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FORM 10-K

     (Mark One)

For the Fiscal Year Ended February 28, 2002

OR

Commission File No. 0-22183

MEADE INSTRUMENTS CORP.

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

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, 2002, there were 16,481,000 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, 2002 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 $5.47 per share as reported by Nasdaq, was approximately $ 57.6 million.

Documents Incorporated by Reference

     The information called for by Part III is incorporated by reference to the definitive Proxy Statement for the 2002 Annual Meeting of Stockholders of the Registrant which will be filed with the Securities and Exchange Commission not later than 120 days after February 28, 2002.

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TABLE OF CONTENTS

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PART I

Item 1. Business

General

     Meade Instruments Corp. is a multinational consumer and industrial optics company that designs, manufactures, imports and distributes telescopes, telescope accessories, binoculars and other optical products. Meade’s dedication to product innovation has led to the successful introduction of a wide range of products, resulting in what the Company believes to be the broadest and most complete line of telescopes and telescope accessories available. The Company offers more than 50 different telescope models with several different optical configurations, as well as more than 250 accessory products. 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 also offers a complete line of binoculars from small aperture theater glasses to full-size waterproof models at retail price points from approximately $10 to more than $300.

     Since its founding in 1972, Meade has strived to develop a 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 has become a major supplier of telescopes to such retailers as Discovery Channel Stores (formerly The Nature Company), Aldi (Germany), Wal-Mart, Costco and Sam’s Club.

     Meade was sold by its founder and current Chief Executive Officer to an investor group in 1986 and was then 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 $2.2 million, $2.1 million and $1.4 million to research and development during fiscal 2002, 2001 and 2000, respectively, and has, over the last five fiscal years, committed $7.4 million in the aggregate to research and development. These research and development expenditures were centered on the development of technologically advanced less-expensive telescopes as well as product improvement and industrial applications of the Company’s existing technologies.

     Meade manufactures nearly the complete line of its 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 are manufactured under proprietary designs by manufacturers principally located in mainland China and Taiwan. The Company also sources component parts for small to midrange telescopes and related accessories from several suppliers in mainland China, Taiwan and Japan that are assembled into finished product in the Company’s wholly-owned Mexican assembly plant (See Item 2. Properties).

     The Company complements its efforts in new product development with an aggressive marketing plan. The Company’s marketing plan includes print advertising in astronomy 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 a comprehensive, full-color, high-quality product catalog that provides significant product exposure to the serious amateur astronomer.

     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

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penetration into these markets. In January 2000, the Company also purchased what was formerly its German distributor for approximately $1.1 million cash.

     In the United States and Canada, the Company distributes its products through a network of more than 500 specialty retailers 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 retail locations in their respective countries. Revenues from customers outside North America accounted for approximately 27% of the Company’s net sales for the fiscal year ended February 28, 2002 (See Note 7 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 has announced several relationships with companies involved in free-space optics communication technologies and digital imaging applications in the scientific research and medical diagnostic equipment markets. Meade acts as an original equipment manufacturer of optical and mechanical components used in free-space optics communications technologies, supplying components to companies such as TeraBeam Corporation (based in Seattle, WA) and AirFiber, Inc. (based in San Diego, CA). Meade acts as an original equipment manufacturer 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, CN). Meade is also supplying a critical digital imager and other components used in a soft tissue imaging system manufactured and sold by Advanced Imaging Technologies, Inc. (based outside Seattle, WA). The free-space optical products and digital imaging systems supplied by Meade use existing Meade telescope, optical and imaging technologies, adapted to the specifications required by these industrial applications. The ultimate quantities and timing of products sold into these industrial marketplaces will depend upon the market roll-out of these new products and technologies. Revenues from the sale of these various industrial-based products amounted to less than 1% of net sales for the year ended February 28, 2002.

Industry Overview

     Market-size data for the telescope and binocular industries are difficult to obtain because many of the companies in the industry are either private or subsidiaries or divisions of larger public companies. The Company believes that the overall size of the telescope market is driven, in part, by the introduction of new products.

     The Company produces products at numerous price points in the consumer optics market, from advanced astronomical telescopes for serious amateur astronomers to less-expensive telescopes for beginning to intermediate amateur astronomers. Advanced astronomical telescopes are 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 in the 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 and are popular among serious amateur astronomers.

