<PAGE>

                          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 [FEE REQUIRED]

For the fiscal year ended October 31, 1997

                                          or

/ /            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from            to           
                               ----------    ----------
Commission file number 0-25540

                                  STB SYSTEMS, INC.
                (Exact name of registrant as specified in its charter)

                   Texas                               75-1855896
       (State or other jurisdiction of              (I.R.S. Employer
       incorporation or organization)               Identification No.)

          1651 North Glenville Drive
              Richardson, Texas                            75081
     (Address of principal executive offices)            (Zip Code)

        Registrant's telephone number, including area code:  (972) 234-8750

            SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                         None

            SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                       Common Stock, par value $0.01 per share
                                   (Title of class)

     Indicate by check mark whether the registrant (l) 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 
                             -----          -----

     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/

     The aggregate market value on January 28, 1998 of the registrant's voting
securities held by non-affiliates was $164,662,400.
                                      -------------

     Number of shares of registrant's Common Stock, par value $0.01 per share,
outstanding as of January 28, 1998: 6,976,630.
                                    ----------

                         DOCUMENTS INCORPORATED BY REFERENCE

     (a)  Selected portions of the registrant's Annual Report to Shareholders
          for the fiscal year ended October 31, 1997. - Part II 

     (b)  Selected portions of the registrant's definitive Proxy Statement for
          the 1998 Annual Meeting of Shareholders. - Part III

<PAGE>

                                        PART I

ITEM 1.   BUSINESS.

     UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" OR "STB" WHEN
USED IN THIS REPORT REFERS TO STB SYSTEMS, INC., A TEXAS CORPORATION, AND ITS
CONSOLIDATED SUBSIDIARIES AND PRIOR AFFILIATES.  THIS REPORT CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. 
ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM
THOSE PROJECTED IN OR CONTEMPLATED BY THE FORWARD-LOOKING STATEMENTS DUE TO A
NUMBER OF FACTORS, INCLUDING WITHOUT LIMITATION THOSE SET FORTH UNDER "--RISK
FACTORS" BELOW.

INTRODUCTION

     STB designs, manufactures and sells multimedia subsystem and specialized 
technology products.  The Company's multimedia subsystem products, which are 
designed for use primarily in desktop personal computers ("PCs"), include a 
full range of multimedia accelerators (also referred to as "video graphics 
adapters"), all of which are capable of displaying full-motion video images 
on a monitor.  These multimedia accelerators enable users to take advantage 
of true-color graphics, 3D and video features found in the latest PC 
operating systems, such as Microsoft Windows 95 and Windows NT, and in 
multimedia applications.  The Company's multimedia accelerators are designed 
for use primarily in mid-range to high-end PCs.  The Company's multimedia 
subsystem product line also includes several complementary products, 
including DVD products, PC/TV convergence subsystem products and sound cards. 
The Company's multimedia subsystem products are sold to original equipment 
manufacturers ("OEMs") and, to a lesser extent, to commercial customers, such 
as retailers, distributors and direct-mail companies.  The Company's OEM and 
commercial customers include Gateway 2000, Dell Computer, Compaq Computer, 
IBM, Best Buy, CompUSA, Tech Data, Ingram Micro and Merisel.

     STB's specialized technology products incorporate graphics technologies 
and are usually designed to enable one computer to simultaneously control the 
display of multiple monitors.  These products are sold to customers for 
specialized applications in a number of industries, including the financial 
services, hospitality, factory automation, transportation and emergency 
response industries.  The Company's customers for specialized technology 
products include Reuters, Compaq Computer and Lodgenet Entertainment.

     STB is recognized as one of the largest independent suppliers of 
multimedia accelerators in the world.

INDUSTRY

     According to Dataquest, an estimated 98.7 million PCs are expected to be
shipped worldwide in 1998, compared to 84.7 million units in 1997 and 71.7
million units in 1996.  A substantial portion of the PCs shipped in recent
periods incorporate high performance Intel Pentium, Pentium Pro and Pentium II
processors and support multimedia functionality, including CD-ROM storage,
higher-resolution graphics, digital video and audio and, in most systems, 


                                      -1-
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hardware 3D and telecommunications.  The evolution of these multimedia-enabled
PCs has been driven by the proliferation of higher performance hardware,
operating systems like Microsoft Windows 95 and Windows NT, the popularity of
the Internet and the growth in the number of consumer and business applications
featuring greater use of 3D graphics, video and sound.

     Multimedia applications typically place significantly higher processing
demands on a PC's central processing unit ("CPU"), which can substantially
degrade system performance.  The processing burden on the CPU can be reduced by
off-loading the multimedia-intensive processing functions to specialized video
graphics and other multimedia subsystems.  This allows for significant
improvement in a PC's performance and can be achieved either through the
placement of subsystems on the motherboard or the use of add-in subsystems. 
Motherboard implementations typically cost less, but generally provide lower
levels of functionality and performance.  While add-in subsystems cost slightly
more, they generally can support higher levels of functionality and provide a
higher degree of flexibility in PC configuration, which allows PC manufacturers
to more rapidly integrate new technologies into their product lines and to meet
a range of price and performance requirements.

     The market continually demands more sophisticated multimedia products as
new technologies evolve and enter the mainstream.  Intel's incorporation of the
MMX extended instruction set in its microprocessors, as well as its recent 440LX
chipset with the Pentium II microprocessor that supports the accelerated
graphics port ("AGP"), demonstrate the demand for higher CPU functionality and
better integration between the CPU and the PC graphics subsystem.  The
incorporation of these architectural enhancements, in addition to evolving
standards such as MPEG-2 decompression, Dolby Digital audio and DVD storage, are
laying the foundation for using the PC as an enabling platform for digital
television, video teleconferencing and other emerging multimedia capabilities.

     The accelerating pace of technological advancement in the PC industry has
made it increasingly difficult for OEMs to devote the resources necessary for
the timely internal development of multimedia subsystems incorporating the
latest innovations.  Furthermore, many OEMs are seeking to expand their product
lines in response to consumer demand for a broader range of price and
performance options.  As a result, the Company believes OEMs increasingly are
choosing to outsource many of their component and subsystem needs to specialized
subsystem vendors with focused development efforts.

STRATEGY

     The Company's goal is to become the leading supplier of multimedia
accelerators and certain other multimedia subsystems for PCs.  The Company's
focus on the design, manufacture and sale of multimedia accelerators has earned
it a reputation for providing advanced graphics display solutions.  With its
size and reputation, the Company has built relationships with chip suppliers
that allow it to obtain advance information about new developments in video
controller chip technology.  Additionally, close relationships with many of its
OEM customers better enable the Company to determine what future performance
features are most desired.  The Company believes that the strength of these
relationships also places it in a strong position to be the 


                                      -2-
<PAGE>


provider of choice to OEMs for a number of other multimedia subsystem products. 
STB believes that it is positioned to compete effectively by using its knowledge
of technological advances and customer desires, together with its own
value-added development of software drivers and utilities, to provide
high-quality multimedia accelerators and other multimedia subsystems to the PC
marketplace on a timely, cost-effective basis.  The Company also seeks to take
advantage of its expertise gained in developing multimedia subsystem products to
develop its specialized technology products.

     The major elements of the Company's strategic plan are as follows:

     FOCUS ON MULTIMEDIA ACCELERATOR MARKET AND EMERGING MULTIMEDIA SUBSYSTEM
OPPORTUNITIES.  The Company intends to continue focusing its efforts on the
multimedia accelerator market, where it has consistently demonstrated an ability
to introduce innovative multimedia accelerators designed to satisfy rapidly
evolving and increasingly demanding performance standards.  Furthermore, the
Company believes that it can leverage its strong OEM relationships and
technological and manufacturing expertise to be the provider of choice to OEMs
for other multimedia subsystem products, including "motherboards" which
incorporate multimedia subsystems.  A motherboard is the main system board which
contains the central processing unit and memory.  Some motherboards also include
multimedia subsystems as an integrated part of the system board circuitry.  

     CONTINUED FOCUS ON OEM SALES CHANNEL.  The Company has continued to focus
on the OEM sales channel, as evidenced by a significant increase in sales within
this channel during the 1997 fiscal year, and the fact that approximately 79% of
the Company's revenues during such period were derived from sales to OEMs.  The
expansion of the Company's business with several established OEM customers, such
as Gateway 2000, Dell Computer, Compaq Computer and IBM, demonstrate the success
of the Company's commitment to meeting the needs of OEMs.  Historically, the
Company has provided OEMs with mid-range multimedia accelerators.  The Company
recently has commenced delivery of high-end multimedia accelerators and other
multimedia subsystem products in an effort to expand its product offerings to
the OEM market.

     CONTROL OF MANUFACTURING.  The Company believes that it is the only 
major independent supplier of multimedia accelerators that manufactures all 
of its own products rather than outsourcing its manufacturing operations.  
The Company believes that having its own manufacturing facility in Juarez, 
Mexico enables it to maintain lower manufacturing costs, meet expedited 
customer delivery schedules, quickly adjust to changes in product orders, 
achieve shorter production cycles and accommodate modified or unusual design 
specifications, while at the same time ensuring product quality and 
reliability.

     CONTROLLER CHIP INDEPENDENCE.  Unlike some of its competitors, the 
Company designs its products after evaluating controller chips produced by a 
number of leading suppliers.  The selection of a controller chip is based on 
competitive factors including cost, performance, compatibility and 
reliability of supply. The Company believes that purchasing rather than 
internally developing controller chips allows it to consistently develop 
products incorporating the latest technological advances.  Moreover, the 
Company is able to leverage the substantial 

                                      -3-
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expenditures made by developers of controller chips, achieve component 
flexibility and decrease the time and expense required to develop new 
products. See "--Risk Factors--Dependence on Suppliers."

     MINIMIZE DESIGN-TO-MARKET CYCLES.  By capitalizing on the foregoing
elements of its strategy, STB is able to design, manufacture, test and ship new
products in relatively short amounts of time, which is particularly important
for obtaining, maintaining and strengthening relationships with its OEM
customers, who also must operate under short design-to-market cycles.

     SELECTIVELY PURSUE OTHER SALES CHANNELS.  In addition to focusing on the
OEM sales channel, the Company intends to continue its efforts to further
penetrate the commercial market.  The Company believes that the high quality,
low cost standards that it must meet for its OEM customers better position it to
provide competitive products in the commercial market.  The Company believes
that increasing awareness of the STB brand, created in part by its penetration
in the OEM sales channel, has strengthened its position in the commercial
market.  The Company also seeks to take advantage of its expertise gained in
developing multimedia subsystem products to develop its specialized technology
products.  The Company believes it is one of the largest suppliers of
specialized technology products in the world and intends to continue marketing
these products to current customers, as well as to new customers in the same and
other targeted industries.

     BRING NEW TECHNOLOGIES TO THE MARKETPLACE.  The Company's experienced
software and hardware engineers provide STB with industry-leading expertise. 
The Company intends to continue applying this expertise to respond quickly to
customer requirements, anticipate trends and advances in its industry and expand
its product line to take advantage of new technology applications.  In
particular, the Company believes that its video graphics expertise places it in
a strong position to develop competitive products employing the most advanced
digital video and audio technologies, including DVD products, PC/TV convergence
subsystem products, sound cards and flat panel display products.

PRODUCTS

     The Company divides its products into two categories: multimedia subsystem
products and specialized technology products.  From its entry-level to its most
sophisticated products, the Company offers customers products that enhance the
video and audio capabilities for an increasingly broad range of PC
configurations and applications.

