor Corporation, as the
Borrowers (excluding Exhibits and Schedules thereto)                                                                                                                                                |  | (o)          





---



##### Table of Contents



|        |  |                                                                                                                                                                                     |  |              
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Exhibit |  |                                                                                                                                                                                     |  | Incorporation
|Number  |  | Description                                                                                                                                                                         |  | Reference    
|        |  |                                                                                                                                                                                     |  |              
|10.48  |  | Subscription Agreement, dated as of October 22, 2002, by and among
Meade Instruments Corp. and each of the Purchasers Named on the
Signature Page thereof                           |  | (o)          
|        |  |                                                                                                                                                                                     |  |              
|10.49  |  | Registration Rights Agreement, dated as of October 22, 2002, by and
among Meade Instruments Corp. and each of the Purchasers Named on
the Signature Page thereof                    |  | (o)          
|        |  |                                                                                                                                                                                     |  |              
|10.50  |  | Amendment No. 2 to Amended and Restated Employee Stock Ownership Plan                                                                                                               |  | (p)          
|        |  |                                                                                                                                                                                     |  |              
|10.51  |  | Transition Agreement, dated as of April 18, 2003, by and between
Meade Instruments Corp., a Delaware corporation, and John C. Diebel,
an individual (excluding the Exhibit thereto) |  | (q)          
|        |  |                                                                                                                                                                                     |  |              
|10.52  |  | Registration Rights Agreement, dated as of April 18, 2003, by and
between Meade Instruments Corp., a Delaware corporation, and John C.
Diebel, an individual                        |  | (q)          
|        |  |                                                                                                                                                                                     |  |              
|10.53   |  | Nonqualified Stock Option Agreement, dated as of April 12, 2000, by and
between Meade Instruments Corp. and Rolf Bresser                                                            |  | (q)          
|        |  |                                                                                                                                                                                     |  |              
|23.1    |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                               |  |              
|        |  |                                                                                                                                                                                     |  |              
|99.1    |  | Sarbanes-Oxley Act Section 906 Certification by John C. Diebel                                                                                                                      |  |              
|        |  |                                                                                                                                                                                     |  |              
|99.2    |  | Sarbanes-Oxley Act Section 906 Certification by Brent W. Christensen.                                                                                                               |  |              



---

|   |  | Previously filed with the Securities and Exchange Commission as set forth
in the following table:                                                                                                                                              
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) |  | Incorporated by reference to the Companys Registration Statement on Form
S-1 (Registration No. 333-21123), as filed with the Securities and
Exchange Commission on February 4, 1997.                                                          
|   
|(b) |  | Incorporated by reference to the Companys Amendment No. 1 to
Registration Statement on Form S-1 (Registration No. 333-21123), as filed
with the Securities and Exchange Commission on February 27, 1997.                                      
|   
|(c) |  | Incorporated by reference to the Companys Amendment No. 2 to
Registration Statement on Form S-1 (Registration No. 333-21123), as filed
with the Securities and Exchange Commission on March 13, 1997.                                         
|   
|(d) |  | Incorporated by reference to the Companys Amendment No. 3 to
Registration Statement on Form S-1 (Registration No. 333-21123), as filed
with the Securities and Exchange Commission on March 25, 1997.                                         
|   
|(e) |  | Incorporated by reference to the Companys Annual Report on Form 10-K for
the Fiscal Year Ended February 28, 1998, as filed with the Securities and
Exchange Commission on May 29, 1998.                                                       
|   
|(f) |  | Incorporated by reference to the Companys Registration Statement on Form
S-8 relating to the Companys Employee Stock Ownership Plan, as filed with
the Securities and Exchange Commission on April 16, 1999.                                 
|   
|(g) |  | Incorporated by reference to the Companys 1999 Proxy Statement on
Schedule 14A, as filed with the Securities and Exchange Commission on June
8, 1999.                                                                                         
|   
|(h) |  | Incorporated by reference to the Companys Current Report on Form 8-K, as
filed with the Securities and Exchange Commission on September 15, 1999.                                                                                             
|   
|(i) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-Q
for the Quarterly Period Ended November 30, 1999, as filed with the
Securities and Exchange Commission on January 14, 2000.                                           
|   
|(j) |  | Incorporated by reference to the Companys Annual Report on Form 10-K for
the Fiscal Year Ended February 29, 2000, as filed with the Securities and
Exchange Commission on May 29, 2000.                                                       
|   
|(k) |  | Incorporated by reference to the Companys Annual Report on Form 10-K for
the Fiscal Year Ended February 29, 2001, as filed with the Securities and
Exchange Commission on May 29, 2001.                                                       
|   
|(l) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-Q
for the Quarterly Period Ended August 31, 2001, as filed with the
Securities and Exchange Commission on October 15, 2001.                                             
|   
|(m) |  | Incorporated by reference to the Companys Registration Statement on Form
S-8 (Registration No. 333-86818), relating to the Companys Stock
Incentive Plan, as amended, as filed with the Securities and Exchange
Commission on April 24, 2002.





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##### Table of Contents



|(n) |  | Incorporated by reference to the Companys Annual Report on Form 10-K for
the Fiscal Year Ended February 28, 2002, as filed with the Securities and
Exchange Commission on May 29, 2002.            
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(o) |  | Incorporated by reference to the Companys Current Report on Form 8-K, as
filed with the Securities and Exchange Commission on November 7, 2002.                                                    
|   
|(p) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-Q
for the Quarterly Period Ended November 30, 2002, as filed with the
Securities and Exchange Commission on January 14, 2003.
|   
|(q) |  | Incorporated by reference to the Companys Current Report on Form 8-K, as
filed with the Securities and Exchange Commission on April 22, 2003.