Competitive Strengths

     Meade believes that it derives significant benefits from its position as a leading designer and distributor of telescopes 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:

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      New Products/Research and Development. Meade places a primary emphasis on product innovation and quality through its research and development efforts. The Company currently employs seventeen engineers on-site, developing new core-business products, new products for the industrial optical and imaging markets, 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’s three most experienced officers have been employed in this industry for an average of over 24 years. 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 industry’s most technically advanced, easy to use, consumer telescopes.

     Broadest Line of Products. The Company’s strategy has been to use the tremendous advancements in microprocessor technology, 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. As a result, the Company believes it currently has the most complete and technically advanced line of telescopes available, including more than 50 different telescope models with several different optical configurations as well as more than 250 accessory products. The Company’s telescopes range in aperture from 2 to 16 inches and in retail price from less than $100 to more than $15,000.

     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 consumer telescope market.

     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 are produced for the Company by manufacturers principally located in mainland China and Taiwan. 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, binocular products 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 service. 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 to such retailers as Discovery Channel Store (formerly The Nature Company), Aldi (Germany), Wal-Mart, Costco, and Sam’s Club. Meade also has an expanding international presence with the addition of Meade Europe. Revenues from customers outside North America were $25.4 million for the fiscal year ended February 28, 2002.

     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 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. Meade also makes available to telescope owners astronomical software and other product enhancements.

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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 also offers a complete line of binoculars from small aperture theater glasses to full-size waterproof roof-prism glasses. 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 economical motorized LX10, to the attractively priced Autostar-controlled LX90, to the state-of-the-art LX200GPS line. The LX200GPS telescopes, available in 7, 8, 10, 12 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. The advanced astronomical telescopes collectively represented approximately 2% of telescope units shipped and approximately 16% of the Company’s net sales for the fiscal year ended February 28, 2002.

     Entry-Level Telescopes. Designed specifically for the beginning to intermediate amateur astronomer or terrestrial observer, the Company’s less-expensive 60mm to 114mm refracting and reflecting telescopes and the ETX series telescopes include many of the features of the more advanced telescopes at economical prices. With the introduction of the Digital Electronic Series telescopes (the “DS telescopes”), with apertures ranging from 60mm to 114mm, and the ETX series, with apertures ranging from 60mm to 125mm, some of the most sophisticated features of the Company’s advanced telescopes were 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 several thousand 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 (both its traditional models and the DS telescopes) for distribution on a semi-exclusive basis to specific specialty retailers. These telescope models comprise the lower-price end of the Company’s product line. Sales of entry-level telescopes comprised approximately 98% of the Company’s telescope units shipped and approximately 59% of the Company’s net sales for the fiscal year ended February 28, 2002.

     Binoculars. The Company expanded its market presence in binoculars with the acquisition of Bresser. The Bresser name is widely recognized in Germany and other countries in Europe as a quality supplier of a wide range of binoculars. Binocular sales accounted for over one half of the sales attributed to Germany during fiscal 2002. The Company also sells a complete line of consumer binoculars through its existing domestic distribution network. The binoculars sold by the Company are purchased from manufacturers outside the United States. Binoculars represented approximately 11% of the Company’s net sales for the fiscal year ended February 28, 2002.

     Accessories. The Company also offers accessories for each of its telescope series that range from additional eyepieces and camera adapters to CCD autoguider/imagers and celestial observation software. Approximately 250 accessory products are currently available from the Company. Sales of accessories represented approximately 12% of the Company’s net sales for the fiscal year ended February 28, 2002. 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 2002.

     Other Products. Meade manufactures digital CCD imaging products as original equipment used in scientific life sciences research systems and soft-tissue diagnostic systems. It also acts as an original equipment manufacturer of components used in free-space optical wireless communication networks. The ultimate quantities and timing of products sold into these industrial marketplaces will depend upon the market roll-out of these new products and technologies.