MULTIMEDIA SUBSYSTEM PRODUCTS

     The Company's multimedia subsystem products include a full range of
multimedia accelerators at various price points, as well as other multimedia
subsystem products.  The Company's current major multimedia subsystem products
include the following:


                                      -4-
<PAGE>


PRODUCT NAME                      DESCRIPTION                         STATUS

                            MULTIMEDIA ACCELERATORS


                       PROFESSIONAL 3D MULTIMEDIA ACCELERATORS

Glyder Max - II       Entry-level professional 3D multimedia         Shipping
                      accelerator with 8MB of synchronous 
                      graphic RAM (SG RAM); PCI or AGP bus

Glyder TX Gold        Mid-range professional 3D multimedia           Shipping
                      accelerator with 8MB of VRAM plus 8MB of 
                      DRAM; PCI bus

Glyder MX             High performance professional 3D multimedia    Shipping
                      accelerator with geometry co-processor using 
                      8MB of VRAM and from 8MB to 32MB of DRAM; 
                      PCI bus

Glyder MP             High performance professional 3D multimedia    Shipping
                      accelerator with dual graphics processors 
                      and geometry co-processor using 8MB of VRAM 
                      and 32MB of DRAM; PCI bus


                              3D MULTIMEDIA ACCELERATORS

Powergraph64 3D       Entry-level multimedia accelerator using       Mature
                      either 2MB or 4MB of SD RAM 

Nitro 3D              Mid-Range multimedia accelerator using         Shipping
                      either 2MB or 4MB of SD RAM 

Velocity 3D           Upper mid-range multimedia accelerator         Mature
                      using 4MB or 8MB of EDO RAM 

Velocity 128          Upper mid-range multimedia accelerator with    Shipping
                      128 bit architecture using 4MB of 128 bit 
                      SG RAM; PCI or AGP bus 


                                      -5-
<PAGE>

PRODUCT NAME                      DESCRIPTION                         STATUS


                            2D MULTIMEDIA ACCELERATORS

Powergraph 64 Video   Entry level multimedia accelerator using       Mature
                      either 1 MB or 2MB of EDO DRAM

Nitro 64 Video        Entry level multimedia accelerator using       Mature
                      either 1 MB or 2MB of EDO DRAM

Lightspeed 128        Mid-range multimedia accelerator using         Mature
                      2 or 2.25 MB of MDRAM


                           OTHER MULTIMEDIA SUBSYSTEMS


                                  DVD PRODUCTS
DVD Theater           DVD product using dedicated hardware 
                      for MPEG-2 and Dolby Digital audio decoding    Shipping

Impact DVD            DVD product using the Impact media processor   Shipping
                      with supporting software for MPEG-2 and 
                      Dolby Digital audio decoding 


                         PC/TV CONVERGENCE SUBSYSTEM PRODUCTS

Video Rage II         3D multimedia accelerator using STB's "Hub"    Shipping
                      architecture with television tuner, TV 
                      output and optional DVD module (similar
                      to DVD Theater)

TV-PCI                TV tuner adapter for PCI bus system with       Shipping
                      the capability of receiving cable or 
                      over-the-air analog television broadcasts


                                     SOUND CARDS

Wave up               Audio wavetable, upgrade card for              Shipping
                      incorporation on certain Intel-logic 
                      motherboards 


     The Company anticipates that its multimedia subsystem product line will
continue to evolve based upon its assessment of strategic multimedia
opportunities and the continuing demand for new generations of video and audio
solutions from OEMs and end-users.  The Company's multimedia subsystem products
tend to have relatively short life cycles, reflecting the dynamic nature of
technological development within the PC industry.  OEMs introduce new system 


                                      -6-
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configurations as often as twice a year, and the Company must introduce its new
products to comply with OEMs' schedules.  The life cycle for a multimedia
accelerator typically is 6 to 9 months (plus a few additional months of sales of
certain of such products in the commercial market).

     MULTIMEDIA ACCELERATORS.  All of the Company's multimedia accelerators are
capable of displaying full-motion video images on a monitor.  A multimedia
accelerator consists of a printed circuit board configured with a video
controller chip, memory chips and software drivers and utilities.  The Company
believes that optimal graphics enhancement and video display require custom
software and hardware design that maximize the performance and features of a PC
system.  The Company distinguishes its products from those of its competitors
through its innovative proprietary software drivers and utilities and through
the hardware design of its multimedia accelerators.  The Company incorporates
its proprietary STB Vision software on all of its multimedia accelerator
products.  STB Vision software supports various chip sets, with a consistent
interface that supports multiple languages, including German, English, French,
Dutch, Polish, Japanese, Italian and Spanish, and enhances the performance of a
multimedia accelerator.

     The Company's multimedia accelerator product line is comprised of products
with varying degrees of performance based on display speed, resolution, color
depth and 2D/3D capability.  The display speed of a multimedia accelerator is
determined primarily by the controller chip and software drivers, while display
resolution and color depth are determined primarily by the amount of display
memory.  The Company offers a large family of multimedia accelerators that are
compatible with the bus architectures prevalent in today's market.

     By offering a complete line of multimedia accelerators, the Company can
better establish and build relationships with OEMs.  The Company currently
offers a high-end professional multimedia accelerator product line that provides
a choice of several "rasterization engines" from 3Dlabs, memory ranging from 8MB
to 40MB and separate geometry co-processors.  This product line is optimized to
support the Windows-NT operating system and Open-GL 3D graphics.  It is targeted
at customers with the most demanding 3D requirements, such as simulation, 3D
modeling and animation development.

     The Company also offers products targeted at mainstream customers.  The top
of STB's mainstream product line is the Velocity 128, which has 4MB of
Synchronous Graphic Ram (SG RAM) and uses the Nvidia Riva 128 graphics 
controller chip.  The Company offers a number of midrange products, including 
products with 2D and 3D graphics capability, which generally contain from 1MB
to 4MB of EDO or Synchronous DRAM memory.  For fiscal 1997, approximately 63% 
of the multimedia accelerators shipped by the Company had hardware assisted 
3D capability.

     OTHER MULTIMEDIA SUBSYSTEM PRODUCTS.  In addition to multimedia
accelerators, the Company also offers complementary multimedia subsystem
products that incorporate emerging technologies.

     -    DVD PRODUCTS.  During the third fiscal quarter of 1997, STB began
          supplying products to OEMs designed to enable the use of DVD drives in
          PCs.  The DVD 


                                      -7-
<PAGE>

          is a 5 1/4" diameter disk that looks almost identical to the CD-ROM.
          However, due to advances in recording technology, the capacity for the
          DVD is a minimum of 4,770 megabytes, as compared to 680 megabytes on
          the CD-ROM.  Full motion video and audio data that is recorded on the
          DVD is compressed using the MPEG-2 standard, and the audio data is
          digital data using Dolby Digital processing.  This video and audio
          data must be processed as it goes from the DVD drive to the PC memory.
          STB provides the adapter circuit that is required to process the data.
          One of STB's initial DVD products, either the DVD Theater or the
          Impact DVD, are being used by three of the top five current PC
          companies (as ranked by International Data Corporation on the basis of
          unit shipments).

          Since the drive mechanism for the DVD is very similar to current
          CD-ROM drives, the cost of these high-capacity drives will likely
          approach that of the CD-ROM drives during late 1998.  Since DVD drives
          can read current CD-ROMs, industry analyst International Data
          Corporation ("IDC") predicts that the DVD will begin replacing the
          CD-ROM during 1998 and will gain market share relative to the CD-ROM
          over the coming years.  IDC's research suggests that 2.26 million DVD
          drives were sold into the PC market in 1997 with the number growing to
          83.8 million units in the year 2000. 

     -    PC/TV CONVERGENCE SUBSYSTEM PRODUCTS.  The Company's PC/TV convergence
          subsystem products are capable of receiving analog television
          broadcasts or cable transmissions and producing a full-motion
          television display on a PC monitor.  One important feature of these
          products is their ability to take advantage of Intel Intercast, which
          broadcasts information similar to a web page within an analog
          transmission signal.  These products are sold through the OEM channel,
          and are available through retailers such as Best Buy and CompUSA.  The
          Company's Video Rage II tuner/video graphics subsystem is used in
          Gateway 2000's Destination PC/TV product line.

     -    SOUND CARDS.  A sound card, or "audio adapter," converts digital audio
          information into high-fidelity, stereo-quality sound.  A sound card
          incorporates an audio controller chip, memory chips and software
          drivers and utilities in configurations designed to produce high
          quality sound.  The Company began shipping sound card products in July
          1996 in response to OEM customer demand for this additional product
          offering.  The Company believes that its sound cards complement its
          video display products.

     The Company's multimedia subsystem products (other than multimedia
accelerators and sound cards) are still in the early production stage.  In
addition, in light of the fact that a substantial number of PCs incorporate
video graphics circuitry on the motherboard, the Company is continuing to study
the design, development and manufacture of motherboards containing STB's
multimedia subsystem capabilities.  There can be no assurance that any of such
products can be produced in profitable quantities, if at all.  The Company
anticipates that it will continue 


                                      -8-
<PAGE>

to expend efforts with respect to these and other potential products.  See
"--Risk Factors--Entry Into New Product Markets."

SPECIALIZED TECHNOLOGY PRODUCTS

     The Company's specialized technology products are characterized by their
incorporation of complex technologies, relatively low unit sales volumes and
relatively high unit prices and gross profit margins.  The Company's specialized
technology products are sold primarily to resellers, the workstation groups of
OEMs and corporate customers for specialized applications in a number of
industries, including the financial services, hospitality, factory automation,
transportation and emergency response industries.  Most specialized technology
products are designed to enable a single computer to control the display of more
than one monitor.  The use of the Company's multi-monitor specialized technology
products in certain configurations can allow one computer to control up to 32
monitors.  The Company believes it is one of the largest suppliers of
multi-monitor products in the world.

     The Company offers two families of multi-monitor multimedia accelerator
products distinguished by the resolution of the monitors with which they are
designed to be used.  The MVP family of products is used with high-resolution
monitors, and the Channel family is used with low-resolution, television-type
monitors.  An important component that the Company incorporates into the MVP is
its "virtual screen" software driver and Mediator utility.  This software driver
allows multiple monitors to act as a single screen, displaying numerous
"windows" of information through only one computer.  The Mediator utility allows
the user to control the placement of applications on the available displays. 
Many financial institutions employ this capability in their trading rooms, where
large amounts of information must be continuously available to traders.  The
Company has made technological advances to its existing MVP product line,
including the introduction of new products, such as full motion digital video
scalers and live video/TV tuner input ports, which are based on the PCI bus
standard and new video graphics drivers and utilities.  Channel products are
used in applications, such as airport arrival and departure displays, where
lower cost and larger display size are more important than clarity of display. 
Channel products are also used to facilitate the selection of on-demand
programming for hotel room televisions.

     The Company began shipping its first flat panel display product during its
first fiscal quarter of 1998.  STB's initial flat panel display product is named
the Galileo 15, a 15 inch thin film transistor display offering a viewing area
similar to a 17 inch CRT-type monitor.  This flat panel display product consists
of (i) a 3D multimedia accelerator that includes special circuitry to transmit
graphics and video data to digital flat panels, (ii) a receiver card to receive
the transmitted information, (iii) the flat panel display housed in STB's
proprietary housing and mounting system, and (iv) STB's custom driver and
utility software to allow the Display Subsystem to work with Windows-NT and
Windows-9X.  Flat panel display products offer several advantages over
traditional cathode ray tube (CRT) glass monitors.  They are much thinner, with
thicknesses from two to six inches rather than the foot or more of depth
required for CRTs.  Flat panel systems also generate less heat than CRTs and
cause less strain on the 


                                      -9-

<PAGE>

user's eyes.  Current flat panel display systems cost from three to five times
what an equivalent CRT system costs, but costs are expected to decline
dramatically in 1998 and 1999.

     The Company also recently introduced several specialized technology
products that incorporate digital video features that meet the MPEG-2
decompression standard and may or may not incorporate a multimedia accelerator. 
These products, some of which have multi-monitor control capability, may be used
for applications such as video-on-demand, storing video data for viewing at a
later time and receiving MPEG-2 encoded material over direct broadcast satellite
or advanced technology cable.  There can be no assurance that such products can
be produced in profitable quantities, if at all.  See "--Risk Factors--Entry
Into New Product Markets."

     Listed below are the principal industries and applications for the
Company's specialized technology products:

<TABLE>
<CAPTION>
     INDUSTRY                 APPLICATION
     --------                 ----------- 
<S>                      <C>
Financial services       Support of simultaneous display of multiple data
                         sources on multiple monitors from a single PC for use
                         by financial traders

Hospitality              Control of display on hotel room televisions to allow
                         guests to view movie choices, review bill prior to
                         checking out and obtain other information

Factory automation       Dual-monitor graphical man-machine interface for
                         factory machinery

Transportation           Flight arrival and departure information

Emergency response       911 emergency call center displays to allow the
                         operator to follow multiple calls simultaneously, plus
                         view a map of the emergency location on a separate
                         monitor
</TABLE>

DESIGN AND DEVELOPMENT

     The timely development and introduction of new products is essential to
meeting the performance requirements of OEM customers as well as reinforcing the
Company's competitive position in STB's other sales channels.  The Company works
closely with its OEM customers and suppliers to develop new products that
satisfy specific OEM product requirements, such as performance and display
features.  The Company's software and hardware engineers design, develop and
test the new product prototype, selecting the most appropriate controller chip,
memory chips and other components for the product.

     Operating compatibility of the Company's products is critical for customer
acceptance.  STB's compatibility lab personnel ensure that the new product can
function properly in a variety of PC system configurations and with most popular
commercial application software and 


                                         -10-
<PAGE>

operating systems.  The compatibility lab also compares the test performance of
the Company's products against that of competitors' products.  In addition, STB
sends product prototypes to OEM customers for performance and compatibility
testing and to the Federal Communications Commission (the "FCC") and to the
Cenelec branch of the European Economic Community ("EEC") for "CE
Certification."  See "--Government Regulations." After any necessary
modifications are made to a product, it is released for production.

     The Company's design and development personnel have enabled STB to
repeatedly deliver the latest technologies to the OEM market.  The Company also
has won numerous top awards from recognized industry magazines, including PC
Magazine, PC World, Windows Magazine, PC Professional, PC Computing, Multimedia
World, InfoWorld and New Media Magazine.  In particular, STB's Velocity 128
product has received greater recognition from industry publications than any
other product in Company history, including top awards from PC Magazine, PC
World, PC Computing and numerous European industry magazines.

     The Velocity 128 recently won the PC Magazine Editor's Choice award for
business computing, primarily as a result of its versatility, with excellent
performance in 2D and 3D graphics plus motion video acceleration.  The Velocity
128 also debuted at the number one position on PC World's top 10 video board
list.  In addition, PC Computing gave the Velocity 128 its 5 star award, plus
the prestigious Most Valuable Product award for the best product of its class
for 1997.  In addition to the excellent results in the US trade press, the
Velocity 128 has won first place awards in graphic subsystems reviews from PC
Welt in Germany, PC Achat and Windows News in France, Computer Buyer and
Personal Computer World in the UK, and Chip in Italy.

     The Company believes that the strength of its engineering resources is
critical to its competitiveness.  The Company has substantially increased its
engineering and technical resources, so that as of December 31, 1997 it had a
total engineering staff of 93, including 17 hardware engineers and 41 software
engineers.  The Company has also established software engineering centers in
Houston, Texas, Eugene, Oregon and Belfast, Northern Ireland.  The Company's
engineering resources are critical to its strength in responding quickly to
customer requirements, anticipating trends and advances in its industry and
expanding its product line to take advantage of new technology applications. 
See "--Products" and "--Risk Factors--Dependence on Key Personnel."  The Company
anticipates that it will continue to increase its engineering resources in the
future.

SUPPLIERS

     The Company believes that its close relationships with its component
suppliers are essential to producing low-cost, innovative products and
maintaining short design-to-market cycles.  The Company's primary products,
multimedia accelerators, are printed circuit boards that contain a number of
components, including a video controller chip, memory chips, logic chips,
capacitors and resistors.  The video controller chip, which regulates the
information that is displayed on the PC monitor, and the memory chip, which
stores graphics information for display, are the most important components in
determining the functions and manufacturing cost 

                                         -11-
<PAGE>

of a multimedia accelerator.  The Company's other multimedia subsystem products
generally contain components similar to those found on an STB multimedia
accelerator but with different types of controller chips.

     The Company purchases memory chips from a number of manufacturers,
including IBM, Mosel/Vitelic, Hyundai, Samsung and Toshiba.  Memory chips
generally are less expensive if purchased directly from the manufacturer, but
manufacturers sometimes do not produce sufficient quantities of memory chips to
satisfy market demand.  In times of restricted supply of memory chips,
manufacturers may allocate the sale of their memory chips to customers based,
among other factors, upon purchase volumes and the customer's creditworthiness. 
The Company's ability to purchase from distributors, and possibly on the spot
market, provides an alternative, but more costly, source of supply if the
Company cannot obtain necessary supplies from memory chip manufacturers.  See
"--Risk Factors--Dependence on Suppliers."

     The Company purchases controller chips directly from a number of suppliers,
including S3, Cirrus Logic, 3Dlabs, Nvidia and IBM.  These controller chips
typically include related software drivers, which the Company's software
engineers often enhance for use in STB products.  In addition to controller
chips and the related software drivers, several other components that are used
in the Company's products are obtained from single or limited sources.  The
Company has no guaranteed supply arrangements with any of its suppliers, and
there can be no assurance that current suppliers will be able to meet its
requirements.  While the Company believes that with respect to its single and
limited source components it could obtain similar products from other sources,
it likely would be required to pay significantly more for such products, alter
product designs to use alternative products or reduce or delay its production of
the related products.  As a result of delays in the delivery of components, lack
of available components or the lack of compatible software drivers from
component vendors, the Company has in the past experienced difficulty in meeting
its own scheduled shipment dates to customers, and such difficulties could
recur.  See "--Risk Factors--Dependence on Suppliers."

     The Company's unit component costs tend to be volatile, and a significant
increase or decrease in unit component costs may have a significant effect on
the Company's results of operations.  The Company may experience component cost
increases in the future, which could have a negative effect upon gross profit
margins and gross profits.  See "--Risk Factors--Dependence on Suppliers." 

MANUFACTURING

     STB considers its ability to manufacture high quality products at a low
cost to be critical to its competitiveness.  STB began manufacturing at its
facility in Juarez, Mexico in 1988 and presently conducts substantially all of
its manufacturing operations at this ISO 9002 certified facility.  STB believes
that by operating its own manufacturing facility the Company has a competitive
advantage in terms of its ability to respond quickly to changing customer needs
and to control product quality.  The Company's manufacturing facility is located
in Juarez, Mexico to benefit from low labor and shipping costs, as well as
proximity to the Company's headquarters in Richardson, Texas.  The Company has
increased its monthly manufacturing capacity in Mexico 

                                         -12-
<PAGE>

from approximately 400,000 boards at the beginning of fiscal 1996 to
approximately 500,000 boards as of the end of fiscal 1997, depending on product
mix and complexity.  This increase in manufacturing capacity has been achieved
primarily through the addition of new high-volume surface-mount technology
("SMT") equipment, as well as through upgrading existing equipment.  The Company
believes that the addition of this equipment has increased not only its
manufacturing capacity but also the speed and efficiency of its manufacturing
operations.  With this additional equipment, the Company believes its
manufacturing capacity is sufficient for its current level of operations. 
Nevertheless, the Company has placed orders for additional SMT equipment to add
incremental manufacturing capacity during fiscal 1998.  In addition, the Company
recently relocated a portion of its manufacturing operations to a larger
facility adjacent to its present manufacturing facility, which should enable the
Company to further increase its manufacturing capacity.  See "Properties" and
"--Risk Factors--Management of Growth" and "--Risk Factors--Single Manufacturing
Facility."

     The Company emphasizes a comprehensive quality control program at each step
in the manufacturing process.  The manufacturing process involves both automated
and manual placement and soldering of components on the circuit board.  After
final assembly is completed, each product unit undergoes an elevated temperature
burn-in, a process simulating a PC environment in which the product is placed in
an oven and connected to an electrical source for several hours.  After each
product has been burned-in, it is placed through a series of diagnostic tests to
detect defects.  The Company believes its comprehensive testing procedures
significantly contribute to its ability to satisfy its customers' stringent
product performance and reliability requirements.  The Company offers a limited
warranty ranging from 15 to 39 months for products sold to OEMs, a five-year
limited warranty on its specialized technology products and a limited lifetime
warranty on products sold to commercial customers.

     While the Company conducts substantially all of its manufacturing
operations at its facility in Juarez, Mexico, it maintains a smaller facility at
its Richardson, Texas headquarters for the development and testing of prototypes
and the first-run testing of new products.  The Company also maintains a
separate facility in Richardson, Texas for technical support and product repair.
In addition, the Company burns-in and functionally tests a small portion of its
products assembled in Mexico at its Richardson, Texas facilities.

     STB provides contract assembly services for third parties, providing
incremental gross profit and contributing to the absorption of overhead by
increasing utilization of manufacturing capacity.  Revenues from these assembly
services constituted approximately 1% of the Company's net sales for the fiscal
year ended October 31, 1997.

SALES AND MARKETING

     SALES.  The Company presently sells its products in North America, most
countries in Europe and certain countries in the Pacific Rim.  United States
sales accounted for approximately 73% of the Company's net sales in the fiscal
year ended October 31, 1997.


                                         -13-
<PAGE>


     The Company organizes its Richardson, Texas-based North American sales
force on the basis of its three sales channels.  The OEM sales force provides
direct sales coverage of selected OEMs.  The commercial market sales force
focuses on marketing and sales to retailers, distributors and direct mail
companies, and also coordinates the efforts of the Company's independent sales
representatives for the commercial channel.  The specialized technology sales
force coordinates its efforts with the Company's engineering staff to create
interest among prospects and customers and to determine product features.

     The Company's North American sales force generally operates in tandem with
the Company's independent sales representative network in the commercial market.
These sales representatives typically are retained based on relationships they
have with potential customers.  The Company believes that the services of
independent sales representatives are important to obtaining and maintaining
relationships with certain commercial customers.  The Company's independent
sales representatives generally do not sell products competitive with those
products that they handle for the Company.  The Company generally does not
utilize independent sales representatives for its OEM or specialized technology
products.

     The Company's European sales force, which is headquartered in London, is
responsible for OEM, commercial and specialized technology product sales in the
region.  The European sales force has more direct sales coverage responsibility
than the North American sales force because STB employs fewer European
independent sales representatives.  The Company's marketing and sales efforts
for countries outside of North America and Europe are coordinated from STB's
Richardson, Texas offices.

     The Company's net sales to OEMs, the commercial market and specialized
technology customers represented approximately 79%, 12% and 8% of the Company's
total net sales in the fiscal year ended October 31, 1997.  The Company's top
three customers accounted for approximately 66% of net sales during the fiscal
year ended October 31, 1997, with Gateway 2000, Dell Computer and Compaq
Computer accounting for approximately 35%, 20% and 11%, respectively, of the
Company's net sales for such period.  The Company recently has increased its
marketing efforts in the distribution segment of the commercial market.  The
Company believes that its recent increase in commercial channel sales is
attributable to these increased efforts.  The Company sells products to the
commercial market through specialty retailers, such as Best Buy and CompUSA, and
to commercial distributors, such as Tech Data, Ingram Micro and Merisel.  The
Company sells its specialized technology products primarily to resellers, the
workstation groups of OEMs and corporate customers in the financial services,
hospitality, factory automation, transportation and emergency response
industries, which include customers such as Reuters, Compaq Computer and
Lodgenet Entertainment.

     The Company generally allows returns in the form of stock rotations only of
products sold through the commercial channel.  The Company's current stock
rotation policies typically permit a commercial channel customer to return
approximately 10% of products purchased from STB within the previous 90 days if
it places an order for other STB products of equal or greater value.  The
Company usually is able to resell returned products.  In addition, the Company
typically provides price protection to commercial channel customers in the form
of credits for price 

                                         -14-
<PAGE>

reductions on products remaining in customer inventories.  See "--Risk
Factors--Stock Rotation and Price Protection Risks" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview."

     The Company currently sells all its products at prices denominated in U.S.
dollars, but expects to sell its products in other currencies in the future,
thereby increasing its currency exposure risk.  Additionally, a substantial
portion of the Company's manufacturing labor costs are incurred in Mexican
pesos.  See "--Risk Factors--International Operations."

     MARKETING.  STB promotes its products to OEM customers and specialized
technology customers primarily through the efforts of the Company's sales force.
The Company believes such direct promotion enables it to develop products that
are more in line with customers' needs and with market trends.  The Company
supplements these efforts through the promotion of its products at industry
trade shows.  The Company's commercial channel marketing efforts include
advertising in recognized industry trade magazines and cooperative promotional
efforts with retailers and commercial distributors.

TECHNICAL SUPPORT

     The Company believes that providing technical support to its customers is
essential to its ongoing competitiveness.  The Company maintains a toll-free
telephone line in the United States for technical support of its specialized
technology products and for its multimedia accelerator products and other
multimedia subsystem products sold in the commercial market.  The Company also
maintains electronic bulletin board systems in Richardson, Texas and London,
England to provide customers with new software drivers and utilities that update
the capabilities of the Company's products.  The Company's technical support
group provides the software on disk at a nominal charge to customers who are
unable to obtain updates through the electronic bulletin board system.  The
Company's policy of providing updates allows products to maintain compatibility
with new versions of software and increases the useful life of these products. 
The Company also devotes significant efforts to the preparation of user manuals
and other product documentation that are informative and easy to understand.

COMPETITION

     The market for the Company's products is highly competitive.  The Company
competes with independent manufacturers of brand name multimedia subsystem
products, as well as contract manufacturers and certain OEM manufacturing
operations that produce multimedia subsystem products.  See "--Industry." The
Company's major competitors in the multimedia subsystem product market include
Diamond Multimedia, ATI Technologies, Number Nine Visual Technology, Matrox,
Elsa, Creative Labs, CEI and Hauppauge.  In the specialized technology product
market, the Company's major competitors include ColorGraphics, Datapath and
Appian. 

     In addition to its major competitors, certain of the Company's suppliers
sell controller chips directly to OEMs for use in internally produced multimedia
accelerators, other multimedia subsystems or on motherboards.  If one or more of
the Company's significant OEM customers 


                                         -15-
<PAGE>

were to commence or increase internal production of multimedia accelerators or
other multimedia subsystems, the Company's results of operations could be
negatively impacted.  Furthermore, a number of significant OEMs currently
integrate video controller chips on the motherboard of their PCs.  If one or
more of the Company's significant OEM customers begins to incorporate video
controller chips or other controller chips onto motherboards rather than using
the Company's products, the Company's results of operations could be negatively
impacted.  See "--Risk Factors--Dependence on Multimedia Accelerator Market;
Migration to Motherboards."

     The Company competes in its markets on the basis of a number of factors,
including the compatibility, reliability, price and performance of its products,
its ability to reach the market quickly with new products, its ability to meet
customer delivery and reliability requirements, the quality of its technical
support and its ability to develop and maintain relationships with customers and
suppliers.  Many of the Company's competitors and potential competitors have
greater financial, marketing, manufacturing and technical resources than the
Company.  In addition, some of the Company's competitors manufacture their own
controller chips, which in certain circumstances may provide these competitors
with an advantage over the Company.  Furthermore, while the Company believes it
is the only supplier of brand name multimedia accelerators that produces its own
products, some of STB's competitors internally manufacture other multimedia
subsystem products, such as sound cards and TV tuner cards.  The rapid pace of
change in the Company's industry places a premium on factors that include the
knowledge and experience of a company's management, engineers and other
personnel and their ability to develop and improve products.  The Company has
continued to increase its engineering resources and believes that its ability to
continue adding new engineers to its staff in the future will affect its
competitiveness.  See "--Risk Factors--Dependence on Key Personnel."

INTELLECTUAL PROPERTY

     The Company's success depends in part upon its proprietary technology,
consisting of both its software drivers and utilities and its hardware designs. 
The Company primarily relies upon copyright, trademark and trade secret laws to
protect its proprietary technology, and also seeks patent protection on selected
inventions from time to time.  The Company generally also enters into
nondisclosure agreements with persons to whom it reveals its proprietary
information, such as OEMs that the Company works with concerning future
products.  There can be no assurance that the Company's present protective
measures will be adequate to prevent misappropriation of its technology or
independent third party development of the same or similar technology.  Many
foreign jurisdictions offer less protection of intellectual property rights than
the United States, and there can be no assurance that the protection provided to
the Company's proprietary technology by the laws of the United States or foreign
jurisdictions will be sufficient to protect the Company's technology.  See
"--Risk Factors--Proprietary Technology." While the Company's competitive
position may be affected by its ability to protect its proprietary information,
the Company believes that the rapid pace of technological change in the
multimedia accelerator industry will cause other factors to be more significant
in maintaining the Company's competitive position.  These factors include the
technical expertise, knowledge and innovative skill of the Company's management
and technical personnel, name recognition, the timeliness and quality 

                                         -16-
<PAGE>

of support services provided by the Company and its ability to rapidly develop,
produce, enhance and market innovative products.

     STB generally enters into nondisclosure agreements with suppliers of
components for its products in connection with discussions regarding forthcoming
features of those components.  The Company also commonly enters into licensing
agreements with suppliers of components that the Company desires to incorporate
into its products.

     The Company has pending certain utility and design patent applications on
its flat panel PC monitor products.  The Company also has a United States
trademark registration for the STB logo, and owns common law trademark rights
with respect to certain other trademarks.

     It is common in the computer industry for companies to assert intellectual
property infringement claims against other companies.  As a consequence, the
Company indemnifies some OEM customers in certain respects against intellectual
property claims relating to STB's products.  Several OEM customers recently sent
the Company notices of potential indemnity claims based upon a notice of
infringement such OEM customers received from a patent owner relating to the
asserted infringement of its patent for processing color graphics imaging data
in PCs.  Subsequently, the patent owner filed a patent infringement lawsuit
against two of such OEM customers.  Based upon the Company's preliminary
evaluation of the patent, it does not believe the infringement claims are
meritorious.  If this or another intellectual property claim were brought
against the Company and one of the Company's products were found to be
infringing upon the rights of others, the Company could be required to pay
infringement damages, pay licensing fees, modify its products so that they are
not infringing or discontinue offering products that were found to be
infringing, any of which could materially adversely affect the Company and its
results of operations.  In addition, the assertion of such claims against one or
more of the Company's vendors could adversely affect the availability from those
vendors of components used by the Company.  See "--Risk Factors--Intellectual
Property Infringement Claims."  

LEGAL PROCEEDINGS

     The Company is a party from time to time to certain legal proceedings
arising in the ordinary course of its business.  Although the amount of any
liability that could arise with respect to these proceedings cannot be predicted
accurately, in the opinion of the Company any liability that might result from
such claims will not have a material adverse effect on the financial position of
the Company. 

GOVERNMENT REGULATIONS

     The Company's business is regulated by federal, state, local and foreign
authorities.  The products produced by the Company are subject to approval by
the FCC and the EEC to assure that they do not interfere with the frequencies of
other consumer electronics products.  The Company installs certain filter
circuitry on its products to prevent them from disturbing other frequencies in
compliance with FCC and EEC regulations.  To date, regulations applicable to the
Company's business have had no material effect on the Company's capital
expenditures, earnings 


                                         -17-
<PAGE>

or competitive position.  Although historically the Company has not experienced
material delays in obtaining FCC or EEC approval of any of its products,
relatively recent government budget constraints have caused delays in obtaining
approval of certain of the Company's products.  The Company believes that any
delay in obtaining approvals could, in turn, result in delays in making certain
shipments on a timely basis.  

     The Company's relationships with its employees at its Mexican manufacturing
facility are regulated by the Mexican Federal Labor Law, which contains detailed
provisions regarding minimum employment conditions and specifies rights that
must be provided to all employees in Mexico.  Other Mexican federal laws require
employers to make contributions to the Mexican Social Security System and to
establish and make regular contributions, in specified amounts, to individual
retirement savings and housing accounts at a commercial bank for all employees. 
In addition, Mexican federal law requires the payment of substantial severance
amounts in the event of the termination of a Mexican employee.  Although Mexican
laws governing employment relationships are extensive, aggregate labor costs at
the Company's Mexican facility are nevertheless significantly less than labor
costs would be at a similar facility in the United States.  There can be no
assurance, however, that these laws will not be amended or supplemented in the
future to increase the compensation required to be paid to Mexican employees or
the costs of compliance with such laws or that any such change would not have a
material adverse effect on the Company and its results of operations.

     The Company's Mexican manufacturing operations are subject to regulation by
various Mexican environmental agencies.  In order to ensure compliance, the
Company regularly monitors changes in Mexican environmental laws, and
representatives of environmental agencies periodically inspect the Company's
Mexican facility.

     The Company spent approximately $30,000 in order to comply with Mexican 
environmental regulations in fiscal 1997 and anticipates that it will spend 
approximately $30,000 in each of fiscal years 1998 and 1999.

BACKLOG

     As of December 31, 1997, the Company's backlog was approximately $47.5
million, as compared to approximately $ 23.5 million at December 31, 1996.  The
Company includes in its backlog accepted purchase orders with respect to which a
delivery schedule has been specified for product shipment within 60 days.  The
Company's business is characterized by short-term order and shipment schedules,
and backlog tends to fluctuate substantially from month to month.  Generally,
orders constituting backlog are subject to changes in delivery schedule or to
cancellation at the option of the purchaser.  The Company's agreements with its
customers typically specify penalties for cancellation of orders within 60 days
prior to shipment.  Other factors, including the Company's inability to obtain
components in sufficient quantities, may result in delays in shipment or
cancellation of orders included in backlog.  See "--Risk Factors--Dependence on
Suppliers." Therefore, although backlog is useful for scheduling production,
backlog as of any particular date should not be considered a reliable measure of
sales for the current or any future period.

                                         -18-
<PAGE>


EMPLOYEES

     As of December 31, 1997, the Company employed 2,191 individuals, of whom
1,865 were employed in operations, 93 in engineering, 75 in sales and marketing
and 158 in administration and finance.  Included in the foregoing figures are
1,869 employees in Mexico.  Competition for personnel in the PC industry is
intense.  The Company believe's that its future success will depend in part on
its ability to continue to attract and retain highly skilled technical,
marketing and management personnel.  None of the Company's employees is
represented by a labor union or is subject to a collective bargaining agreement.
The Company believes that its relations with its employees are good.  See
"--Government Regulations."


SEASONALITY

     The Company's quarterly operating results vary significantly depending on
factors such as the timing of large customer orders, timing of new product
introductions, adequacy of component supply, changes in component costs,
variations in the Company's product mix, seasonal promotions by the Company and
its customers and competitive pricing pressures. Because the timing of these
factors may vary, the results of any particular quarter may not be indicative of
results for the full year or any future period.  In addition, the PC market
generally experiences weaker sales during the summer months.  Although the
Company has experienced sales growth for each year since fiscal 1990, there can
be no assurance that this growth will continue on a quarterly or annual basis.


RISK FACTORS

     This Prospectus contains certain forward-looking statements within the
meaning of the federal securities laws.  Actual results and the timing of
certain events could differ materially from those projected in or contemplated
by the forward-looking statements due to a number of factors, including, without
limitation, those set forth below and elsewhere in this report.  In addition to
the other information in this report, the following factors, which may affect
the Company's current position and future prospects, should be considered
carefully in evaluating the Company and an investment in the Common Stock of the
Company.

     POTENTIAL FOR FLUCTUATING OPERATING RESULTS; SEASONALITY.  The Company's
historical operating results have fluctuated significantly from period to period
and will likely fluctuate in the future.  Fluctuations result from a wide
variety of factors, including the timing and availability of components, changes
in product mix and pricing, the timing of customer orders, new product
developments or introductions, production interruptions, product reviews and
other media coverage, changes in sales channel mix and product returns or price
protection claims from customers.  Many of these factors are beyond the control
of the Company.  The volume and timing of orders received during a quarter are
difficult to forecast.  Customers generally order on an as-needed basis. 
Consequently, the Company historically has operated with a relatively 

                                         -19-


<PAGE>

small backlog.  Moreover, as sometimes occurs in the PC industry, a 
disproportionate percentage of the Company's net sales in any quarter may be 
generated in the last month of a quarter.  As a result, a shortfall in sales 
in any quarter as compared to expectations may not be identifiable until the 
end of the quarter.  The Company's gross profit margins are impacted by 
product sales cycles, sales channel mix, product mix, pricing pressures, the 
availability and cost of components from the Company's suppliers and general 
economic conditions. The Company's markets are characterized by intense 
ongoing competition and a trend of declining average selling prices.  
Accordingly, the Company's margins may decline in the future from the levels 
experienced to date.  In addition, the Company's margins may be adversely 
affected by shortages in the availability of key components for the Company's 
products, as well as by fluctuations in the value of certain foreign 
currencies.  The Company's quarterly results are also subject to seasonal 
fluctuations, with generally weaker fiscal third quarter results.  See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations-Seasonality."

     DEPENDENCE ON SUPPLIERS.  Several components used in the Company's 
products are obtained from single or limited sources and, in instances in 
which component manufacturers do not allocate a sufficient supply of 
components to meet the Company's needs, the Company must obtain such 
components from distributors or on the spot market at a higher cost.  The 
Company has no guaranteed supply arrangements with any of its suppliers, and 
there can be no assurance that current suppliers will be able to meet its 
requirements.  The Company believes that with respect to its single and 
limited source components, it generally could obtain similar components from 
other sources but likely would be required to pay significantly more for such 
products, alter product designs to use alternative components (which would 
cause significant delays) or reduce its production of the related multimedia 
accelerators.  As a result of delays in the delivery of components or lack of 
available components, the Company in the past has experienced difficulty in 
meeting certain product shipment dates to customers, which in some instances 
has resulted in a loss of business.  In addition, software drivers, which are 
essential to product performance, are included with some of these single and 
limited source components.  In the past, the Company has experienced delays 
in the delivery of its products due to the inadequacy or the incompatibility 
of software drivers provided by component suppliers or developed internally.  
It is likely that delays in delivery of components, shortages of components 
and problems with software drivers will continue to occur in the future, and 
such delays or problems would materially adversely affect the Company and its 
results of operations.  Additionally, in its attempt to counter actual or 
perceived component shortages, the Company may overpurchase certain 
components, resulting in excess inventory or, in the event of inventory 
obsolescence or a decline in the market value of such inventory, causing 
inventory write-offs against the Company's operating results.

     Significant increases in the prices of components, such as graphics 
controller chips or memory chips, occur from time to time, and often the 
Company is not able to adjust the price of its products accordingly.  
Occasional worldwide shortages of memory or controller chips and 
international tariff disputes have resulted in substantial component cost 
increases in the past that have materially adversely affected the Company and 
its results of operations.

     The Company relies upon outside suppliers to continue to develop, 
introduce and manufacture in sufficient volumes controller chips, memory 
chips and other components.  

                                       -20-
<PAGE>

Moreover, the technology of these components must compare favorably in terms 
of functionality, features and price with the offerings of other 
manufacturers, including competitors of the Company that have internally 
developed computer chips or manufacturing expertise.  The Company's 
dependence on single and limited source suppliers, and the risks associated 
with any delay or shortfall in supply, are exacerbated by the short life 
cycles which characterize multimedia subsystem products.  See "--Suppliers."

     DEPENDENCE ON MULTIMEDIA ACCELERATOR MARKET; MIGRATION TO MOTHERBOARDS.  
A substantial portion of the Company's net sales is derived from the sale of 
multimedia accelerators.  According to Jon Peddie Associates, approximately 
69% of all graphics controller chips manufactured in the 12-month period 
ended September 30, 1997, were incorporated onto multimedia accelerators, and 
approximately 31% were incorporated onto motherboards.  Multimedia 
accelerators generally are used in higher-end PCs offering the latest 
technology and performance features.  However, as a given functionality 
becomes technologically stable and widely accepted by PC users, it typically 
migrates to the PC motherboard.  The Company anticipates that such migration 
could occur with respect to the functionality provided by certain of its 
current products.  In this regard, Intel Corporation's MMX instruction set 
and the expanded operating systems provided by Microsoft Corporation 
incorporate several functions that traditionally have been performed by 
multimedia accelerators.  In addition, single chip solutions are currently 
available that provide 16-bit sound functionality for implementation directly 
onto PC motherboards.  As a result of this tendency of technology to migrate 
to the PC motherboard, the Company's success is largely dependent on its 
ability to continue to develop products that incorporate new and rapidly 
evolving technologies that manufacturers have not yet fully incorporated onto 
PC motherboards, or dependent on the Company's ability to develop PC 
motherboard products that incorporate multimedia subsystems.  While the 
Company believes that a market will continue to exist for add-in subsystems 
that provide advanced functionalities and offer flexibility in systems 
configuration, there can be no assurance that the incorporation of new 
functionalities onto PC motherboards will not adversely affect the market for 
the Company's products.  An increase in the number or percentage of PCs that 
incorporate graphics circuitry on the motherboard at the expense of add-in 
multimedia accelerators, an increase in the number or percentage of 
multimedia accelerators manufactured internally by OEMs or a decrease in PC 
sales volumes would effectively shrink the market for the Company's current 
products and could materially adversely effect the Company's business.  See 
"--Industry."

     TECHNOLOGICAL CHANGE AND NEW PRODUCTS.  The market for the Company's 
products is characterized by short product life cycles, rapidly changing 
technology, evolving industry standards and frequent introductions of new 
products.  OEMs introduce new system configurations as often as twice a year, 
and the life cycles of the Company's multimedia accelerators typically range 
from 6 to 9 months (plus a few additional months of sales of certain of such 
products in the commercial market).  If the Company does not successfully 
introduce new products within a given product cycle, the Company's sales will 
be adversely affected for that cycle and possibly for subsequent cycles.  Any 
such failure could also impair the Company's brand name, reputation and 
relationships with its OEM customers.  The Company's success depends upon 
market acceptance of its existing products, its ability to enhance its 
existing products and its ability to continually develop and introduce new 
products and features to meet 

                                       -21-
<PAGE>

changing customer requirements.  Each new product cycle presents new 
opportunities for current or prospective competitors of the Company to gain 
market share.  The Company's competitors include manufacturers of products 
that directly compete with the Company's products, as well as competitors 
that can produce products that have a similar functionality to the Company's 
products. For instance, Intel Corporation has added new functionalities, such 
as MMX, to its controller chips to enhance the power of the CPU of a PC to 
manage the display features of a PC.  Similarly, Microsoft Corporation is 
introducing new versions of its operating systems with features, such as 
Direct 3D, that increase the capability of its operating systems to control a 
PC's display features.  Moreover, Intel's announced acquisition of Chips and 
Technologies could eventually result in increased migration of graphics 
functionality to the motherboard.  Because of the short product life cycles 
and the long lead times for many components used in the Company's products, 
the Company may not be able to quickly reduce its production or inventory 
levels in response to unexpected shortfalls in sales or, conversely, to 
increase production in response to unexpected demand.  There can be no 
assurance of the continued acceptance of the Company's existing products or 
that the Company will be successful in enhancing its existing products or 
identifying, developing, manufacturing or marketing new products. Delays in 
developing new products or enhancements or the failure of such products or 
enhancements to gain market acceptance would materially adversely affect the 
Company and its results of operations.

     Sales of individual products and product lines are typically 
characterized by declines in volumes, pricing and margins toward the end of 
the product's life cycle, the precise timing of which may be difficult to 
predict.  As new products are planned and introduced, the Company attempts to 
monitor closely the inventory of older products (and older components) and to 
phase out their manufacture in a controlled manner.  Nevertheless, the 
Company could experience unexpected reductions in sales of older generation 
products as customers anticipate new products.  These reductions could give 
rise to additional charges for obsolete or excess inventory, returns of older 
generation products by retailers or commercial distributors or substantial 
price protection claims.  To the extent that the Company is unsuccessful in 
managing product transitions, its business and operating results would be 
materially adversely affected.

     DEPENDENCE ON KEY CUSTOMERS AND DESKTOP PC MARKET.  The Company's top 
three customers accounted for 59% and 66% of net sales during fiscal 1996 and 
fiscal 1997, respectively.  In recent years, Gateway 2000 has been the 
Company's top customer, although STB's other significant customers have 
changed from period to period.  See "Business--Sales and Marketing--Sales."  
The loss or reduction of the business of Gateway 2000 or one or more of the 
Company's other major customers would have a material adverse effect on the 
Company and its results of operations.  In addition, the Company's future 
success will depend significantly upon the success of its customers, 
particularly its OEM customers.  The Company has no long-term commitments or 
contracts with its customers.  While a number of the Company's OEM customers 
have achieved strong PC sales in recent periods, such customers, and the PC 
industry in general are subject to dynamic competitive conditions.  In 
particular, the loss of sales by the Company's OEM customers to other OEMs or 
a decrease in the popularity of desktop PCs that incorporate the Company's 
products would adversely affect the Company and its results of operations.

                                       -22-
<PAGE>

     CHANGE IN PRODUCT OR SALES CHANNEL MIX.  The Company offers two broad 
categories of products:  multimedia subsystem products that are sold to OEMs 
and the commercial market and specialized technology products that are sold 
to resellers, workstation groups of OEMs and corporate customers in certain 
industries.  Sales of multimedia accelerators to OEMs, which currently 
account for substantially all of the Company's OEM multimedia subsystem 
product sales, are characterized by relatively high unit volumes and 
relatively low gross profit margins.  The Company began shipping significant 
unit volumes of certain new multimedia subsystem products (i.e., other than 
multimedia accelerators) to OEM customers in the third quarter of its 1996 
fiscal year, but is not yet in a position to forecast the effect that the 
sale of these new products will have on its results of operations.  Sales to 
the commercial market are characterized by modest volumes and moderate gross 
profit margins.  Sales of the Company's specialized technology products are 
characterized by relatively low unit volumes and relatively high gross profit 
margins.  The Company's sales to OEMs, the commercial market and specialized 
technology products customers represented approximately 79%, 12% and 8% of 
the Company's total net sales during the 1997 fiscal year.  In the event the 
Company experiences a shift in the type of products that it is able to sell 
or a shift in the sales channels into which such products are sold, its 
results of operations could be materially adversely affected.  In particular, 
a decrease in sales of multimedia subsystem products to the commercial market 
or in sales of specialized technology products could result in a 
disproportionately greater decrease in the Company's gross profit. See 
"--Products" and "Management's Discussion and Analysis of Financial Condition 
and Results of Operations--Overview."

     ENTRY INTO NEW PRODUCT MARKETS.  While the Company's business 
historically has focused on the design, manufacture and sale of multimedia 
accelerators, in the third quarter of fiscal 1996 the Company first began 
shipping significant unit volumes of new multimedia subsystem products.  
Further, the Company first began shipping DVD products in the third quarter 
of fiscal 1997 and flat panel display products in the first quarter of fiscal 
1998.  See "--Products."  There are numerous risks inherent in the entry into 
new product markets, including the reallocation of limited management, 
engineering and capital resources to unproven product ventures, a greater 
likelihood for encountering technical problems and a greater likelihood that 
the market will not accept the Company's new products or the PCs into which 
they are incorporated.  In addition, a new product line, like flat panel 
display products, requires significant investment in long-lead time 
inventories.  The failure of one or more of such products, or any negative 
effects upon the Company's core multimedia accelerator business, could 
materially adversely affect the Company and its results of operations.

     PRICE PROTECTION AND STOCK ROTATION RISKS.  As is common practice in its 
industry, the Company's arrangements with its commercial customers generally 
allow customers, in the event of a price decrease, credit equal to the 
difference between the price originally paid and the new decreased price on 
units in the customers' inventories on the date of the price decrease.  In 
addition, commercial customers generally have the right to return slow-moving 
or excess inventory for product credit up to an agreed upon percentage of 
shipments within specified time periods.  While the Company establishes 
reserves to cover these practices, there can be no assurance that these 
reserves will be sufficient or that any future price protection claims or 
returns will not have a material adverse effect on the Company and its 
results of operations, particularly 

                                       -23-
<PAGE>

because results are heavily dependent on products for which the Company has 
little or no operating history.  See "--Sales and Marketing--Sales" and 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations--Overview." 

     COMPETITION.  The markets for the Company's products are highly 
competitive.  The Company has competitors specifically dedicated to the 
multimedia subsystem market or specific segments within that market.  
Companies in related markets also offer products with functions similar to 
the Company's products.  For example, the Company's suppliers sell video 
graphics controller chips directly to OEMs for use in internally produced 
multimedia accelerators or on motherboards.  Increased sales of competitive 
products could result in price reductions by the Company or loss of its 
market share, which would materially adversely affect the Company and its 
results of operations.  In addition, the Company's OEM customers could 
commence or increase internal production of multimedia accelerators or other 
multimedia subsystems.  Furthermore, the Company's markets are expected to 
become increasingly competitive as multimedia functions continue to converge 
and companies that previously supplied products providing distinct functions 
(for example, companies in the sound board and telephony markets) emerge as 
competitors across broader product categories.  The Company also anticipates 
that as the breadth of its product lines expand, the markets in which it 
competes and the number of competitors against which it competes also will 
expand.  There can be no assurance that the Company will be able to continue 
to compete successfully in its markets or that it will be able to compete 
successfully against current and new competition as these markets continue to 
evolve.  Many of the Company's current and potential competitors design and 
manufacture some of their own product components.  While the Company believes 
that its controller chip independence enables it to select from among the 
most advanced components available, there may be instances in which these 
internally developed components have better features and performance 
characteristics than those available from third party vendors.  Furthermore, 
the Company believes that certain of its current and potential competitors 
compete largely on the basis of price, which may result in significant price 
competition, lower margins for the Company's products or otherwise affect the 
market for the Company's products.  Certain of the Company's current and 
potential competitors also are located in foreign jurisdictions that may have 
lower labor costs, impose significantly lower taxes than the United States or 
levy duties on product imports.  Many of the Company's current and potential 
competitors have greater financial, marketing. manufacturing and 
technological resources than the Company.  There can be no assurance that the 
Company will be able to continue to compete successfully with its existing 
competitors or with new competitors.  See "--Competition."

     DEPENDENCE ON KEY PERSONNEL.  The Company's success depends upon the 
services of its management, sales, marketing and engineering personnel.  
While the Company has entered into employment agreements with a number of 
such personnel, the loss of the services of one or more of such personnel 
could have a material adverse effect on the Company and its results of 
operations.  The success of the Company will depend, in part, on its ability 
to retain its key management, sales, marketing and engineering personnel and 
to attract other personnel to satisfy the Company's current and future needs. 
 There is substantial competition for such personnel in the computer 
industry, and the inability to retain key personnel or to attract additional 
personnel 

                                       -24-
<PAGE>

to satisfy the Company's needs could have a material adverse effect on the 
Company and its results of operations.

     MANAGEMENT OF CHANGE.  The Company has experienced rapid growth, and has 
consequently increased its expenditures in a number of areas and made certain 
long-term commitments, a number of which would be difficult to quickly reduce 
in the event of a decrease, or slower rate of growth, in the Company's 
business. In the event the Company experiences further growth, such growth 
may require larger quantities of components, additional marketing, sales and 
engineering personnel, additional manufacturing equipment and improved 
operating, financial and administrative controls, any of which could require 
significant additional capital expenditures.  The Company may experience 
difficulty securing adequate quantities of components or additional 
manufacturing equipment, attracting or retaining skilled personnel, improving 
infrastructure and information systems or overcoming other difficulties 
associated with growth.  In addition, gross profit margins derived from 
initial orders with new OEM customers are frequently lower than the Company's 
typical gross profit margins.  There can be no assurance that the Company 
will be able to manage future changes in the size of its business 
successfully or that difficulties in doing so will not have a material 
adverse effect on the Company and its results of operations.

     SINGLE MANUFACTURING FACILITY.  The Company's primary manufacturing 
facility is located in Juarez, Mexico.  The Company recently relocated a 
portion of its manufacturing operations to an adjacent, larger building, thus 
expanding the overall facility square footage, and transitioned to new or 
reconfigured manufacturing equipment.  Since the Company is substantially 
dependent on this single manufacturing facility, a disruption of the 
Company's manufacturing operations at this facility would have a material 
adverse effect on the Company and its results of operations.  Such disruption 
could result from various factors, including difficulties associated with the 
transition to new or reconfigured manufacturing equipment, or a labor 
dispute, human error, governmental or political risks or a natural disaster 
such as an earthquake, tornado, fire or flood.  In addition, in comparison to 
those of its competitors that do not maintain their own manufacturing 
facilities, the Company incurs higher relative fixed overhead and labor costs 
as a result of operating its own manufacturing facility.  Any failure to 
generate the level of product revenues needed to absorb these overhead and 
labor costs would have a material adverse effect on the Company and its 
results of operations.  See "--Manufacturing." 

     INTERNATIONAL OPERATIONS.  A substantial portion of the Company's 
manufacturing operations are carried out in Mexico.  The Company's export 
sales (which primarily consist of European sales) were approximately 27% of 
net sales in the fiscal year ended October 31, 1997.  The Company is subject 
to the general risks of conducting business internationally, including 
unexpected changes in regulatory requirements, fluctuations in currency 
exchange rates, delays resulting from difficulty in obtaining export licenses 
for certain technology, state imposed restrictions on the repatriation of 
funds, tariffs and other barriers and restrictions and the burdens of 
complying with a variety of foreign laws.  In addition, the Company is 
subject to general geopolitical risks, such as political instability and 
changes in diplomatic and trade relationships, in connection with its 
international operations.  Although the Company has not to date experienced 
any material adverse effect on its operations as a result of such factors, 
there can be 

                                       -25-
<PAGE>

no assurance that such factors will not materially adversely impact the 
Company and its results of operations in the future or require the Company to 
modify its current business practices.  The Company currently sells its 
products at prices denominated in U.S. dollars, and an increase in the value 
of the U.S. dollar relative to foreign currencies could make the Company's 
products more expensive and potentially less competitive in foreign markets.  
The Company expects to sell a portion of its products in the future at prices 
denominated in other currencies and will therefore increase its currency 
exposure risk.  In addition, a substantial portion of the Company's 
manufacturing labor costs are paid in Mexican pesos, so any decrease in the 
value of the U.S. dollar relative to the Mexican peso could increase the 
Company's manufacturing costs and adversely affect the Company and its 
results of operations.  See "--Manufacturing" and "--Sales and Marketing."

     PROPRIETARY TECHNOLOGY.  The Company's success partially depends upon 
its proprietary technology, consisting of its software drivers and utilities 
and, to a lesser extent, its hardware designs.  The Company relies primarily 
upon copyright and trade secret laws and agreements with its suppliers and 
customers to protect its proprietary technology, and also seeks patent 
protection on selected inventions from time to time.  There can be no 
assurance that the Company's present protective measures will be adequate to 
prevent misappropriation of its technology or independent third party 
development of the same or similar technology.  Many foreign jurisdictions 
offer less protection of intellectual property rights than the United States, 
and there can be no assurance that the protection provided to the Company's 
proprietary technology by the laws of the United States or foreign 
jurisdictions will be sufficient to protect the Company's technology.  See 
"--Intellectual Property."

     The Company has and may in the future find it necessary or desirable to 
procure licenses from third parties relating to current or future products or 
technologies, but there can be no assurance that the Company will continue to 
be able to obtain such licenses or other rights or, if it is able to obtain 
them, that it will be able to do so on commercially acceptable terms.  The 
Company could be placed at a disadvantage if its competitors obtain licenses 
with lower royalty fee payments or other terms more favorable than those 
received by the Company.  If the Company or its suppliers were unable to 
obtain licenses relating to current or future products or technologies, the 
Company could be forced to market products without certain technological 
features.  The Company's inability to obtain licenses necessary to use 
certain technology or its inability to obtain such licenses on competitive 
terms could have a material adverse effect on the Company and its results of 
operations.  See "--Intellectual Property."

     INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS.  It is common in the computer 
industry for companies to assert intellectual property infringement claims 
against other companies.  As a consequence, the Company indemnifies some OEM 
customers in certain respects against intellectual property claims relating 
to its products.  Several OEM customers recently sent the Company notices of 
potential indemnity claims based upon a notice of infringement such OEM 
customers received from a patent owner relating to the asserted infringement 
of its patent for processing color graphics imaging data in PCs.  Subsequently, 
the patent owner filed a patent infringement lawsuit against two of such OEM 
customers.  Based upon the Company's preliminary evaluation of the patent, it 
does not believe the infringement claims are meritorious.  If this or another 
intellectual property claim were to be brought against the Company and the 
Company were found to be infringing upon the rights of others, the Company 
could be required to pay infringement damages, pay licensing fees, 

                                       -26-
<PAGE>

modify its products so that they are not infringing or discontinue offering 
products that were found to be infringing, any of which could materially 
adversely affect the Company and its results of operations.  See 
"--Intellectual Property."

     If an intellectual property claim were to be brought against one or more 
of the Company's suppliers and the supplier were found to be infringing upon 
the rights of others, the supplier could be enjoined from further shipments 
of its products to the Company, which could materially adversely affect the 
Company and its results of operations.

     ANTI-TAKEOVER MEASURES.  The Company is a Texas corporation and is 
therefore subject to the provisions of the Texas Business Corporation Act, 
including the terms of the Texas Business Combination Law ("TBCL") that 
became effective on September 1, 1997.  In general, the TBCL prohibits a 
Texas "issuing public corporation" (such as the Company) from engaging in a 
"business combination" with any shareholder who is a beneficial owner of 20% 
or more of the corporation's outstanding stock for a period of three years 
after such shareholder's acquisition of a 20% ownership interest, unless:  
(i) the board of directors of the corporation approves the transaction or the 
shareholder's acquisition of shares prior to the acquisition or (ii) 
two-thirds of the unaffiliated shareholders of the corporation approve the 
transaction at a shareholders' meeting.  The TBCL may have the effect of 
inhibiting a non-negotiated merger or other business combination involving 
the Company.  The Company is subject to the terms of the TBCL, unless its 
shareholders or directors take action electing not to be governed by its 
terms (which action is not currently contemplated).

     STOCK MARKET VOLATILITY.  There has been significant volatility in the 
market price of the Company's Common Stock, as well as in the market price of 
securities of technology-based companies.  Factors such as announcements of 
new products by the Company or its competitors, variations in the Company's 
quarterly operating results or general economic or stock market conditions 
unrelated to the Company's operating performance may have a significant 
impact on the market price of the Common Stock.  See "Market for Registrant's 
Common Equity and Related Stockholder Matters."

     SHARES ELIGIBLE FOR FUTURE SALE.  The Company currently has outstanding 
6,976,630 shares of Common Stock, of which 5,880,800 shares are currently 
freely tradeable.  The executive officers and directors of the Company, who 
beneficially own 1,211,211 outstanding shares of Common Stock, are free to 
sell the shares beneficially owned by them, subject to compliance with the 
Securities Act of 1933, as amended (the "Securities Act"), including Rule 144 
promulgated thereunder, and the terms of a right of first refusal agreement, 
to which certain of such shares are subject.  A substantial portion of the 
shares held by such beneficial owners may be sold into the public market 
effectively free of any significant restrictions.  No prediction can be made 
as to the effect, if any, that market sales of the above shares or the 
availability of such shares for future sale will have on the market price of 
shares of Common Stock prevailing from time to time.  Future sales of 
substantial amounts of Common Stock by existing shareholders could adversely 
affect the prevailing market price of the Common Stock after the offering and 
the Company's ability to raise additional capital. 

                                       -27-
<PAGE>


ITEM 2.   PROPERTIES.

     The Company leases a 68,400 square foot facility in Richardson, Texas 
(16,200 square feet of which are subleased to the Company pursuant to a 
sublease that commenced November 1, 1996 and expires October 31, 1998) that 
serves as its headquarters and as a site for product development and testing. 
 The Company also leases an additional approximately 21,100 square foot 
facility that is near its headquarters in Richardson, Texas that is used for 
technical support and product development and repair.  The foregoing leases 
both expire in December 1998.  

     The Company has purchased a tract of land and commenced construction of 
a new 210,000 square foot headquarters facility in Richardson, Texas with an 
expected completion date of December 1998.  At that time, the various 
operations conducted at its current facilities in Richardson will be 
relocated to the new facility.

     The Company currently leases a 79,100 square foot manufacturing facility 
in Juarez, Mexico, and recently undertook occupancy of a new 136,800 square 
foot manufacturing facility under lease on an adjacent site that provides 
increased space and improved layout for manufacturing operations, as well as 
options to acquire additional space.  The term of the new lease will expire 
in November, 2007 (plus four optional renewal periods of five years each).  
The Company has negotiated an extension of its current lease covering the 
79,100 square foot Juarez facility to extend the lease on one-half of the 
space through June 30, 1998 and through December 31, 1999 for the remainder 
of the space.  See "Business--Manufacturing."  

     Additionally, the Company leases 6,900 square feet of storage space in 
El Paso, Texas, under a lease expiring in March 1998, a software development 
office in Houston, Texas under a lease expiring in May 1999, a software 
development office in Eugene, Oregon under a lease expiring in February 2000, 
a software development office in Belfast, Northern Ireland under a lease 
expiring in April 2006, and sales offices in London, Paris and Austin under 
leases expiring in September 2012, December 2004 and March 1998, 
respectively.  The Company also maintains product inventories in various 
locations under bonded warehouse arrangements in order to permit the timely 
delivery of certain products to nearby customers. 

     The Company believes that its existing facilities are well maintained 
and in good operating condition and, following completion of construction of 
the Company's new headquarters facility, are adequate for its present and 
anticipated levels of operations.

ITEM 3.   LEGAL PROCEEDINGS.

     The Company is a party from time to time to certain legal proceedings 
arising in the ordinary course of its business.  Although the amount of any 
liability that could arise with respect to these proceedings cannot be 
predicted accurately, in the opinion of the Company any liability that might 
result from such claims will not have a material adverse effect on the 
financial position of the Company.

                                       -28-
<PAGE>

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

     No matter was submitted to a vote of the Company's shareholders during 
the fourth quarter of fiscal 1997.

                                       PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Company's Common Stock has traded on the NASDAQ National Market 
under the symbol "STBI" since February 14, 1995.  At January    , 1998, there 
were approximately     record holders of the Company's Common Stock, although 
the Company believes that the number of beneficial owners of its Common Stock 
is substantially greater.  The table below sets forth for the fiscal quarters 
indicated the high and low sale prices for the Common Stock, as reported by 
the NASDAQ National Market, which prices have been adjusted to reflect the 
three-for-two stock split of the Common Stock effected in the form of a stock 
dividend on July 17, 1997

                                    HIGH      LOW
                                  --------  -------
     Fiscal 1997
          Fourth quarter.....     $ 45.75   $ 27.00
          Third quarter......     $ 29.88   $ 20.00
          Second quarter.....     $ 24.17   $ 14.50
          First quarter......     $ 23.92   $ 12.67
     Fiscal 1996
          Fourth quarter.....     $ 17.25   $  8.17
          Third quarter......     $ 12.33   $  6.83
          Second quarter.....     $  7.50   $  5.42
          First quarter......     $  8.17   $  4.92   


     The Company intends to retain any future earnings for use in its 
business and does not intend to pay cash dividends in the foreseeable future. 
 The payment of future dividends, if any, will be at the discretion of the 
Company's Board of Directors and will depend, among other things, upon future 
earnings, operations, capital requirements, restrictions in future financing 
agreements, the general financial condition of the Company and general 
business conditions. The Company's new Revolving Credit Facility prohibits 
the Company from paying cash dividends.  See "Management's Discussion and 
Analysis of financial Conditions and Results of Operations--Liquidity and 
Capital Resources."

ITEM 6.   SELECTED FINANCIAL DATA. 

     This information is set forth under the caption "Selected Consolidated 
Financial Data" for each of the five years in the period ended October 31, 
1997, of the Company's 1997 Annual Report to Shareholders, which portion of 
such Annual Report is filed herein as Exhibit 13 and incorporated herein by 
reference.  

                                       -29-
<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS.

     This information is set forth under the caption "Management's Discussion 
and Analysis of Financial Condition and Results of Operations" of the 
Company's 1997 Annual Report to Shareholders, which portion of such Annual 
Report is filed herein as Exhibit 13 and incorporated herein by reference.  

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements of the Company including the independent 
accountant's report thereon of the Company's 1997 Annual Report to 
Shareholders, which financial statements are filed herein as Exhibit 13, are 
incorporated herein by reference.  

ITEM 9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

          None.  


                                       PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information set forth under the captions "Election of Directors" and 
"Executive Officers of the Company" of the Company's definitive Proxy 
Statement for the Company's 1998 Annual Meeting of Shareholders is 
incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information set forth under the caption "Executive Compensation and 
Other Matters" of the Company's definitive Proxy Statement for the Company's 
1998 Annual Meeting of Shareholders is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information set forth under the caption "Outstanding Capital Stock 
and Stock Ownership of Directors, Certain Executive Officers and Principal 
Shareholders" of the Company's definitive Proxy Statement for the Company's 
1998 Annual Meeting of Shareholders is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information set forth under the caption "Certain Transactions" of 
the Company's definitive Proxy Statement for the Company's 1998 Annual 
Meeting of Shareholders is incorporated herein by reference.


                                         -30-

<PAGE>


                                       PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
          REPORTS ON FORM 8-K.

     (a)  1.   The following financial statements are incorporated by reference
               from the Company's 1998 Annual Report to Shareholders, which
               financial statements are filed herein as Exhibit 13:

               Report of Independent Accountants.
               Consolidated Balance Sheets dated October 31,
                1997 and 1996.
               Consolidated Statement of Operations for the three
                years ended October 31, 1997.
               Consolidated Statement of Changes in Shareholders'
                Equity for the three years ended October 31, 1997.
               Consolidated Statement of Cash Flows for the three
                years ended October 31, 1997.
               Notes to Consolidated Financial Statements.

          2.   Consolidated Financial Statement Schedule                    PAGE
                                                                            ----

               Report of Independent Accountants on
                Financial Statement Schedule.                                S-1

               Consolidated Valuation and Qualifying
                Accounts.                                                    S-2

               All other schedules for which provision is made in the applicable
               accounting regulation of the Securities & Exchange Commission are
               not required under the related instructions or are inapplicable
               and therefore have been omitted.

          3.   The following documents are filed or incorporated by reference 
               as exhibits to this Report: 

               3.1  Amended and Restated Articles of Incorporation of the
                    Company (incorporated by reference to Exhibit 3.1 to the 
                    Company's Registration Statement on Form S-1 (Registration
                    No. 33-87612))

               3.2  Articles of Amendment to Articles of Incorporation of the 
                    Company (incorporated by reference to Exhibit 3.1 to the 
                    Company's Quarterly Report on Form 10-Q for the quarter 
                    ended April 30, 1997)

               3.3  Amended and Restated Bylaws of the Company (incorporated by
                    reference to Exhibit 3.2 to the Company's Registration 
                    Statement on Form S-1 (Registration No. 33-87612))

               4.1  Specimen of Common Stock Certificate (incorporated by 
                    reference to Exhibit 4.1 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))


                                         -31-

<PAGE>

               4.2  Amended and Restated Articles of Incorporation and Bylaws 
                    of the Company (see Exhibits 3.1, 3.2 and 3.3 above)

               4.3  Right of First Refusal Agreement dated December 16, 1994 
                    by and among the Company and Messrs. Ogle, Balthaser and 
                    Sims (incorporated by reference to Exhibit 4.3 to the 
                    Company's Registration Statement on Form S-1 (Registration 
                    No. 33-87612))

         *    10.1  Employment Agreement dated November 1, 1996 by and between 
                    the Company and William E. Ogle (incorporated by reference 
                    to Exhibit 10.42 to the Company's Registration Statement on
                    Form S-1 (Registration No. 333-14313)) 

         *    10.2  Employment Agreement dated November 1, 1996 by and between 
                    the Company and Randall D. Eisenbach (incorporated by 
                    reference to Exhibit 10.43 to the Company's Registration 
                    Statement on Form S-1 (Registration No. 333-14313)) 

         *    10.3  Employment Agreement dated November 1, 1996 by and between 
                    the Company and James L. Hopkins (incorporated by reference
                    to Exhibit 10.44 to the Company's Registration Statement on
                    Form S-1 (Registration No. 333-14313)) 

         *    10.4  Employment Agreement dated November 1, 1996 by and between 
                    the Company and J. Shane Long (incorporated by reference to
                    Exhibit 10.45 to the Company's Registration Statement on 
                    Form S-1 (Registration No. 333-14313)) 

         *    10.5  Indemnification Agreement dated February 8, 1995 by and
                    between William E. Ogle and the Company (incorporated by 
                    reference to Exhibit 10.23 to the Company's Registration 
                    Statement on Form S-1 (Registration No. 33-87612))

         *    10.6  Indemnification Agreement dated February 8, 1995 by and 
                    between Randall D. Eisenbach and the Company (incorporated
                    by reference to Exhibit 10.24 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

         *    10.7  Indemnification Agreement dated February 8, 1995 by and
                    between James L Hopkins and the Company (incorporated by 
                    reference to Exhibit 10.25 to the Company's Registration 
                    Statement on Form S-1 (Registration No. 33-87612))

         *    10.8  Indemnification Agreement dated February 8, 1995 by and
                    between J. Shane Long and the Company (incorporated by
                    reference to Exhibit 10.30 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

         *    10.9  Indemnification Agreement dated February 8, 1995 by and
                    between James J. Byrne and the Company (incorporated by
                    reference to Exhibit 10.28 to the Company's Registration 
                    Statement on Form S-1 (Registration No. 33-87612))


                                         -32-

<PAGE>

         *    10.10  Indemnification Agreement dated February 8, 1995 by and 
                     between Lawrence E. Wesneski and the Company (incorporated
                     by reference to Exhibit 10.29 to the Company's Registration
                     Statement on Form S-1 (Registration No. 33-87612))

    +    *    10.11  INTENTIONALLY OMITTED

    +    *    10.12  INTENTIONALLY OMITTED

         *    10.13  Indemnification Agreement dated February 8, 1995 by and 
                     between Mark S. Sims and the Company (incorporated by 
                     reference to Exhibit 10.26 to the Company's Registration 
                     Statement on Form S-1 (Registration No. 33-87612))

         *    10.14  Indemnification Agreement dated February 8, 1995 by and 
                     between William D. Balthaser Jr. and the Company 
                     (incorporated by reference to Exhibit 10.27 to the 
                     Company's Registration Statement on Form S-1 (Registration
                     No. 33-87612))

         *    10.15  Company's Amended and Restated 1995 Long Term Incentive 
                     Plan (incorporated by reference to Appendix A of the 
                     Company's definitive Proxy Statement for the 1997 Annual 
                     Meeting of Shareholders)

         *    10.16  Company's Amended and Restated Stock Option Plan for 
                     Non-Employee Directors (incorporated by reference to 
                     Appendix B of the Company's definitive Proxy Statement
                     for the 1997 Annual Meeting of Shareholders)

         *    10.17  STB Systems, Inc. 1995 Employee Stock Option Purchase Plan
                     (as amended) (incorporated by reference to Exhibit 10.38 to
                     the Company's Quarterly Report on Form 10-Q for the quarter
                     ended January 31, 1996)

         *    10.18  Amended and Restated Profit Sharing Incentive Plan 
                     (incorporated by reference to Exhibit 10.47 to the 
                     Company's Registration Statement on Form S-1 (Registration
                     No. 333-14313)) 

              10.19  Lease Agreement dated December 6, 1988 by and between STB 
                     de Mexico S.A. de C.V. (formerly known as Industrias 
                     Fronterizas de Chihuahua, S.A. de C.V.) (a subsidiary of 
                     the Company, as lessee) and Complejo Industrial Fuentes, 
                     S.A. de C.V (as lessor), including an Agreement for 
                     Modification dated February 25, 1994 by and between the 
                     same parties (incorporated by reference to Exhibit 10.1
                     to the Company's Registration Statement on Form S-1 
                     (Registration No. 33-87612))

              10.20  Modification Agreement dated October 4, 1996 by and between
                     STB de Mexico, S.A. de C.V. and Complejo Industrial 
                     Fuentes, S.A. de C.V. (relating to the Lease Agreement 
                     filed as Exhibit 10.1 hereto) (incorporated by reference to
                     Exhibit 10.46 to the Company's Registration Statement on
                     Form S-1 (Registration No. 333-14313))

              10.21  Lease Contract dated October 4, 1996 by and between STB de
                     Mexico, S.A. de C.V. (as lessee) and Complejo Industrial 
                     Fuentes, S.A. de C.V. (as lessor) 


                                         -33-

<PAGE>

                     (incorporated by reference to Exhibit 10.41 to the 
                     Company's Registration Statement on Form S-1 (Registration
                     No. 333-14313)) 

         +    10.22  Amendment to Lease Agreement dated January 30, 1997, by 
                     and between STB de Mexico, S.A. de C.V. (as lessee) and 
                     Complejo Industrial Fuentes, S.A. de C.V. 

              10.23  Lease Agreement, as amended, dated July 8, 1986 by and 
                     between the Company (as lessee) and Central Park 
                     Associates, Ltd. (as lessor) (incorporated by reference
                     to Exhibit 10.2 to the Company's Registration Statement on
                     Form S-1 (Registration No. 33-87612))

              10.24  Lease Agreement dated June, 1995, by and between the 
                     Company (as lessee) and Springcreek Place, Ltd. (as lessor)
                     (incorporated by reference to Exhibit 10.32 to the 
                     Company's Annual Report on Form 10-K for the fiscal year 
                     ended October 31, 1995)

              10.25  Addendum to Lease Agreement dated March 7, 1996 by and 
                     between the Company (as lessee) and Springcreek Place, 
                     Ltd. (as lessor) (incorporated by reference to Exhibit 
                     10.37 to the Company's Quarterly Report on Form 10-Q for 
                     the quarter ended January 31, 1996)

              10.26  Second Addendum to Lease Agreement dated March 7, 1996, by
                     and between the Company (as lessee) and Springcreek Place,
                     Ltd. (as lessor) (incorporated by reference to Exhibit 10.1
                     to the Company's Quarterly Report on Form 10-Q for the 
                     quarter ended July 31, 1997) 

              10.27  Sublease Agreement dated August 1996 by and between ADC 
                     Telecommunications, Inc. (as sublessor) and the Company 
                     (as sublessee) (incorporated by reference to Exhibit 10.40
                     to the Company's Registration Statement on Form S-1 
                     (Registration No. 333-14313)) 

              10.28  Tax Allocation and Indemnification Agreement dated 
                     December 16, 1994 by and among the Company and Messrs. 
                     Ogle, Balthaser and Sims (incorporated by reference to 
                     Exhibit 10.15 to the Company's Registration Statement on 
                     Form S-1 (Registration No. 33-87612))

         +    10.29  Purchase Agreement dated December 17, 1996, by and between 
                     the Company and Gateway 2000, Inc.  

              10.30  Lease Agreement by and between the Company and Banc One 
                     Leasing Corporation dated October 30, 1996, together with
                     related attachments (incorporated by reference to Exhibit
                     10.48 to the Company's Registration Statement on Form S-1
                     (Registration No. 333-14313))

         +    10.31  Participation Agreement dated as of November 14, 1997 among
                     Asset XVII Holdings Company, L.L.C., as lessor, STB 
                     Systems, Inc., as lesee and Bank One, Texas, N.A., as 
                     lender.

         +    10.32  Lease and Development Agreement dated as of November 14, 
                     1997 among Asset XVII Holdings Company, L.L.C., as lessor,
                     and STB Systems, Inc., as lessee.


                                         -34-

<PAGE>

         +    10.33  Limited Notice to Proceed No. 1 dated as of December 18, 
                     1997 executed by STB Systems, Inc. and Austin Commercial,
                     Inc.

         +    10.34  Credit Agreement dated as of November 21, 1997 between STB
                     Systems, Inc., and Bank One, Texas, N.A.

         +     11.1  Computation of Earnings Per Common Share and Common 
                     Equivalent Share 

         +     13    Selected portions of the Company's Annual Report to 
                     Shareholders for fiscal year ended October 31, 1997

               21    Subsidiaries of the Company 

                     (a)  STB Assembly, Inc., a Texas corporation
                     (b)  STB de Mexico, S.A. de C.V., a Mexican corporation
                     (c)  Maquilados Continentales de Chihuahua, a Mexican 
                          corporation (an inactive shell corporation)
                     (d)  Symmetric Simulation Systems, Inc.

         +     23    Consent of Price Waterhouse LLP 

         +     24    Powers of Attorney (included on first signature page)

         +     27    Financial Data Schedule 
               _______________
               *     Management contract or compensatory plan or arrangement.
                     The Company will furnish a copy of any exhibit listed above
                     to any shareholder without charge upon written request to 
                     Mr. Bryan F. Keyes, Treasurer, 1651 North Glenville Drive,
                     Richardson, Texas 75081.

               +     Filed herewith.

(b)  No reports on Form 8-K were filed during the last quarter of the period 
     covered by this Report. 


                                         -35-

<PAGE>
 
                                  POWER OF ATTORNEY


     KNOW ALL MEN BY THESE PRESENTS that each of STB Systems, Inc., a Texas 
corporation, and the undersigned directors and officers of STB Systems, Inc., 
hereby constitutes and appoints William E. Ogle, Randall D. Eisenbach and 
Bryan F. Keyes, or any one of them, its or his true and lawful 
attorney-in-fact and agent, for it or him and in its or his name, place and 
stead, in any and all capacities, with full power to act alone, to sign any 
and all amendments to this Report, and to file each such amendment to the 
Report, with all exhibits thereto, and any and all other documents in 
connection therewith, with the Securities and Exchange Commission, hereby 
granting unto said attorney-in-fact and agent full power and authority to do 
and perform any and all acts and things requisite and necessary to be done in 
and about the premises as fully to all intents and purposes as it or he might 
or could do in person, hereby ratifying and confirming all that said 
attorney-in-fact and agent may lawfully do or cause to be done by virtue 
hereof.

                                      SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Company has duly caused this Report to be signed on 
its behalf by the undersigned, thereunto duly authorized.

                              STB SYSTEMS, INC.


                              By:  /s/ William E. Ogle                       
                                   --------------------------------------
                                   William E. Ogle
                                   Chairman of the Board
                                   and Chief Executive Officer


Dated:  January 29, 1998


                                         -36-

<PAGE>
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, 
this Report has been signed below by the following persons on behalf of the 
Company in the capacities indicated on January 29, 1998.

         SIGNATURE                         TITLE

     /s/ William E. Ogle           Chairman of the Board of Directors and Chief
-------------------------------    Executive Officer (Principal Executive
     William E. Ogle               Officer)
                                   
                                   

     /s/ Randall D. Eisenbach      Executive Vice President, Chief Operating
-------------------------------    Officer, Assistant Secretary and Director
     Randall D. Eisenbach          
                                   

     /s/ James L. Hopkins          Chief Financial Officer, Vice President of
-------------------------------    Strategic Marketing and Director
     James L. Hopkins              
                                   

     /s/ Bryan F. Keyes            Director of Legal and Finance, Secretary and
-------------------------------    Treasurer (Principal Financial and Accounting
     Bryan F. Keyes                Officer)
                                   
                                   

     /s/ J. Shane Long             Vice President of Sales and Marketing and
-------------------------------    Director
     J. Shane Long                 
                                   

     /s/ James J. Byrne            Director
-------------------------------
     James J. Byrne                


     /s/ Dennis G. Sabo            Director
-------------------------------
     Dennis G. Sabo                


     /s/ Lawrence E. Wesneski      Director
-------------------------------
       Lawrence E. Wesneski        


                                         -37-

<PAGE>

                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE



To the Board of Directors
of STB Systems, Inc.

Our audits of the consolidated financial statements referred to in our report 
dated December 8, 1997 appearing in the 1997 Annual Report to Shareholders of 
STB Systems, Inc. (which report and consolidated financial statements are 
incorporated by reference in this Annual Report on Form 10-K) also included 
an audit of the Financial Statement Schedule listed in Item 14(a) of this 
Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, 
in all material respects, the information set forth therein when read in 
conjunction with the related consolidated financial statements.



PRICE WATERHOUSE LLP
Dallas, Texas
December 8, 1997

                                       S-1

<PAGE>

                CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
  FISCAL                                           BALANCE AT     CHARGED TO              BALANCE AT
  YEAR                                             BEGINNING      COSTS AND                   END
  ENDED                 DESCRIPTION                 OF YEAR       EXPENSES    DEDUCTIONS    OF YEAR
-----------------------------------------------------------------------------------------------------
<S>                    <C>                           <C>           <C>         <C>         <C>
31-Oct-95     Allowance for Bad Debts                363,125       231,040      145,092      449,073
              Allowance for Obsolete Inventory       625,000       692,830      317,830    1,000,000

31-Oct-96     Allowance for Bad Debts                449,073       489,837      607,078      331,832
              Allowance for Product Returns
              and Price Protection                    45,000       405,000      175,000      275,000
              Allowance for Obsolete Inventory     1,000,000     1,928,013    1,528,013    1,400,000

31-Oct-97     Allowance for Bad Debts                331,832       300,000      166,500      465,332
              Allowance for Product Returns
              and Price Protection                   275,000           -            895      274,105
              Allowance for Obsolete Inventory     1,400,000     2,248,918    2,248,918    1,400,000
</TABLE>










                                      S-2

<PAGE>

                                    EXHIBIT INDEX 

     EXHIBIT
     -------


          3.1  Amended and Restated Articles of Incorporation of the Company
               (incorporated by reference to Exhibit 3.1 to the Company's
               Registration Statement on Form S-1 (Registration No. 33-87612))

          3.2  Articles of Amendment to Articles of Incorporation of the Company
               (incorporated by reference to Exhibit 3.1 to the Company's
               Quarterly Report on Form 10-Q for the quarter ended April 30,
               1997)

          3.3  Amended and Restated Bylaws of the Company  (incorporated by
               reference to Exhibit 3.2 to the Company's Registration Statement
               on Form S-1 (Registration No. 33-87612))

          4.1  Specimen of Common Stock Certificate (incorporated by reference
               to Exhibit 4.1 to the Company's Registration Statement on Form
               S-1 (Registration No. 33-87612))

          4.2  Amended and Restated Articles of Incorporation and Bylaws of the
               Company (see Exhibits 3.1, 3.2 and 3.3 above)

          4.3  Right of First Refusal Agreement dated December 16, 1994 by and
               among the Company and Messrs. Ogle, Balthaser and Sims
               (incorporated by reference to Exhibit 4.3 to the Company's
               Registration Statement on Form S-1 (Registration No. 33-87612))

     *    10.1 Employment Agreement dated November 1, 1996 by and between the
               Company and William E. Ogle (incorporated by reference to Exhibit
               10.42 to the Company's Registration Statement on Form S-1
               (Registration No. 333-14313)) 

     *    10.2 Employment Agreement dated November 1, 1996 by and between the
               Company and Randall D. Eisenbach (incorporated by reference to
               Exhibit 10.43 to the Company's Registration Statement on Form S-1
               (Registration No. 333-14313)) 

     *    10.3 Employment Agreement dated November 1, 1996 by and between the
               Company and James L. Hopkins (incorporated by reference to
               Exhibit 10.44 to the Company's Registration Statement on Form S-1
               (Registration No. 333-14313)) 

     *    10.4 Employment Agreement dated November 1, 1996 by and between the
               Company and J. Shane Long (incorporated by reference to Exhibit
               10.45 to the Company's Registration Statement on Form S-1
               (Registration No. 333-14313)) 

     *    10.5 Indemnification Agreement dated February 8, 1995 by and between
               William E. Ogle and the Company (incorporated by reference to
               Exhibit 10.23 to the Company's Registration Statement on Form S-1
               (Registration No. 33-87612))

     *    10.6 Indemnification Agreement dated February 8, 1995 by and between
               Randall D. Eisenbach and the Company (incorporated by reference
               to Exhibit 10.24 to the Company's Registration Statement on Form
               S-1 (Registration No. 33-87612))

     *    10.7 Indemnification Agreement dated February 8, 1995 by and between
               James L Hopkins and the Company (incorporated by reference to
               Exhibit 10.25 to the Company's Registration Statement on Form S-1
               (Registration No. 33-87612))

     *    10.8 Indemnification Agreement dated February 8, 1995 by and between
               J. Shane Long and the Company (incorporated by reference to
               Exhibit 10.30 to the Company's Registration Statement on Form S-1
               (Registration No. 33-87612))


<PAGE>

     EXHIBIT
     -------


     *    10.9 Indemnification Agreement dated February 8, 1995 by and between
               James J. Byrne and the Company (incorporated by reference to
               Exhibit 10.28 to the Company's Registration Statement on Form S-1
               (Registration No. 33-87612))

     *  10.10  Indemnification Agreement dated February 8, 1995 by and between 
               Lawrence E. Wesneski and the Company (incorporated by reference 
               to Exhibit 10.29 to the Company's Registration Statement on Form 
               S-1 (Registration No. 33-87612))

 +   *  10.11  INTENTIONALLY OMITTED

 +   *  10.12  INTENTIONALLY OMITTED

     *  10.13  Indemnification Agreement dated February 8, 1995 by and between 
               Mark S. Sims and the Company (incorporated by reference to 
               Exhibit 10.26 to the Company's Registration Statement on Form S-1
               (Registration No. 33-87612))

     *  10.14  Indemnification Agreement dated February 8, 1995 by and between 
               William D. Balthaser Jr. and the Company (incorporated by 
               reference to Exhibit 10.27 to the Company's Registration 
               Statement on Form S-1 (Registration No. 33-87612))

     *  10.15  Company's Amended and Restated 1995 Long Term Incentive Plan
               (incorporated by reference to Appendix A of the Company's
               definitive Proxy Statement for the 1997 Annual Meeting of
               Shareholders)

     *  10.16  Company's Amended and Restated Stock Option Plan for Non-Employee
               Directors (incorporated by reference to Appendix B of the 
               Company's definitive Proxy Statement for the 1997 Annual Meeting
               of Shareholders)

     *  10.17  STB Systems, Inc. 1995 Employee Stock Option Purchase Plan (as 
               amended) (incorporated by reference to Exhibit 10.38 to the 
               Company's Quarterly Report on Form 10-Q for the quarter ended 
               January 31, 1996)

     *  10.18  Amended and Restated Profit Sharing Incentive Plan (incorporated
               by reference to Exhibit 10.47 to the Company's Registration 
               Statement on Form S-1 (Registration No. 333-14313)) 

        10.19  Lease Agreement dated December 6, 1988 by and between STB de 
               Mexico S.A. de C.V. (formerly known as Industrias Fronterizas 
               de Chihuahua, S.A. de C.V.) (a subsidiary of the Company, as 
               lessee) and Complejo Industrial Fuentes, S.A. de C.V (as lessor),
               including an Agreement for Modification dated February 25, 1994 
               by and between the same parties (incorporated by reference to 
               Exhibit 10.1 to the Company's Registration Statement on Form S-1
               (Registration No. 33-87612))

        10.20  Modification Agreement dated October 4, 1996 by and between STB 
               de Mexico, S.A. de C.V. and Complejo Industrial Fuentes, S.A. de
               C.V. (relating to the Lease Agreement filed as Exhibit 10.1 
               hereto) (incorporated by reference to Exhibit 10.46 to the 
               Company's Registration Statement on Form S-1 (Registration No. 
               333-14313))

        10.21  Lease Contract dated October 4, 1996 by and between STB de 
               Mexico, S.A. de C.V. (as lessee) and Complejo Industrial Fuentes,
               S.A. de C.V. (as lessor) (incorporated by reference to Exhibit 
               10.41 to the Company's Registration Statement on Form S-1 
               (Registration No. 333-14313)) 


<PAGE>

     EXHIBIT
     -------


     +    10.22     Amendment to Lease Agreement dated January 30, 1997, by and
                    between STB de Mexico, S.A. de C.V. (as lessee) and Complejo
                    Industrial Fuentes, S.A. de C.V. 

          10.23     Lease Agreement, as amended, dated July 8, 1986 by and
                    between the Company (as lessee) and Central Park Associates,
                    Ltd. (as lessor) (incorporated by reference to Exhibit 10.2
                    to the Company's Registration Statement on Form S-1
                    (Registration No. 33-87612))

          10.24     Lease Agreement dated June, 1995, by and between the Company
                    (as lessee) and Springcreek Place, Ltd. (as lessor)
                    (incorporated by reference to Exhibit 10.32 to the Company's
                    Annual Report on Form 10-K for the fiscal year ended October
                    31, 1995)

          10.25     Addendum to Lease Agreement dated March 7, 1996 by and
                    between the Company (as lessee) and Springcreek Place, Ltd.
                    (as lessor) (incorporated by reference to Exhibit 10.37 to
                    the Company's Quarterly Report on Form 10-Q for the quarter
                    ended January 31, 1996)

          10.26     Second Addendum to Lease Agreement dated March 7, 1996, by
                    and between the Company (as lessee) and Springcreek Place,
                    Ltd. (as lessor) (incorporated by reference to Exhibit 10.1
                    to the Company's Quarterly Report on Form 10-Q for the
                    quarter ended July 31, 1997) 

          10.27     Sublease Agreement dated August 1996 by and between ADC
                    Telecommunications, Inc. (as sublessor) and the Company (as
                    sublessee) (incorporated by reference to Exhibit 10.40 to
                    the Company's Registration Statement on Form S-1
                    (Registration No. 333-14313)) 

          10.28     Tax Allocation and Indemnification Agreement dated December
                    16, 1994 by and among the Company and Messrs. Ogle,
                    Balthaser and Sims (incorporated by reference to Exhibit
                    10.15 to the Company's Registration Statement on Form S-1
                    (Registration No. 33-87612))

     +    10.29     Purchase Agreement dated December 17, 1996, by and between 
                    the Company and Gateway 2000, Inc. 

          10.30     Lease Agreement by and between the Company and Banc One
                    Leasing Corporation dated October 30, 1996, together with
                    related attachments (incorporated by reference to Exhibit
                    10.48 to the Company's Registration Statement on Form S-1
                    (Registration No. 333-14313))                     

     +    10.31     Participation Agreement dated as of November 14, 1997 among
                    Asset XVII Holdings Company, L.L.C., as lessor, STB Systems,
                    Inc., as lesee and Bank One, Texas, N.A., as lender.

     +    10.32     Lease and Development Agreement dated as of November 14,
                    1997 among Asset XVII Holdings Company, L.L.C., as lessor,
                    and STB Systems, Inc., as lessee.

     +    10.33     Limited Notice to Proceed No. 1 dated as of December 18,
                    1997 executed by STB Systems, Inc. and Austin Commercial,
                    Inc.

     +    10.34     Credit Agreement dated as of November 21, 1997 between STB
                    Systems, Inc., and Bank One, Texas, N.A.

     +    11.1      Computation of Earnings Per Common Share and Common 
                    Equivalent Share 

     +    13        Selected portions of the Company's Annual Report to 
                    Shareholders for fiscal year ended October 31, 1997


<PAGE>

     EXHIBIT
     -------


          21        Subsidiaries of the Company 

                    (a)  STB Assembly, Inc., a Texas corporation
                    (b)  STB de Mexico, S.A. de C.V., a Mexican corporation
                    (c)  Maquilados Continentales de Chihuahua, a Mexican 
                         corporation (an inactive shell corporation)
                    (d)  Symmetric Simulation Systems, Inc.

     +    23        Consent of Price Waterhouse LLP 

     +    24        Powers of Attorney (included on first signature page)

     +    27        Financial Data Schedule 
               _______________
               *    Management contract or compensatory plan or arrangement. 
                    The Company will furnish a copy of any exhibit listed above
                    to any shareholder without charge upon written request to
                    Mr. Bryan F. Keyes, Treasurer, 1651 North Glenville Drive,
                    Richardson, Texas 75081.

               +    Filed herewith.