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Sales and Marketing

     The Company’s telescopes, binoculars and accessories are sold through a domestic network of mail order dealers, specialty retailers 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 products are generally sold through mail order dealers or single and multiple-location specialty retailers. Meade’s less-expensive products are sold in similar venues but are sold principally through mass merchandisers. The Company maintains direct contact with its larger dealers 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 Costco. For additional information about geographic areas, see Note 7 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 twenty-two persons in sales and customer service positions, 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 amateur astronomers. 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. In an effort to further simplify assembly and use of the Company’s products, Meade pre-assembles a substantial portion of its telescopes prior to packaging. (See “Business — Competitive Strengths - Superior Customer Service.”) The Company’s dedication to providing a high level of customer service is one factor that management believes sets Meade apart from its competition.

     The Company’s 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. 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. In the recent past the Company has also engaged in marketing programs aimed at expanding the existing telescope market through more traditional consumer oriented print media.

     Throughout fiscal 2002, the Company sold its products to mail order dealers and to more than 500 specialty retailers and mass merchandisers that offer Meade’s products in more than 3,000 retail store outlets. During fiscal 2002, Wal-Mart (including Sam’s Club) and Discovery Channel Store (“DCS”, formerly The Nature Company), 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. During fiscal 2000 no customer accounted for 10% or more of the Company’s net sales. The Company’s ten largest customers, in the aggregate, accounted for approximately 51% of the Company’s net sales in fiscal 2002. 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.

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     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.

     For the past decade the Company has worked closely with a factory in Taiwan (the “Taiwanese Factory”), developing proprietary telescope designs and ensuring that the manufacturing processes produce telescopes that meet the Company’s quality standards. In order to diversify its supply, Meade has expanded the number of Far-Eastern manufacturers supplying quality telescopes and telescope accessories to the Company. Those suppliers are principally located in mainland China. Many of the Company’s telescopes, telescope components and telescope accessories purchased during fiscal 2002 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 telescopes, telescope components, binocular products and accessories. Meade also regularly commits at least one of its United States based quality control engineers to the Far East.

     During 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, 2002, this facility employed approximately ninety people engaged in the assembly of several products including less-expensive and mid-range telescopes, electronic sub-assemblies, and accessory products.

Competition

     The telescope and binocular 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 Tasco Worldwide, Inc. (“Tasco”) (both of which are owned by Tasco Holdings, 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, Tasco, Vixen Optical Industries, Ltd., and with other smaller regional telescope importers and manufacturers. In addition, 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 the binocular market, which is generally more competitive than the telescope market, with a greater number of competitors at each price point, the Company competes primarily with Bushnell, Tasco, Nikon Inc., Canon Inc., Minolta Camera, Co., Ltd., Pentax Corporation and various smaller manufacturers and resellers. Many of these competitors in the binocular 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.

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Employees

     As of February 28, 2002, Meade had approximately 450 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, 2002:

     John C. Diebel founded 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.

     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.

     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. Christensen has 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. Peterson has 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

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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. Davis has been the Company’s Senior Vice President — Business Development and Assistant General Counsel since March 1, 2002. Mr. Davis was the Company’s Vice President and Assistant General Counsel from December 1999 and Vice President — Business Development from March 2001. 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

     The Company leases 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 leases expire in 2007 and 2003, respectively. 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 13,500 square foot office, repair and distribution facility in Graefelfing, Germany which expires in August 2002. 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.

Item 3. Legal Proceedings

     On October 17, 2001, the Company filed suit against Tasco Sales, Inc. (“Tasco”) and Celestron International, Inc. (“Celestron”; collectively “Defendants”), 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 C 01-976 (GLT) (MLGx)), 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, 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. These matters are in the early stages of discovery. 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.

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     The Company is also 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.

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, 2002 and 2001, respectively, were:

     The reported closing sales price of the Company’s common stock on the Nasdaq National Market on May 15, 2002 was $5.47. As of May 15, 2002, there were 64 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, 2002 and 2001 and the consolidated statements of operations for the three years ended February 28 (29), 2002 and the notes thereto appearing elsewhere herein.

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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:

     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.

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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.

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 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.

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     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.

Fiscal 2001 Compared to Fiscal 2000

     Net sales decreased from $126.8 million in fiscal 2000 to $123.0 million in fiscal 2001, a decrease of 3.0%. During fiscal 2001, lower unit sales of less-expensive telescopes manufactured in Asia, lower telescope accessory sales, the negative effect of seasonal promotional markdowns and product promotions, and decreased sales from the Company’s European subsidiary more than offset increases in sales of both the Company’s advanced telescopes manufactured domestically and less-expensive and mid-range products assembled in the Company’s Mexican facility.

     Gross profit decreased from $51.0 million (40.2% of net sales) in fiscal 2000 to $40.2 million (32.7% of net sales) in fiscal 2001, a decrease of 21.2%. The decrease in gross profit was principally due to the decrease in net sales from the prior year and a decrease in the gross margin percentage. The decrease in the gross margin percentage was principally due to the effect of charges to gross profit of approximately $3 million and approximately $6.1 million, taken in the third and fourth quarter, respectively. These charges related to the aforementioned seasonal product markdowns and promotions as well as to provisions for excess inventories resulting from the lower sales volume. Gross profit was also negatively affected by lower average gross margins on products sold at the Company’s European subsidiary.

     Selling expenses increased from $15.5 million (12.2% of net sales) in fiscal 2000 to $21.8 million (17.7% of net sales) in fiscal 2001, an increase of 40.8%. This increase principally reflects higher advertising and marketing expenses that increased by more than $4 million over the prior year. Those expenses were part of an aggressive print media and point-of-sale advertising campaign aimed at the general consumer throughout the year but concentrated during the Christmas holiday buying period. Also contributing to the increase over the prior year was higher bad debt expenses brought on by certain customer bankruptcies and other general selling expense increases.

     General and administrative expenses decreased from $10.4 million (8.2% of net sales) in fiscal 2000 to $8.4 million (6.9% of net sales) in fiscal 2001, a decrease of 18.5%. This decrease was principally due to decreases in compensation expenses during the year. Also contributing to the decrease were lower professional and consulting fees and other sundry expense reductions.

     ESOP contribution expense increased from $1.9 million (1.4% of net sales) in fiscal 2000 to $3.0 million (2.4% of net sales) in fiscal 2001, an increase of 61.0%. The increase in this non-cash charge was due to increases in the average market price of the Company’s stock allocated to the Employee Stock Ownership Plan during fiscal 2001. 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 $1.4 million (1.1% of net sales) in fiscal 2000 to $2.1 million (1.7% of net sales) in fiscal 2001, an increase of 51.5%. This increase was due to increased engineering

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personnel costs, outside consulting costs and parts and supplies costs related to telescope and other consumer related products, the development of industrial optical products for TeraBeam Corporation and the development of certain CCD imaging products for commercial and industrial applications.

     Interest expense increased from $977,000 for the fiscal year 2000 to $2.0 million for fiscal 2001, an increase of 108.4%. This increase was due to interest expense on the $5.0 million Term Loan, higher average borrowings on the Company’s bank lines of credit and higher average market interest rates compared to the prior period.

     The provision for income taxes increased to 55.3% of income before income taxes for fiscal year 2001 compared to 43.1% in the prior year. The increase 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 most significant of these differences was the ESOP charge.

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 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, 2002. 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.

     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 and short-term bank borrowings during the year. Positive cash flow from operations was principally attributed to a significant decrease in inventories. Non-cash charges to operations totaled $5.5 million, significantly offseting the net loss of $1.4 million. Increases in accounts receivable were principally offset by increases in accounts payable and decreases in prepaid expenses and other current assets, leaving the reduction in inventories as the most significant contribution to cash flows during the year. After less than expected sell-through at the end of fiscal 2001, the Company began fiscal 2002 with unseasonably high levels of inventory and resulting bank borrowings. The decrease in inventories during fiscal 2002 was the result of management’s plan to purposely reduce inventories through discounts, promotions and more timely management of inventory purchases. Prepaid expenses and other current assets decreased by approximately $1.0 million principally as the result of a tax refund payment received during the year.

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Net working capital totaled approximately $41.8 million at February 28, 2002, up from $38.9 million at February 28, 2001. Working capital requirements fluctuate during the year due to the seasonal nature of the business. These requirements are typically financed through a combination of internally generated cash flow from operating activities and short-term bank borrowings.

     In September 2001, the Company refinanced its bank borrowings by entering into a new credit agreement (the “U.S. Credit Agreement”) with a bank. The U.S. Credit Agreement provided the Company with a $32,100,000 credit facility consisting of a $30,000,000 revolving credit line and a $2,100,000 term loan. In April 2002, the U.S. Credit Agreement was amended providing the Company with a $27,100,000 credit facility consisting of a $25,000,000 revolving credit line (the “U.S. Revolving Loan”) and a $2,100,000 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. Amounts outstanding on the U.S. Revolving Loan and U.S. Term Loan at February 28, 2002 were $2.0 million and $1.9 million, respectively. Availability under the U.S. Revolving Loan at February 28, 2002 was approximately $7,800,000. The U.S. Term Loan is secured 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. 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.

     In August 2001, the Company’s German subsidiary entered into an 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 2002 and a five-year term loan of approximately $1.3 million secured 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, 2002 were $1.2 million and $1.1 million, respectively. The European Loans bear interest at the bank’s base rate plus or minus applicable margins.

     Capital expenditures, including financed purchases of equipment, aggregated $731,000, $2.4 million and $2.7 million for the fiscal years ended February 28(29), 2002, 2001 and 2000, 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.

     The Company continues to be impacted by softness in the consumer market as well as competitive pricing pressures, which has resulted in lower sales across most of the Company's major product lines. During the year, the Company generated $13,428,000 in cash flow from operations and was able to reduce amounts outstanding under its line of credit and long-term debt by $12,743,000. In order for the Company to return to profitability, it will need to either increase sales or reduce costs, while continuing to generate cash flow from operations. The Company continues to depend upon operating cash flow and availability of its bank line of credit to provide short-term liquidity. Management believes that operating cash flow and bank borrowing capacity should provide sufficient liquidity for the Company's obligations for the next twelve months. Should the Company be unable to return to profitability and sustain its cash flows, it may be required to seek additional sources of capital; however there can be no assurance that such additional sources of capital will be available on reasonable terms, if at all.

     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, 2002 was a loss of $26,000 which is included in other comprehensive income for the year ended February 28, 2002.

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     The following table summarizes the Company’s contractual obligations as of February 28, 2002, and the effect such obligations are expected to have on its liquidity and cash flows in future periods:

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 June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141, Business Combinations (“SFAS No. 141”) and SFAS No. 142, Goodwill and Other Intangible Assets. The FASB also issued SFAS No. 143, Accounting for Obligations Associated with the retirement of Long-Lived Assets, and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in August and October 2001, respectively.

     SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method. SFAS No. 141 superceded APB Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises and is effective for all business combinations initiated after June 30, 2001.

     SFAS No. 142, effective for fiscal years beginning after December 15, 2001, addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS No. 142 the Company will no longer be required to amortize goodwill and other intangible assets with indefinite lives but will be required to subject these assets to periodic testing for impairment. The Company is currently evaluating the provisions of SFAS No. 142 but expects that the provisions will not have a material effect on its financial position or results of operations upon adoption.

     SFAS No. 143 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 is currently evaluating the provisions of SFAS No. 143 but expects that the provisions will not have a material effect on its financial position or results of operations upon adoption.

     SFAS No. 144 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 is currently evaluating the provisions of SFAS No. 144 but expects that the provisions will not have a material effect on it financial position or results of operations upon adoption.

Forward-Looking Information

     The preceding “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections 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 expand the markets for telescopes, binoculars and other optical products as a

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result of its advertising and marketing efforts; the Company’s ability to continue to develop and bring to market new and innovative products; the Company’s ability to continue to integrate and 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 continue to integrate and further develop the business of Bresser in combination with the Company’s existing business; the Company experiencing fluctuations in its sales, gross margins and profitability from quarter to quarter consistent with prior periods; 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 copyrights and patents; 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 domestic binocular market 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.

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.

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     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, 2002 was a loss of $26,000 which is included in other comprehensive income for the year ended February 28, 2002.

     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 14.

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.

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.

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PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K

(a)

The following documents are filed as part of this report:

(b)

Reports on Form 8-K:

     None.

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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 14(a)(1) on page 19, present fairly, in all material respects, the financial position of Meade Instruments Corp. and its subsidiaries at February 28, 2002 and February 28, 2001, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 2002, 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 14(a)(2) on page 19, 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.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Orange County, California
April 18, 2002

F-1

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MEADE INSTRUMENTS CORP.

CONSOLIDATED BALANCE SHEETS

ASSETS

See accompanying notes to consolidated financial statements.

F-2

Table of Contents

MEADE INSTRUMENTS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

F-3

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MEADE INSTRUMENTS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY