UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

---

FORM 10-Q

---

[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

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

For the transition period from ________to _________

Commission file number 1-10981



SBS Technologies, Inc.



|New Mexico                                                     | 85-0359415                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

7401 Snaproll NE
Albuquerque, New Mexico      87109

(505) 875-0600




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

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ P] No [  ]

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

The total number of shares outstanding of the registrant's Common Stock as of October 28, 2005 was 15,646,255.










SBS Technologies, Inc. and Subsidiaries
Form 10-Q for the Quarter Ended September 30, 2005

Table of Contents





|        |                                                                                                                                 | Page
|------- | ------------------------------------------------------------------------------------------------------------------------------- | ----
|        | Forward Looking Statements                                                                                                      | 2   
|PART I  | FINANCIAL INFORMATION                                                                                                           |     
|        | Item 1 - Unaudited Condensed Financial Statements                                                                               |     
|        | Consolidated Balance
SheetsAs of September 30, 2005 and June 30, 2005                                                           | 3   
|        | Consolidated Statements of
OperationsFor the three months ended September 30, 2005 and
2004                                     | 4   
|        | Consolidated Statement of
Changes in Stockholders' Equity and Comprehensive IncomeFor the three months ended September 30, 2005 | 5   
|        | Consolidated Statements of
Cash FlowsFor the three months ended September 30, 2005 and
2004                                     | 6   
|        | Notes to Condensed
Consolidated Financial StatementsAs of September 30, 2005                                                    | 7   
|        | Item 2 -Management's
Discussion and Analysis of Financial Condition and Results of
Operations                                   | 17  
|        | Item 3 -Quantitative and
Qualitative Disclosures About Market Risk                                                              | 29  
|        | Item 4 -Controls and
Procedures                                                                                                 | 29  
|PART II | OTHER INFORMATION                                                                                                               |     
|        | Item 1 -Legal
Proceedings                                                                                                       | 31  
|        | Item 6 -Exhibits                                                                                                                | 31  
|        | SIGNATURES                                                                                                                      | 32  
|        | EXHIBIT INDEX                                                                                                                   | 33  



---

FORWARD-LOOKING
STATEMENTS

This Form 10-Q contains forward-looking statements with
respect to the financial condition, results of operations, and business of SBS
Technologies, Inc. and subsidiaries (referred to variously as "SBS",
"we", "us" and "our").  You may find many of these
statements by looking for words like "intends," "expects,"
"projects," "believes," "anticipates" or similar
expressions in this Form 10-Q. We consider all statements regarding anticipated
or future matters, including the following, to be forward-looking
statements:

- statements regarding future events and the future
financial performance of SBS;
- expected sales and gross margin levels for the fiscal
year ending June 30, 2006;
- expected sales
levels for the quarter ending December 31, 2005;
- expected levels of selling, general and administrative
expense and research and development expense;
- the expectation of internally-generated cash flows;
- the continued health of the end markets we serve;
- the expectation that orders for military systems will
increase as we progress through fiscal year 2006;
- the expectation of revenues from AdvancedMCTM
products to begin to ramp up during the later part of fiscal year 2006;
- the expectation that we will continue to grow through
strategic acquisitions; and
- the expectation that 30% to 40% of our sales in each
fiscal quarter will be based on orders received and booked during that same
fiscal quarter.



These statements are not guarantees of our future
performance. They are based upon our assumptions and assessments only on the
date we made them and in light of our experience and our perception of
historical trends, current conditions, expected future developments, and other
factors we believe to be appropriate. Our assumptions and assessments include
the volume and product mix of sales, estimates of costs, inventory and
receivable levels based on preliminary information, and others.  Risks,
uncertainties, and other important factors could cause actual performance or
achievements to be materially different from those we may project. These risks,
uncertainties, and factors include:

- business and economic conditions generally affecting our
customers and their end customers, including but not limited to the changes in
size and program priorities of military procurement budgets, which may be less
favorable than we expect, resulting in lower sales and earnings;
- a high degree of uncertainty and rapid change in the
markets addressed by our products that could reduce sales or render certain SBS
products obsolete, resulting in reduced gross profit levels;
- customer demand for and acceptance of our products, which
may be less than we expect, affecting both sales and margins;
- our ability to design, test and introduce new products on
a timely basis, which, if we are not able, may decrease both sales and margins;
- the other risk factors listed under "Risk
Factors" included in SBS' Annual Report on Form 10-K for the year ended
June 30, 2005.



Many of the factors that will determine these items are
beyond our ability to control or predict. We caution you not to place undue
reliance on our forward-looking statements, which speak only as of the date of
this Form 10-Q.  We do not undertake any obligation to update publicly or revise
any forward-looking statements, whether as a result of new information, future
events, or otherwise.

---





SBS Technologies, Inc. and
Subsidiaries
Consolidated Balance Sheets
Thousands (except share amounts)
(Unaudited)

---

`September 30,         June 30,
                                                                       2005               2005
                                                                 ----------------   ----------------
                          ASSETS
Current assets:
  Cash and cash equivalents.................................... $         55,868   $         55,195
  Receivables, net ............................................           27,135             27,535
  Inventories..................................................           22,431             21,815
  Deferred income taxes........................................            1,355              1,361
  Prepaid expenses.............................................            1,557              1,676
  Other current assets.........................................              972                718
                                                                 ----------------   ----------------
    Total current assets.......................................          109,318            108,300

Property and equipment, net....................................            7,418              7,635
Goodwill.......................................................           17,134             16,995
Intangible assets, net.........................................            2,840              3,108
Deferred income taxes..........................................           15,429             15,529
Other assets...................................................              941                891
                                                                 ----------------   ----------------
    Total assets............................................... $        153,080   $        152,458
                                                                 ================   ================
           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable............................................. $          5,490   $          4,509
  Accrued representative commissions...........................              716                819
  Income taxes payable.........................................            2,107              3,051
  Accrued compensation.........................................            5,093              4,851
  Accrued severance and consolidation costs....................              304                424
  Other current liabilities ...................................            3,463              2,785
                                                                 ----------------   ----------------
    Total current liabilities..................................           17,173             16,439
Other long-term liabilities....................................              190                132
                                                                 ----------------   ----------------
    Total liabilities..........................................           17,363             16,571
                                                                 ----------------   ----------------
Stockholders' equity:
  Common stock, no par value; 200,000,000 shares authorized;
    15,646,255 issued and outstanding at September 30, 2005,
    15,645,929 issued and outstanding at June 30, 2005                    98,941             98,369
  Unearned compensation .......................................             (525)               (84)
  Accumulated other comprehensive income.......................            2,252              2,014
  Retained earnings............................................           35,049             35,588
                                                                 ----------------   ----------------
    Total stockholders' equity.................................          135,717            135,887
                                                                 ----------------   ----------------
    Total liabilities and stockholders' equity................. $        153,080   $        152,458
                                                                 ================   ================`

See accompanying notes to condensed consolidated financial statements

---





SBS Technologies, Inc. and
Subsidiaries
Consolidated Statements of Operations
Thousands (except per share amounts)
(Unaudited)

`Three Months Ended
                                                                        September 30,
                                                                   ------------------------
                                                                       2005         2004
                                                                   -----------  -----------  
Sales............................................................ $    34,138  $    34,884
Cost of sales:
  Cost of products sold..........................................      19,661       19,040
  Amortization of intangible assets..............................         259          367
                                                                   -----------  -----------
    Total cost of sales..........................................      19,920       19,407
                                                                   -----------  -----------
Gross profit.....................................................      14,218       15,477

Selling, general and administrative expense......................       8,661        8,023
Research and development expense.................................       6,693        5,505
Amortization of intangible assets................................          78           71
                                                                   -----------  -----------
Operating income (loss)..........................................      (1,214)       1,878
                                                                   -----------  -----------
Interest and other income, net...................................         396          141
Foreign exchange losses..........................................         (12)        (102)
                                                                   -----------  -----------
                                                                          384           39
                                                                   -----------  -----------
Income (loss) before income taxes................................        (830)       1,917
Income tax expense (benefit).....................................        (291)         671
                                                                   -----------  -----------
Net income (loss)................................................ $      (539) $     1,246
                                                                   ===========  ===========


Earnings per share data:
  Net income (loss) per share.................................... $     (0.03) $      0.08
                                                                   ===========  ===========
  Net income (loss) per share -
    assuming dilution............................................ $     (0.03) $      0.08
                                                                   ===========  ===========

Weighted average shares used in net income
  (loss) per share computations..................................      15,646       15,504
                                                                   ===========  ===========
Weighted average shares used in net income
  (loss) per share - assuming dilution
  computations...................................................      15,646       15,664
                                                                   ===========  ===========`

See accompanying notes to condensed consolidated financial statements.

---





SBS Technologies, Inc. and
Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity and Comprehensive Income
For Three Months Ended September 30, 2005
Thousands (except share amounts)
(Unaudited)

`Accumulated
                                                                                         other                 Total      Compre-
                                                        Common Stock         Unearned    compre-               stock-    hensive
                                                     ----------------------   compen-   hensive    Retained   holders'    income
                                                       Shares      Amount     sation     income    earnings    Equity     (loss)
                                                     -----------  ---------  ---------  ---------  ---------  ---------  ---------

Balances at June 30, 2005........................... 15,645,929  $  98,369  $     (84) $   2,014  $  35,588  $ 135,887
Exercise of stock options...........................        326          2         --         --         --          2
Stock-based compensation............................         --         35         94         --         --        129
Restricted stock awards issued......................         --        535       (535)        --         --         --
Comprehensive income (loss):
  Net loss..........................................         --         --         --         --       (539)      (539) $    (539)
  Other comprehensive income:
    Foreign currency translation adjustments........         --         --         --        238         --        238        238
                                                                                                                         ---------
    Comprehensive income (loss).....................                                                                    $    (301)
                                                     -----------  ---------  ---------  ---------  ---------  ---------  =========
Balances at September 30, 2005...................... 15,646,255  $  98,941  $    (525) $   2,252  $  35,049  $ 135,717
                                                     ===========  =========  =========  =========  =========  =========`

See accompanying notes to condensed consolidated financial statements

---





SBS Technologies, Inc. and
Subsidiaries
Consolidated Statements of Cash Flows
Thousands
(Unaudited)

`Three months ended
                                                                            September 30,
                                                                        ------------------------
                                                                            2005         2004
                                                                        -----------  -----------
Cash flows from operating activities:
  Net income (loss)................................................... $      (539) $     1,246
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
      Depreciation and amortization...................................       1,250        1,440
      Bad debt expense................................................         115          (61)
      Deferred income taxes...........................................         181          (14)
      Loss on disposition of assets...................................          --          (10)
      Foreign exchange losses.........................................          12          102
      Stock-based compensation........................................         129           22
      Changes in assets and liabilities:
        Receivables...................................................         351         (997)
        Inventories...................................................        (641)        (627)
        Prepaid expenses and other....................................        (182)          (5)
        Accounts payable..............................................         941       (2,485)
        Accrued representative commissions............................        (100)        (331)
        Income taxes..................................................        (941)       3,193
        Accrued compensation..........................................         235         (608)
        Accrued severance and consolidation costs.....................        (120)        (110)
        Other liabilities.............................................         715          297
                                                                        -----------  -----------
        Net cash provided by operating activities.....................       1,406        1,052

Cash flows from investing activities:
  Acquisition of property and equipment...............................        (683)        (618)
                                                                        -----------  -----------
        Net cash used by investing activities.........................        (683)        (618)

Cash flows from financing activities:
  Proceeds from exercise of stock options.............................           2           92
                                                                        -----------  -----------
        Net cash provided by financing activities.....................           2           92
Effect of exchange rate changes on cash...............................         (52)         157
                                                                        -----------  -----------
        Net change in cash and cash equivalents.......................         673          683
Cash and cash equivalents at beginning of period......................      55,195       47,943
                                                                        -----------  -----------
Cash and cash equivalents at end of period............................ $    55,868  $    48,626
                                                                        ===========  ===========
Supplemental disclosure of cash flow information:
  Income taxes paid, net.............................................. $       385  $     2,450
                                                                        ===========  ===========`

See accompanying notes to condensed consolidated financial statements.

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 2005
(Unaudited)

1)	Summary of Significant
Accounting Policies



The accounting policies as set forth in SBS Technologies,
Inc.'s (SBS or the Company) Annual Report on Form 10-K for the year ended June
30, 2005 have been adhered to in preparing the accompanying interim condensed
consolidated financial statements.  These statements are unaudited but include
all adjustments, consisting of normal recurring adjustments, that SBS considers
necessary for a fair presentation of the financial position, results of
operations, and cash flows for such interim periods.  Results for such interim
periods are not necessarily indicative of results for the full fiscal year 2006
or any other future periods.

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the Condensed Consolidated Financial Statements and accompanying notes. Actual
results could differ from these estimates.

Effective July 1, 2005, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123R, Share-Based
Payment, (SFAS 123R) using the modified prospective method.  See Note 12 for
additional information regarding stock based compensation.

2)	Receivables, net

Receivables, net consist of the following:

`September 30,  June 30,
Thousands                                        2005          2005
                                              -----------   -----------   
Accounts receivable........................ $     27,508  $     27,836
Less allowance for doubtful accounts.......         (373)         (301)
                                              -----------   -----------
                                            $     27,135  $     27,535
                                              ===========   ===========`

3)	Inventories

Inventories consist of the following:

`September 30,  June 30,
Thousands                                        2005          2005
                                              -----------   -----------   
Raw materials.............................. $     12,003  $      9,711
Work in process............................        3,585         3,880
Finished goods.............................        6,843         8,224
                                              -----------   -----------
                                            $     22,431  $     21,815
                                              ===========   ===========`



---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

4)	Goodwill and Intangible Assets

The Company completed the required annual goodwill impairment
analysis for the fiscal year ended June 30, 2005, as of April 1, 2005, and the
estimated fair value of goodwill was determined to be in excess of its carrying
value, indicating the underlying goodwill was not impaired at that date.

Changes in the carrying amount of goodwill for the three
months ended September 30, 2005 are as follows:

`Total Goodwill by Operating Segment
Thousands                                      Americas       Europe         Total
                                              -----------   -----------   -----------  
Balance at June 30, 2005................... $      3,697  $     13,298  $     16,995
Foreign currency translation adjustments ..          159           (20)          139
                                              -----------   -----------   -----------
Balance at September 30, 2005.............. $      3,856  $     13,278  $     17,134
                                              ===========   ===========   ===========`

The following table discloses information regarding the
carrying amounts and associated accumulated amortization for intangible assets
subject to amortization.

`Amortized Intangible Assets
------------------------------------------------------------------------------------
                                    Estimated      Gross                      Net
                                      useful     carrying    Accumulated   carrying
 Thousands                             life       amount     amortization   amount
                                    ----------   ---------   -----------   ---------
As of September 30, 2005            
  Current technology............... 2 - 7 yrs  $    9,504  $      7,672  $    1,832
  License agreements............... 2 - 5 yrs         227           132          95
  Covenant not to compete.......... 3 - 5 yrs       1,381           621         760
  Other intangibles................ 8 - 17 yrs        380           227         153
                                                 ---------   -----------   ---------
        Total                                  $   11,492  $      8,652  $    2,840
                                                 =========   ===========   =========
As of June 30, 2005                 
  Current technology............... 2 - 7 yrs  $    9,816  $      7,767  $    2,049
  License agreements............... 2 - 5 yrs       2,452         2,345         107
  Covenant not to compete.......... 3 - 5 yrs       2,965         2,176         789
  Other intangibles................ 8 - 17 yrs        376           213         163
                                                 ---------   -----------   ---------
        Total......................            $   15,609  $     12,501  $    3,108
                                                 =========   ===========   =========`

The net change in the gross carrying amount and accumulated
amortization balances reflected above are primarily the result of the removal of
assets which were fully amortized as of June 30, 2005 and changes as a result of
foreign currency translation adjustments.  Accordingly, the net change in
accumulated amortization for the period does not agree to amortization expense
reported in the accompanying statements of operations for the period.

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

The following table summarizes estimated amortization expense
for future periods as follows:

`Estimated amortization expense:                        Thousands    
  Remainder of fiscal year ending June 30, 2006..... $     1,069
  For the fiscal years ending:
      June 30, 2007.................................       1,209
      June 30, 2008.................................         520
      June 30, 2009.................................           5
      June 30, 2010 and thereafter..................          37
                                                       ----------
                                                     $     2,840
                                                       ==========`

5)	Revolving Line of Credit

SBS maintains a revolving line of credit agreement (Credit
Agreement) with Wells Fargo Bank National Association.  The Credit Agreement
provides for borrowings for working capital and general corporate purposes of up
to $20 million and any outstanding borrowings are due and payable in full on March
28, 2006.  The Credit Agreement is secured by a first priority lien on
substantially all assets of SBS.  Interest on borrowings is set forth in each
promissory note executed under the terms of the Credit Agreement and is either
payable on a variable basis at the Wells Fargo Bank prime rate or payable for a
fixed rate term of either one, two or three months at a rate of LIBOR plus
1.75%.  There have been no borrowings under the Credit Agreement through
September 30, 2005.

The terms of the Credit Agreement, as amended, require SBS to
comply with certain financial and other covenants.  Effective on May 9, 2005,
the Credit Agreement was amended (First Amendment to Credit Agreement) to modify
the minimum tangible net worth requirement defined in Section 4.9(a) of the
agreement to exclude the impact of foreign currency translation adjustments from
the minimum required balance.  As of September 30, 2005, SBS is in compliance
with all financial covenants required under the terms of the amended Credit
Agreement.  In addition, SBS is required to maintain its primary operating
accounts with Wells Fargo Bank or maintain a balance of not less than $20
million on deposit with the bank. As of September 30, 2005, the Company's
balance on deposit with Wells Fargo Bank was in excess of the $20 million
requirement.

6) 	Accrued Compensation

In fiscal 2006, in connection with our adoption of SFAS 123R
on July 1, 2005, management reviewed and evaluated the potential impact of the
future recognition of stock-based compensation associated with stock option
grants if the Company continued to grant stock options to employees at levels
consistent with prior year grants.  Based on this evaluation, management
recommended to the Board of Directors that the Company adopt a pay-for-
performance model based on cash compensation, together with limited restricted
stock award grants, as the primary form of incentive compensation for employees.
This decision represents a change from our historical granting of stock options
to employees as the primary form of incentive compensation.  Accordingly, on
July 25, 2005, the Company's Board of Directors approved the following incentive
compensation plans: the SBS Technologies FY 2006 Employee Bonus Plan (FY 2006
EBP); the SBS Technologies FY 2006 Executive Incentive Plan (FY 2006 EIP); and
the SBS Technologies FY 2006 Long-Term Executive Incentive Plan (FY 2006 LTEIP).

FY 2006 Employee Bonus Plan

Under the FY 2006 EBP, non-executive employees of the Company
in the United States who are not covered by sales commission arrangements are
entitled to receive cash bonuses depending on the achievement of certain
specified performance goals.  The FY 2006 EBP commenced on July 1, 2005 and
concludes on June 30, 2006.  Awards are targeted at 7% of an employee's eligible
income as defined in the FY 2006 EBP.  Individual awards will be based on the
Company meeting certain specified levels of (i) revenue and (ii) earnings before
interest expense, income taxes,

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

depreciation and amortization
("EBITDA") and (iii) the achievement of individual performance goals.
The specific thresholds with respect to the the Company's performance and the
percentage weighting for the required metrics under the FY 2006 EBP were
approved by the Company's Board of Directors.  The FY 2006 EBP will be
administered in six-month performance periods that coincide with each half of
the Company's fiscal year ending on June 30, 2006.  Participants will be
entitled to receive bonuses ranging from 0% to 120% of their targeted award per
six-month performance period, depending on the level of the Company's
performance and the individual employee's performance.  For the three months
ended September 30, 2005, management has recorded an estimate of approximately
$295,000 for incentive compensation in fiscal 2006 in connection with the FY
2006 EBP which is included under the caption accrued compensation in the
accompanying consolidated balance sheets.

FY 2006 Executive Incentive Plan

Under the FY 2006 EIP, certain designated executives
identified as participants in this plan are entitled to receive cash bonuses if
the Company's actual performance meets certain specified levels of (i) revenue
and (ii) EBITDA as established by the Board of Directors, as well as (iii) the
achievement of financial goals at different levels of the Company's operating
structure (referred to as "Division Goals") and (iv) individual
performance goals as established by the Chief Executive Officer.  The FY 2006
EIP commenced on July 1, 2005 and concludes on June 30, 2006.  The designated
executives will be entitled to receive cash incentive bonus payments up to 20%
of eligible income as defined in the EIP for attainment of Threshold I and up to
40% of eligible income for attainment of Threshold II, depending on the level of
the Company's performance, the level of financial performance of the respective
employees operating group (if applicable), and the individual employee's
performance.  In the event Company revenue and EBITDA performance levels at
Threshold I are not achieved, there will be no bonus payment.  In the event
Company revenue and EBIDTA performance levels attained are above Threshold I,
but less than Threshold II, the percentage payouts will be adjusted
appropriately based on the level of achievement.  For the three months ended
September 30, 2005, management has recorded an estimate of approximately $73,000
for incentive compensation in fiscal 2006 in connection with the FY 2006 EIP
which is included under the caption accrued compensation in the accompanying
consolidated balance sheets.

FY 2006 Long-Term Executive Incentive Plan

Under the FY 2006 LTEIP, certain designated executives
identified as participants in this plan are entitled to receive cash bonuses if
the Company's actual performance for average annual earnings per share growth
and operating margin over the three-year period beginning July 1, 2005 and
ending June 30, 2008 exceed certain performance levels (Threshold I, Threshold
II, and Threshold III) as established by the Board of Directors.  The Board also
established and approved the relative weighting that will be used to determine
the amount of the overall incentive compensation awards.  The term of the LTEIP
is July 1, 2005 through June 30, 2008.  Performance of the Company above any
Threshold but less than the next Threshold will result in a graduated
proportional pay-out; below Threshold I performance results in no pay-out.  For
the three months ended September 30, 2005, management has recorded an estimate
of approximately $58,000 for incentive compensation in fiscal 2006 in connection
with the FY 2006 LTEIP which is included under the caption accrued compensation
in the accompanying consolidated balance sheets.

Restricted Stock Award under the FY 2006 LTEIP

Under the FY 2006 LTEIP, restricted stock awards, made
out of SBS' 1998 Long-Term Equity Incentive Plan, for 53,462 shares of the
Company's common stock were granted to certain designated executives on July 25,
2005.  The restrictions on the restricted stock awards lapse on June 30, 2008,
regardless of whether any cash incentive awards are paid under the LTEIP,
provided the designated executive remains an employee of the Company throughout
the term of the LTEIP.  If a change in control of SBS occurs, the shares of
restricted stock will vest on the date of the close of the change in control
transaction.  The restricted stock awards were issued under the terms of the
Company's 1998 Long-Term Equity Incentive Plan.  See discussion regarding stock-
based compensation associated with the restricted stock awards included in Note
12, "Stock-Based Compensation."

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

7)	Product Warranty Liability

The Company's customers receive a warranty, generally for
a period of two years, upon purchase of products.  The Company accrues estimated
costs to repair or replace potentially defective products when products are
shipped and revenue is recognized. Estimated warranty costs are based on prior
warranty costs for substantially similar products.  The following table presents
the activity in the product warranty liability for the three months ended
September 30:

`2005         2004
Thousands                                              ----------   ----------   
Balance at beginning of period...................... $       765  $       599
  Estimated warranty costs for product sales........         156          212
  Adjustments to settle warranty activity...........        (113)        (173)
                                                       ----------   ----------
Balance at end of period............................ $       808  $       638
                                                       ==========   ==========`

8) 	Accrued Consolidation Costs

On June 12, 2003, the Company announced the closure of
its Carlsbad, California facility and the consolidation of its manufacturing
operations into the Company's St. Paul, Minnesota facility.  The costs
associated with the closure included certain lease termination costs recorded on
the cease use date in accordance with SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities.  The lease termination charge,
recorded on the cease use date, represents the estimated fair value of the
remaining future lease payments and related obligations, net of estimated
sublease income, over the term of the lease.  The remaining accrued costs
represent primarily lease obligations expected to be paid monthly through April
2006.

9)	Earnings Per Share

Net income (loss) per share is based on weighted average
shares outstanding.  Net income (loss) per share - assuming dilution includes
the dilutive effects of potential common shares outstanding during the period.

`Three Months Ended
                                                            September 30,
                                                       -----------------------
Thousands (except per share amounts)                       2005         2004  
                                                       ----------   ----------
Net income (loss)................................... $      (539) $     1,246
                                                       ==========   ==========
Net income (loss) per share:
  Weighted-average common shares outstanding
    used in earnings per share computations.........      15,646       15,504
                                                       ==========   ==========
  Net income (loss) per share....................... $     (0.03) $      0.08
                                                       ==========   ==========
Net income (loss) per share - assuming dilution:
  Weighted-average common shares outstanding
    used in earnings per share computations.........      15,646       15,664
                                                       ==========   ==========
  Net income (loss) per share - assuming dilution... $     (0.03) $      0.08
                                                       ==========   ==========
Shares Used in Per Share Computations:
  Weighted average common shares outstanding........      15,646       15,504
  Incremental shares from assumed conversions -
    potential common shares ........................          --          160
                                                       ----------   ----------
  Shares used in computations - assuming dilution...      15,646       15,664
                                                       ==========   ==========`

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

Due to the reported net loss for the three months ended
September 30, 2005, 42,668 potential common shares were not included in the
computation of earnings per share - assuming dilution because the effect would
be anti-dilutive.  For the three month periods ended September 30, 2005 and
2004, options to purchase 3,055,567 and 1,678,105  shares of common stock,
respectively, were outstanding but were not included in the computation of
earnings per share - assuming dilution because the options' exercise prices were
greater than the average market price of the common shares.

10)	Comprehensive Income (Loss)

Comprehensive income (loss) for the three month periods
ended September 30, 2005 and 2004 was ($0.3) million and $2.4 million,
respectively.  The difference between comprehensive income (loss) and net income
(loss) was related to foreign currency translation adjustments.

11)	Segment Financial Data

The Company is engaged in the design, research,
development, integration and production of embedded computer products and we
operate worldwide through two operating segments: the Americas Group and the
Europe Group.  Both the Americas Group and the Europe Group offer our complete
portfolio of embedded computer products to customers in the government,
commercial and communications end markets.  Each segment has management who
report directly to the Company's Chief Executive Officer and its own sales and
distribution channels.  The Americas Group consists of the Company's operations
based in the United States and Canada including the sales, engineering and test
activities in Albuquerque, New Mexico; Mansfield, Massachusetts; Newark,
California; Raleigh, North Carolina; St. Paul, Minnesota; and Waterloo, Ontario,
Canada; the manufacturing and assembly operations located in St. Paul, Minnesota
and Albuquerque, New Mexico; and the sales and support activities based in
Shenzhen, China.  The Europe Group consists of the Company's operations based in
Germany which include the sales, engineering, test, assembly, and manufacturing
activities located in Augsburg and Mindelheim, Germany.

SBS measures the results of operations for segments (segment
profit (loss)) based on income (loss) before income taxes and prior to (a) the
allocation of corporate overhead expenses other than marketing costs, (b)
substantially all amortization associated with acquisitions and (c) interest and
other income from our U.S. operations.  The accounting policies used to measure
segment profit (loss) are the same as those referred to in Note 1.

`Americas     Europe      Corporate &
Thousands                                         Group       Group     Unallocated (1)    Total
                                                ---------   ---------   --------------   ---------
Three month periods ended September 30 
Gross sales...........................  2005  $   25,302  $   14,302  $            --  $   39,604
Inter-segment sales...................            (3,333)     (2,133)              --      (5,466)
                                                ---------   ---------   --------------   ---------
Sales to external customers...........        $   21,969  $   12,169  $            --  $   34,138

Gross sales...........................  2004  $   25,039  $   13,557  $            --  $   38,596
Inter-segment sales...................            (1,617)     (2,095)              --      (3,712)
                                                ---------   ---------   --------------   ---------
Sales to external customers...........        $   23,422  $   11,462  $            --  $   34,884

Segment profit (loss)                   2005  $      891  $    1,779  $        (3,500) $     (830)
                                        2004  $    2,495  $    2,388  $        (2,966) $    1,917

Total assets
              As of September 30, 2005        $   32,409  $   39,934  $        80,737  $  153,080
                   As of June 30, 2005        $   34,349  $   38,067  $        80,042  $  152,458`

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)



|(1)The corporate and unallocated column includes
amounts for corporate items.  With regard to results of operations, corporate
and unallocated includes corporate overhead expenses other than corporate
marketing costs, interest income and interest expense from our U.S. operations,
and substantially all amortization associated with acquisitions.  Corporate
assets primarily include cash and cash equivalents from our U.S. operations,
deferred and current income tax assets, goodwill and intangible assets.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12)	Stock Based Compensation

Effective on July 1, 2005, we adopted SFAS 123R using the
modified prospective method, which requires measurement of compensation cost for
all stock-based awards at fair value on the grant date and recognition of
compensation expense over the requisite service period for awards expected to
vest.  The fair value of stock option grants is determined using the Black-
Scholes valuation model, which is consistent with our valuation techniques
previously utilized for options in footnote disclosures required under SFAS No.
123, Accounting for Stock Based Compensation, (SFAS 123) as amended by
SFAS No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure (SFAS 148).  The fair value of restricted stock awards is
determined based on the number of shares granted and the quoted price of our
common stock.  Such fair values will be recognized as compensation expense over
the requisite service period, net of estimated forfeitures, using the
accelerated method under SFAS 123R.

The fair value method under SFAS 123R is similar to the fair
value method under SFAS 123 as amended by SFAS 148 with respect to measurement
and recognition of stock-based compensation.  However, SFAS 123 permitted us to
recognize forfeitures as they occur, while SFAS 123R requires us to estimate
future forfeitures and adjust our estimate on a quarterly basis.  SFAS 123R also
requires a classification change in the statement of cash flows; whereby, the
income tax benefit from stock option exercises are reported as a financing cash
flow rather than an operating cash flow as previosly reported.

The Company has several Board and shareholder approved stock
option plans for which stock options and restricted stock awards are available
to grant to employees and directors.  All employee and director stock options
granted under the Company's stock option plans have an exercise price equal to
the market value of the underlying common stock on the grant date.  There are no
vesting provisions tied to performance conditions for any options as vesting for
all outstanding option grants was based only on continued service as an employee
of the Company.  All of the Company's outstanding stock options and restricted
stock awards are classified as equity instruments.

On April 21, 2005, the Board of Directors of SBS approved the
acceleration of the vesting of all outstanding unvested stock options with an
exercise price greater than $9.22 (the Acceleration).  The Acceleration was
effective for all such options outstanding on April 21, 2005, all of which were
granted by the Company when the Company used the intrinsic-value method of
accounting for stock options. All of the other terms and conditions applicable
to such outstanding stock option grants still apply.  The Company's decision to
accelerate the vesting of these options was in anticipation of compensation
expense to be recorded subsequent to the effective date of the Company's
adoption of SFAS 123R in connection with outstanding unvested stock options
issued to employees.

As a result of the Acceleration, options to purchase
approximately 1.3 million shares of SBS' common stock became immediately
exercisable on April 21, 2005. Due to the Acceleration, the Company will not
recognize stock-based compensation expense of approximately $2.5 million in
fiscal years ending June 30, 2006 and beyond (estimated using the Black-Scholes
fair value model).  The stock-based compensation expense which otherwise would
have been reported in future periods, has been reflected in pro forma footnote
disclosures for periods prior to the adoption of SFAS 123R, as permitted under
the provisions of SFAS 123 prior to its revision.

Stock Options

On the date of adoption of SFAS 123R, there were 3,397,414
outstanding stock options, of which 3,296,080 were fully vested.  There were no
stock option grants during the three month period ended September 30, 2005.

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

For the three months ended September 30, 2005, the Company
recorded approximately $36,000 of stock-based compensation expense associated
with outstanding unvested stock options in selling, general and administrative
expense in the accompanying consolidated statements of operations.  As of
September 30, 2005, there was approximately $170,000 of remaining unamortized
stock-based compensation expense associated with unvested stock options which
will be expensed over the remaining service period through April 2008.

The following table summarizes our stock option activity in
fiscal 2006:

`Weighted avg
                                      Number of     Exercise
                                       options        Price
                                     -----------   ----------- 
Outstanding at June 30, 2005          3,397,414  $      14.39

  Granted                                    --            --
  Exercised                                 326          5.40
  Cancelled                              39,065         19.35
                                     -----------
Outstanding at September 30, 2005     3,358,023  $      14.33
                                     ===========

As of September 30, 2005:
  Options exercisable                 3,261,689
                                     ===========
  Shares available for grant          2,287,355
                                     ===========`

Significant option groups outstanding and exercisable at
September 30, 2005 and related weighted average price and life information
follows:

`Weighted
                                     Average     Weighted                 Weighted
                                    Remaining    Average                  Average
      Range of           Number    Contractual   Exercise     Number      Exercise
  Exercise Prices     Outstanding     Life        Price    Exercisable     Price    
--------------------  ------------ -----------  ---------- ------------  ----------
 $  5.44 - $ 10.85        680,913     6.80     $     9.36      584,579  $     9.56
 $ 10.94 - $ 12.49        786,104     7.47          12.21      786,104       12.21
 $ 12.69 - $ 14.50        821,506     6.29          13.63      821,506       13.63
 $ 14.61 - $ 17.00        731,500     4.48          15.78      731,500       15.78
 $ 17.47 - $ 34.50        338,000     4.91          27.83      338,000       27.83
                      ------------ -----------  ---------- ------------  ----------
 $  5.44 - $ 34.50      3,358,023     6.14     $    14.33    3,261,689  $    14.51
                      ============                         ============`

Restricted Stock Awards

For the three months ended September 30, 2005, approximately
$93,000 of stock-based compensation associated with restricted stock awards was
recorded in selling, general and administrative expense in the accompanying
consolidated statements of operations. As of September 30, 2005, there was
approximately $525,000 of remaining unamortized deferred compensation associated
with restricted stock awards, reflected as a separate component of stockholders'
equity in the accompanying consolidated condensed balance sheets, which will be
expensed over the remaining service period through June 30, 2008.

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

On the date of adoption of SFAS 123R, there were 17,020
outstanding restricted stock awards issued to Independent Directors in November
and December 2004 in connection with their service on the Company's Board of
Directors.

On July 25, 2005, restricted stock awards for 53,462 shares
of the Company's common stock were granted to certain designated executives in
connection with the FY 2006 LTEIP.  The restricted stock awards vest on June 30,
2008 provided the designated executive remains an employee of the Company
through June 30, 2008.  In the event of a change in control of SBS, the shares
of restricted stock will vest on the date of the close of the change in control
transaction.  The restricted stock awards were issued under the Company's 1998
Long-Term Equity Incentive Plan.  The fair value for each of the 53,462
restricted stock awards granted was $10 per share based on the closing price of
the Company's common stock on July 25, 2005.  The total compensation of $534,620
was recorded as deferred compensation, a separate component of stockholders'
equity in the accompanying consolidated balance sheets, and will be amortized to
expense over the requisite service period from July 2005 to June 2008.  For the
three months ended September 30, 2005, the Company recorded approximately
$30,000 of stock-based compensation expense associated with the FY 2006 LTEIP
restricted stock awards.

Fair Value Disclosures - Prior to Adoption of SFAS
123R

Prior to July 1, 2005, the Company accounted for stock-based
awards under the intrinsic value method, which followed the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Under this method, compensation
expense was recorded on the date of grant only if the current market price of
the underlying stock exceeded the exercise price. Substantially all stock-based
compensation reflected in reported net income related to restricted stock award
grants to members of the Company's Board of Directors.  The following table
illustrates the effect on net income (loss) and net income (loss) per common
share in prior periods if the Company had applied the fair value recognition
provisions of SFAS 123 to stock-based employee compensation prior to adoption of
SFAS 123R.

`Three months
                                                                             ended
                                                                            Sept. 30,
Thousands (except per share amounts)                                          2004
                                                                          ----------- 
Net income (loss), as reported......................................... $      1,246
Stock-based compensation, net of tax effects:
     Add: compensation included in reported net income (loss)..........           13
     Deduct: compensation determined under fair value method...........         (365)
                                                                          -----------
Pro forma net income (loss)............................................ $        894
                                                                          ===========
Net income (loss) per common share, as reported........................ $       0.08
                                                                          ===========
Net income (loss) per common share, pro forma.......................... $       0.06
                                                                          ===========
Net income (loss) per common share - assuming dilution, as reported.... $       0.08
                                                                          ===========
Net income (loss) per common share - assuming dilution, pro forma...... $       0.06
                                                                          ===========`

---



SBS Technologies, Inc. and
Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
September 30, 2005
(Unaudited)

13)	Contingencies

SBS is subject to various claims that arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations, or liquidity of SBS.



---



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

For a description of SBS' critical accounting policies and an
understanding of the significant factors that influenced SBS' performance during
the three months ended September 30, 2005 and 2004, this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
(MD&A) should be read in conjunction with the consolidated financial
statements, including the related notes, appearing in Item 1 of this Form 10-Q,
as well as our Annual Report on Form 10-K for the year ended June 30, 2005.

Company Overview

We design and build open-architecture embedded computer products that
enable OEMs to serve the government, commercial, and communications end markets.
Embedded computer products are put inside or made part of larger systems to
process information, control machines, move computer data between machines, and
interact with people.  The companies that use our products manufacture very
sophisticated, expensive devices, such as MRI machines, flight simulators,
wireless networks, fighter jets and industrial robots.

The SBS product line is strategically focused on embedded computing, and we
serve virtually all parts of the market.  We currently list more than 550
products in the product section of our website,

We serve a broad range of customers. We help our customers get to market
faster, more reliably and more economically, by providing a wide range of
standard and customized embedded computer products.  Our products have
application in diverse industries, including space and aviation,
telecommunications, military and government, transportation, robotics,
networking, broadcasting, wireless communications and medical imaging.

The embedded computer industry is highly competitive and fragmented.  The
size of the total addressable embedded computer market has been estimated by
industry publications to be approximately $4 billion for board-level products,
exclusive of complete embedded computer systems.  This market is addressed by
many competitors.  No single competitor holds a dominant position in the
embedded computer market.

We have grown because we understand our role in the embedded computing
process: we make components which are part of larger, more complicated devices.
As embedded computer applications expand, we broaden our product line to meet
our customers' needs and to attract new customers. We invest in technology and
customer service so that we can grow with our customers.

We have grown organically and through strategic acquisitions, acquiring
companies that supplement our core competencies - a pattern we expect to
continue. Our organic growth is driven by adding new products, improving
existing products through our research and development program, and attracting
new customers with our products and service. We have completed eleven
acquisitions since 1992 that broadened our product offerings and our customer
base.

Executive Summary

The September quarter was an excellent bookings quarter, with orders at
$40.1 million, increasing our backlog to $50.4 million from $44.4 million at the
end of the prior quarter.  As we discussed in our press release dated September
27, 2005, sales were below our original guidance of $35 million to
$37 million due to a combination of supplier problems and customer delays
that unfortunately were not resolved in time to allow the affected shipments to
occur before the end of September.  Compared to the quarter ended September 30,
2004 and the preceding quarter, an increased proportion of sales of lower margin
products and competitive pricing lowered gross profit as a percentage of sales.
Although our financial results for the quarter ended September 30, 2005 were not
as strong as our original expectations, our solid bookings and increased backlog
give us confidence we will achieve our sales projections for the fiscal
year.

During the quarter ended September 30, 2005:

- Sales for the quarter were $34.1 million;

On a sequential basis, total sales decreased 10.1%, compared to $38.0 million
in sales for the quarter ended 
June 30, 2005.

---



- Net loss for the quarter was ($539,000).  Net loss per share - assuming
dilution for the quarter was ($0.03), compared to net income per share -
assuming dilution of $0.08 for the comparable period of the prior year.
- Customer orders received and booked during the quarter were $40.1 million.
This resulted in a book-to-bill ratio of 1.17 to 1 for the quarter.

Book-to-bill ratio represents the net value of customer orders received
and booked each period divided by total sales. Historically, 30% to 40% of our
sales in each fiscal quarter will be based on orders received and booked during
that same fiscal quarter, and we expect this pattern to continue.

- Order backlog was $50.4 million as of September 30, 2005, compared to
$44.4 million at the end of the preceding quarter on June 30, 2005 and $46.9
million as of September 30, 2004;

Order backlog represents customer orders that have been contracted for
future delivery. Accordingly, these orders have not yet been recognized as
revenue, but represent potential future revenue.

- We achieved eleven design wins during the quarter.

In the government and commercial markets, each reported design win
represents an initial purchase order of a minimum of $100,000 and is forecasted
to produce a minimum of $500,000 in sales annually when in production.

Recognizing the different characteristics of the communications market,
beginning this quarter we have lowered the minimum purchase order value for
design wins in the communications market to $10,000, although the minimum of
$500,000 in sales annually when in production remains unchanged.  Based on
quoting activity for design win opportunities, we believe that the production
potential is large but initial orders are in low-value prototype quantities.
The new threshold is more representative of our customers' future order patterns
in the communications market.

By end market, the design wins included seven in the government market,
two in the commercial market and two in the communications market.

- For the quarter ended September 30, 2005, as a percentage of total sales,
sales to one communications customer, Ericsson, represented 17%; and sales to
one commercial customer, Applied Materials, represented 7%.  No other customer
represented more than 5% of sales.

Financial Highlights

Selected financial highlights during the three month period ended
September 30, 2005 compared to the same period of the prior fiscal year and the
preceding quarter ended June 30, 2005 follows:

`Three Months Ended
                          ------------------------------------------------
                               September 30,
Thousands (except         -------------------    %       June 30,    %
  per share amounts)          2005       2004  change      2005    change  
                          --------   -------- --------   -------- --------
Sales.................. $  34,138  $  34,884     -2.1% $  37,973    -10.1%
                          ========   ========            ========

Net income (loss)...... $    (539) $   1,246   -143.3% $     767   -170.3%
                          ========   ========            ========

Net income (loss) per share
  - assuming dilution.. $   (0.03) $    0.08           $    0.05
                          ========   ========            ========`

See detailed analysis of the financial results below.

Stock-Based Compensation

Effective on July 1, 2005, we adopted the provisions of Statement of
Financial Accounting Standards No. 123R, Share-Based Payment, (SFAS
123R) using the modified prospective method, which requires measurement of
compensation cost for all stock-based awards at fair value on the grant date and
recognition of compensation expense over the requisite service period for awards
expected to vest.

The fair value method under SFAS 123R is similar to the fair value method
under SFAS No. 123, Accounting for Stock Based Compensation, (SFAS 123)
as amended by SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure

---

(SFAS 148) with respect to measurement and
recognition of stock-based compensation.  However, SFAS 123 permitted us to
recognize forfeitures as they occur, while SFAS 123R requires us to estimate
future forfeitures and adjust our estimate on a quarterly basis.  SFAS 123R also
requires a classification change in the statement of cash flows; whereby, the
income tax benefit from stock option exercises is reported as a financing cash
flow rather than an operating cash flow as previosly reported.

We have several Board and shareholder approved stock option plans for which
stock options and restricted stock awards are available to grant to employees
and directors.  All employee and director stock options granted under our stock
option plans have an exercise price equal to the market value of the underlying
common stock on the grant date.  There are no vesting provisions tied to
performance conditions for any option as vesting for all outstanding option
grants was based only on continued service as an employee of SBS.  All of our
outstanding stock options and restricted stock awards are classified as equity
instruments.

On April 21, 2005, our Board of Directors approved the acceleration of the
vesting of all outstanding unvested stock options with an exercise price greater
than $9.22 (the Acceleration).  The Acceleration was effective for all such
options outstanding on April 21, 2005, all of which were granted by us when we
used the intrinsic-value method of accounting for stock options.  All of the
other terms and conditions applicable to such outstanding stock option grants
still apply.  Our decision to accelerate the vesting of these options was in
anticipation of compensation expense to be recorded subsequent to the effective
date of SFAS 123R on July 1, 2005 in connection with outstanding unvested stock
options issued to employees.  As a result of the Acceleration, options to
purchase approximately 1.3 million shares of SBS' common stock became
immediately exercisable on April 21, 2005.  Due to the Acceleration, SBS will
not recognize stock-based compensation expense of approximately $2.5 million in
fiscal years ending
June 30, 2006 and beyond (estimated using the Black-Scholes fair value model).

Stock Options

On the date of adoption of SFAS 123R, there were 3,397,414 outstanding
stock options, of which 3,296,080 were fully vested.  There were no stock option
grants during the three month period ended September 30, 2005.

For the three months ended September 30, 2005, we recorded approximately
$36,000 of stock-based compensation expense associated with outstanding unvested
stock options in selling, general and administrative expense.  As of September
30, 2005, there was approximately $170,000 of remaining unamortized stock-based
compensation expense associated with unvested stock options which will be
expensed over the remaining service period through April 2008.

Restricted Stock Awards

For the three months ended September 30, 2005, approximately
$93,000 of stock-based compensation associated with restricted stock awards was
recorded in selling, general and administrative expense.  As of September 30,
2005, there was approximately $525,000 of remaining unamortized deferred
compensation associated with restricted stock awards, reflected as a separate
component of stockholders' equity in the accompanying consolidated condensed
balance sheets, which will be expensed over the remaining service period through
June 30, 2008.

Managements Evaluation of Incentive Compensation Plans

In fiscal 2006, in connection with our adoption of SFAS 123R on July 1,
2005, management reviewed and evaluated the potential impact of the future
recognition of stock-based compensation associated with stock option grants if
we continued to grant stock options to employees at levels consistent with prior
year grants.  Based on this evaluation, management recommended to the Board of
Directors that we adopt a pay-for-performance model based on cash compensation,
together with limited restricted stock award grants, as the primary form of
incentive compensation for employees.  This decision represents a change from
our historical granting of stock options to employees as the primary form of
incentive compensation.  As a result, on July 25, 2005, our Board of Directors
approved the following incentive compensation plans: the SBS Technologies FY
2006 Employee Bonus Plan (FY 2006 EBP); the SBS Technologies FY 2006 Executive
Incentive Plan (FY 2006 EIP); and the SBS Technologies FY 2006 Long-Term
Executive Incentive Plan (FY 2006 LTEIP).

FY 2006 Employee Bonus Plan

Under the FY 2006 EBP, non-executive employees of SBS in the United
States who are not covered by sales commission arrangements are entitled to
receive cash bonuses depending on the achievement of certain specified
performance goals.  The FY 2006 EBP commenced on July 1, 2005 and concludes on
June 30, 2006.  Awards are targeted at 7% of an employee's eligible income as
defined in the FY 2006 EBP.  Individual awards will be based on SBS meeting
certain specified levels of (i) revenue and (ii) earnings before interest
expense, income taxes, depreciation and amortization ("EBITDA") and
(iii) the achievement of individual performance goals.  The specific thresholds
with respect to SBS' performance and the percentage weighting for the required
metrics under the FY 2006 EBP were approved by our Board of Directors.  The FY
2006 EBP will be administered in six-

---

month performance periods that coincide
with each half of our fiscal year ending on June 30, 2006.  Participants will be
entitled to receive bonuses ranging from 0% to 120% of their targeted award per
six-month performance period, depending on the level of SBS' performance and the
individual employee's performance.  For the three months ended September 30,
2005, management has recorded an estimate of approximately $295,000 for
incentive compensation in fiscal 2006 in connection with the FY 2006 EBP.

FY 2006 Executive Incentive Plan

Under the FY 2006 EIP, certain designated executives identified as
participants in this plan are entitled to receive cash bonuses if our actual
performance meets certain specified levels of (i) revenue and (ii) EBITDA as
established by the Board of Directors, as well as (iii) the achievement of
financial goals at different levels of our operating structure (referred to as
"Division Goals") and (iv) individual performance goals as established
by the Chief Executive Officer.  The FY 2006 EIP commenced on July 1, 2005 and
concludes on June 30, 2006.  Designated executives will be entitled to receive
cash incentive bonus payments up to 20% of eligible income as defined in the EIP
for attainment of Threshold I and up to 40% of eligible income for attainment of
Threshold II, depending on the level of SBS' performance, the level of financial
performance of the respective employees operating group (if applicable), and the
individual employee's performance.  If our revenue and EBITDA performance levels
at Threshold I are not achieved, we will not make bonus payments.  If our
revenue and EBIDTA performance levels attained are above Threshold I, but less
than Threshold II, the percentage payouts will be adjusted appropriately based
on the level of achievement.  For the three months ended September 30, 2005,
management has recorded an estimate of approximately $73,000 for incentive
compensation in fiscal 2006 in connection with the FY 2006 EIP.

FY 2006 Long-Term Executive Incentive Plan

Under the FY 2006 LTEIP, certain designated executives identified as
participants in this plan are entitled to receive cash bonuses if our actual
performance for average annual earnings per share growth and operating margin
over the three-year period beginning July 1, 2005 and ending June 30, 2008
exceed certain performance levels (Threshold I, Threshold II, and Threshold III)
as established by the Board of Directors.  The Board also established and
approved the relative weighting that will be used to determine the amount of the
overall incentive compensation awards.  The term of the LTEIP is July 1, 2005
through June 30, 2008.  Performance of SBS above any Threshold but less than the
next Threshold will result in a graduated proportional pay-out; below Threshold
I performance results in no pay-out.  For the three months ended September 30,
2005, management has recorded an estimate of approximately $58,000 for incentive
compensation in fiscal 2006 in connection with the FY 2006 LTEIP.

Restricted Stock Award under the FY 2006 LTEIP

Under the FY 2006 LTEIP, restricted stock awards, made out of SBS' 1998
Long-Term Equity Incentive Plan, for 53,462 shares of the Company's common stock
were granted to certain designated executives on July 25, 2005.  The
restrictions on the restricted stock awards lapse on June 30, 2008, regardless
of whether any cash incentive awards are paid under the LTEIP, provided the
designated executive remains an employee of the Company throughout the term of
the LTEIP.  If a change in control of SBS occurs, the shares of restricted stock
will vest on the date of the close of the change in control transaction.

The fair value for each restricted stock award was $10 based on the closing
price of our common stock on July 25, 2005.  The total compensation for the
restricted stock awards of $534,620 will be amortized to expense over the
requisite service period from July 25, 2005 to June 30, 2008.  For the three
months ended September 30, 2005, approximately $30,000 of stock-based
compensation associated with these restricted stock awards was recorded in
selling, general and administrative expenses in the accompanying consolidated
statements of operations.

---



Results of Operations(references to fiscal 2006 and fiscal 2005 relate to
interim periods of the fiscal years ending on June 30)

The following table sets forth for the periods
indicated certain operating data as a percentage of sales:

`Three Months Ended
                                                                        September 30,
                                                                   ----------------------
                                                                       2005        2004   
                                                                   ----------  ----------
Sales............................................................      100.0 %     100.0 %
Cost of sales:
  Cost of products sold..........................................       57.6 %      54.6 %
  Amortization of intangible assets..............................        0.8 %       1.1 %
                                                                   ----------  ----------
    Total cost of sales..........................................       58.4 %      55.6 %
                                                                   ----------  ----------
Gross profit.....................................................       41.6 %      44.4 %

Selling, general and administrative expense......................       25.4 %      23.0 %
Research and development expense.................................       19.6 %      15.8 %
Amortization of intangible assets................................        0.2 %       0.2 %
                                                                   ----------  ----------
Operating income (loss)..........................................       (3.6)%       5.4 %
                                                                   ----------  ----------
Interest and other income, net...................................        1.2 %       0.4 %
Foreign exchange losses..........................................        0.0 %      (0.3)%
                                                                   ----------  ----------
                                                                         1.2 %       0.1 %
                                                                   ----------  ----------
Income (loss) before income taxes................................       (2.4)%       5.5 %
Income tax expense (benefit).....................................       (0.8)%       1.9 %
                                                                   ----------  ----------
Net income (loss)................................................       (1.6)%       3.6 %
                                                                   ==========  ==========`

Three Month Periods Ended September 30, 2005 compared to the Three
Month Periods Ended September 30, 2004

Sales

Our total sales during the quarter ended September 30, 2005 compared to the
same period of the prior fiscal year and the preceding quarter ended June 30,
2005 follows:

`Three Months Ended
                          ------------------------------------------------
                               September 30,
                          -------------------    %       June 30,    %
Thousands                     2005       2004  change      2005    change  
                          --------   -------- --------   -------- --------
Sales.................. $  34,138  $  34,884     -2.1% $  37,973    -10.1%
                          ========   ========            ========`

As we discussed in our press release dated September 27, 2005, sales were
below our original guidance of $35 million to $37 million
due to a combination of supplier problems
and customer delays that unfortunately were not resolved in time to allow the
affected shipments to occur before the end of September.  On a
sequential basis, sales decreased $3.8 million, primarily as a result of
supplier problems, customer delays, and
a decrease in sales in our quick-turn, short lead time
business when compared to sales for the preceding quarter ended June 30,
2005.

For the quarter ended September 30, 2005, as a percentage of total sales,
sales to one communications customer, Ericsson, represented 17%; and sales to
one commercial customer, Applied Materials, represented 7%.  No other customer
represented more than 5% of sales.  For the quarter ended September 30, 2004, as
a percentage of total sales, sales to one communications customer, Ericsson,
represented 13%; sales to one commercial customer, Applied Materials,
represented 11%; and sales to another European-based communications customer
represented 5%.  No other customer represented more than 5% of sales.

---



Sales by end market for the quarter ended September 30, 2005 compare to the
same period of the prior fiscal year and the preceding fiscal quarter ended June
30, 2005 as indicated below:

`SALES BY END MARKET
                                             (dollars in thousands)
                             Sept. 30,  % of     Sept. 30,  % of     June 30,   % of
Three months ended:            2005     total      2004     total      2005     total 
--------------------------   --------- -------   --------- -------   --------- -------

Government................ $   14,465      42% $   15,298      44%     16,368      43%
Communications............     10,718      31%      9,347      27%     11,828      31%
Commercial................      8,955      27%     10,239      29%      9,777      26%
                             --------- -------   --------- -------   --------- -------
Total..................... $   34,138     100% $   34,884     100%     37,973     100%
                             ========= =======   ========= =======   ========= =======`

For the three months ended September 30, 2005, sales to government customers
decreased 5.4%, sales to communications customers increased 14.7% and sales to
commercial customers decreased 12.5%, all compared to the comparable period of
the prior fiscal year.  On a sequential basis, sales to government customers
decreased 11.6%, sales to communications customers decreased 9.4% and sales to
commercial customers decreased 8.4%, all compared to the preceding quarter ended
June 30, 2005.

Gross Profit

Gross profit during the quarter ended September 30, 2005 compared to the same
period of the prior fiscal year and the preceding quarter ended June 30, 2005
follows:

`Three months ended
                                       -----------------------------------------------------
                                            September 30,
                                       ---------------------    Incr/    June 30,     Incr/
Thousands                                  2005        2004    (decr)      2005      (decr)  
                                       ---------   ---------   -------   ---------   -------
Gross profit........................ $   14,218  $   15,477  $ (1,259) $   16,775  $ (2,557)
                                       =========   =========   =======   =========   =======
Gross profit as a percent of sales:
  Cost of products sold.............       57.6%       54.6%                 55.2%
  Intangible asset amortization.....        0.8%        1.1%                  0.6%
                                       ---------   ---------             ---------
    Gross profit....................       41.6%       44.4%                 44.2%
                                       =========   =========             =========`

Compared to the quarter ended September 30, 2004 and the preceding quarter,
an increased proportion of sales of lower margin products and competitive
pricing lowered gross profit as a percentage of sales.

Consistent with our Form 10-K for the year ended June 30, 2005, we have
included the amortization of intangible assets associated with completed
technology and license agreements as a separate component of cost of sales.  The
decrease in amortization of intangible assets in fiscal 2006 compared with
fiscal 2005 was primarily the result of the completion of the amortization of
certain license agreements in June 2005.

---



Selling, General and Administrative Expense

Selling, general and administrative (SG&A) expense during the quarter
ended September 30, 2005 compared to the same period of the prior fiscal year
and the preceding quarter ended June 30, 2005 follows:

`Three months ended
                                       -----------------------------------------------------
                                            September 30,
                                       ---------------------    Incr/    June 30,     Incr/
Thousands                                  2005        2004    (decr)      2005      (decr)  
                                       ---------   ---------   -------   ---------   -------
SG&A expense........................ $    8,661  $    8,023  $    638  $    9,702  $ (1,041)
                                       =========   =========   =======   =========   =======

As a percent of sales...............       25.4%       23.0%                 25.5%
                                       =========   =========             =========`

The increase in SG&A expense for the three months of fiscal 2006 compared
to the same period of the prior fiscal year was principally the result of an
increase in certain discretionary expenditures in fiscal 2006 together with
compensation costs associated with the incentive compensation plans approved by
the Board of Directors on July 25, 2005.  In addition, stock-based compensation
associated with unvested stock options granted in prior periods was
approximately $36,000 in fiscal 2006 versus none in the prior fiscal year.
These costs were recorded as a result of our adoption of the fair value method
of accounting for stock options as required in SFAS 123R, "Share Based
Payment," effective July 1, 2005.

On a sequential basis, the decrease was primarily the result of cost control
initiatives, partially offset by the increased incentive compensation costs
discussed previously, together with certain costs present in the quarter ended
June 30, 2005 which did not repeat in the current quarter.  Those costs included
employee severance costs, costs associated with moving to new facilities in
Albuquerque, New Mexico and Mansfield, Massachusetts, and costs associated with
our Sarbanes-Oxley Section 404 implementation during the preceding quarter.

For the three months ended September 30, 2005, SG&A expense increased to
25.4% compared to 23.0% for the same period of the prior fiscal year.
 Looking forward, based on our sales
projections, we expect the expense level incurred in the current quarter to
remain relatively constant.

Research and Development Expense

Research and development (R&D) expense during the quarter ended September
30, 2005 compared to the same period of the prior fiscal year and the preceding
quarter ended June 30, 2005 follows:

`Three months ended
                                       -----------------------------------------------------
                                            September 30,
                                       ---------------------    Incr/    June 30,     Incr/
Thousands                                  2005        2004    (decr)      2005      (decr)  
                                       ---------   ---------   -------   ---------   -------
R&D expense......................... $    6,693  $    5,505  $  1,188  $    6,755  $    (62)
                                       =========   =========   =======   =========   =======

As a percent of sales...............       19.6%       15.8%                 17.8%
                                       =========   =========             =========`

Increasing our intellectual property is a key element of our growth strategy.
During the quarter ended September 30, 2005, we introduced 4 new products.  The
increase in R&D expense for the three months of fiscal 2006 compared to the
same period of the prior fiscal year was primarily the result of our fiscal 2005
mid-year investment in additional engineering resources to serve the government
and international markets, the timing of outside development costs associated
with our product development efforts, and increased incentive compensation costs
associated with the incentive compensation plans approved by the Board of
Directors on July 25, 2005.

On a sequential basis, R&D expense was consistent with the preceding
quarter as a result of the timing of outside development costs associated with
our product development efforts offset by the increased incentive compensation
costs noted previously.

---



For these reasons, R&D expense for the three months ended September 30,
2005 increased to 19.6% compared to 15.8% for the same period of the prior
fiscal year.  Looking forward, as with SG&A, we expect the current quarter's
expense level to remain relatively constant.

Interest and Other Income, Net

Net interest and other income of $396,000 for the three months ended
September 30, 2005 represented an increase from prior year levels due primarily
to improvements in interest rates earned for cash balances and increased cash
balances.

Foreign Exchange Losses

Foreign exchange losses in fiscal 2006, which represent primarily realized
and unrealized losses on transactions denominated in non-functional currencies,
decreased from fiscal 2005 levels primarily as a result of reduced payables in
non-functional currencies and changes in the Euro to U.S. dollar exchange rates
during the period.

Income Tax Expense

We record income tax expense based on our estimated worldwide effective tax
rates for the respective fiscal years.  For fiscal 2006 and 2005, our estimated
worldwide effective tax rate was approximately 35.0%.  Our estimated worldwide
effective income tax rate incorporates a projected mix of pre-tax income from
domestic and foreign sources, together with benefits from certain income tax
planning strategies, including benefits from foreign sales and research and
experimentation tax credits.  We continue to evaluate the potential impact of
the foreign dividend repatriation provisions of the Americans Jobs Creation Act
of 2004 on our estimated worldwide effective tax rate.

In assessing the realizability of our deferred tax assets, management
considers projected future sources of taxable income together with tax planning
strategies. A valuation allowance has been established that applies to certain
U.S. State and foreign operating loss and tax credit carryforwards that, in the
opinion of management, may expire unused due to uncertainty regarding future
taxable income.  Based on SBS'
historical taxable transactions, the timing of the reversal of existing
temporary differences, and the evaluation of tax planning strategies, management
believes it is more likely than not that SBS'
future taxable income will be sufficient to realize
the benefit of the remaining deferred tax assets existing at September 30,
2005.

We generally do not record deferred income taxes on the undistributed
earnings of our foreign subsidiaries in accordance with the indefinite reversal
criterion in APB Opinion No. 23, "Accounting for Income Taxes -
Special Areas", because we currently do not expect those unremitted
earnings to reverse and become taxable in the foreseeable future.  Upon
distribution of these earnings, which amounted to approximately $34.6 million at
June 30, 2005, we may be subject to U.S. income taxes and foreign withholding
taxes.  It is not practical, however, to estimate the amount of taxes that may
be payable on the eventual remittance of these earnings.

Earnings Per Share

For the three months ended September 30, 2005 (fiscal 2006), net loss per
common share and net loss per common share - assuming dilution were ($0.03).
This compares to net income per common share and net income per common share -
assuming dilution of $0.08 for the comparable period of fiscal 2005 ended
September 30, 2004.

Review of Business Segments

We are engaged in the design,
research, development, integration and production of embedded computer products
and we operate worldwide through two operating segments: the Americas Group and
the Europe Group.  Both the Americas Group and the Europe Group offer
our complete portfolio of embedded computer products to customers in the
government, commercial and communications end markets.  Each segment has
management who report directly to our Chief Executive Officer and its own sales
and distribution channels.  The Americas Group consists of our operations based
in the United States, Canada, and Shenzhen, China.  This includes the sales,
engineering and test activities in Albuquerque, New Mexico; Mansfield,
Massachusetts; Newark, California; Raleigh, North Carolina; St. Paul, Minnesota;
and Waterloo, Ontario, Canada; the manufacturing and assembly operations located
in St. Paul, Minnesota and Albuquerque, New Mexico; and the sales and technical
support activities based in Shenzhen, China.  The Europe Group consists of our
operations based in Germany which include the sales, engineering, test,
assembly, and manufacturing activities located in Augsburg and Mindelheim,
Germany.

The following is a discussion of sales to external customers and segment
profit (loss) for each reportable segment.  We measure the results of operations
for segments (Segment Profit (Loss)) based on income (loss) before income taxes
and before:

---



- the allocation of corporate overhead expenses other than marketing
costs;
- substantially all amortization expense associated with acquisitions; and
- interest income earned on U.S. operations cash balances.

Americas Group

`Three Months Ended
                                  ------------------------------
                                       September 30,
                                  ---------------------    %
Thousands                             2005        2004  change  
                                  ---------   --------- -------
Sales to External Customers.... $   21,969  $   23,422    -6.2%
                                  =========   =========

Segment Profit................. $      891  $    2,495   -64.3%
                                  =========   =========`

Sales to External Customers.   For the three months ended September
30, 2005, sales to external customers decreased approximately $1.5 million
compared to the comparable period of the prior fiscal year.  Sales during fiscal
2006 were negatively impacted by a combination of supplier problems and customer
delays that were not resolved in time to allow the affected shipments to occur
before the end of September, and a decrease in quick-turn, short lead time
business.

Segment Profit.  For the three months ended September 30, 2005,
segment profit decreased from fiscal 2005 levels primarily as a result of
decreased gross profit together with increased SG&A and R&D expenses.
The decrease in gross margin as a percent of sales was the result of a change in
sales mix due to a higher proportion of sales of lower margin products in
relation to total sales and competitive pricing.  The increased SG&A
expenses were due primarily to the timing of certain discretionary expenses and
increased incentive compensation as discussed previously.  The increased R&D
expenses were due primarily to our mid-year decision in fiscal 2005 to invest in
our infrastructure to pursue opportunities in the government systems market, the
timing of outside development costs associated with our product development
efforts, and increased incentive compensation as discussed previously.  For
these reasons, segment profit as a percentage of sales to external customers was
4.1% for the three month periods ended September 30, 2005, respectively,
compared to 10.7% for the same period of fiscal 2005.

Europe Group

`Three Months Ended
                                  ------------------------------
                                       September 30,
                                  ---------------------    %
Thousands                             2005        2004  change  
                                  ---------   --------- -------
Sales to External Customers.... $   12,169  $   11,462     6.2%
                                  =========   =========

Segment Profit................. $    1,779  $    2,388   -25.5%
                                  =========   =========`

Sales to External Customers.  For the three months ended September 30,
2005, sales to external customers increased approximately $0.7 million compared
to the comparable period of the prior fiscal year.  Compared with the prior
fiscal year, changes in currency exchange rates used to translate the Group's
financial statements to U.S. dollars had minimal impact.  During fiscal 2006,
sales to one communications customer, Ericsson, represented $5.8 million
compared to $4.5 million in the same period of fiscal 2005 ended September 30,
2004.

Segment Profit. For the three month period ended September 30, 2005,
segment profit decreased $609,000 compared to the comparable period of the prior
fiscal year, due primarily to reduced gross profit as a result of a higher mix
of lower margin production orders, and increased SG&A and R&D expenses
commensurate with the growth in the business, partially offset by the increase
in sales.  For these reasons, segment profit as a percentage of sales was 14.6%
for the three month period of fiscal 2006, compared to 20.8% for the same period
of fiscal 2005.

---



Liquidity, Capital Resources and Financial Condition

Our objective is to maintain adequate financial resources and
liquidity to finance our operations.  We use a combination of proceeds from the
sale or issuance of equity securities and internally generated funds to finance
our working capital requirements, capital expenditures, and operations.

Our cash balance of $55.9 million at September 30, 2005 represented an
increase of $0.7 million during the quarter ended September 30, 2005.  For the
quarters ended September 30, 2005 and 2004, net cash flows from operating
activities and proceeds from the exercise of employee stock options were the
principal sources of funding, and cash was used for a mix of activities
including working capital needs and capital expenditures.  We anticipate that
this trend will continue during the remainder of the fiscal year ending June 30,
2006; however, future cash inflows from employee stock option exercises are
generally dependent upon the amount of excess, if any, between the current
market price of our common stock and the price the employee must pay to exercise
the option and are therefore difficult to predict with certainty.

Cash Flows

Changes to our cash balance during the three months ended September 30,
2005, and 2004 follows:

Comparison of Condensed
Consolidated Statements of Cash Flows

`Three Months Ended
                                                   September 30,
                                              -----------------------
                                                 2005         2004
                                              ----------   ----------
Cash Flow Provided by (Used in)                     Thousands 
   Operating activities....................  $    1,406   $    1,052
   Investing activities....................        (683)        (618)
   Financing activities....................           2           92
   Net effect on cash from:
      Exchange rate changes................         (52)         157
                                              ==========   ==========`

Operating Activities

Cash flows from operating activities during the three months ended September
30, 2005, were principally the result of the net loss, changes in working
capital and the impact of certain non-cash and non-operating activities.
including depreciation and amortization expenses totaling approximately $1.3
million and stock-based compensation costs of approximately $129,000, of which
approximately $36,000 is the result of our adoption of SFAS 123R on July 1,
2005.

The underlying drivers of the changes in working capital during the first
quarter of fiscal 2006 were as follows:

- The decrease in accounts receivable provided operating cash of $128,000,
before foreign currency translation adjustments of approximately $272,000, due
to cash collections during the period.
- The increase in inventory used cash of $587,000, before foreign currency
translation adjustments of approximately $25,000, due primarily to supplier
problems and customer delays experienced during the quarter.
- The decrease in total liabilities used cash from operations of $899,000,
before foreign currency translation adjustments of $47,000, due to incentive
compensation accruals during the quarter and the timing of payments.

Investing Activities

Our principal recurring investing activity is the funding of capital
expenditures necessary to support the growth of our business and to enhance the
productivity of our operations.  During the three month period ended September
30, 2005, purchases of property and equipment were $0.7 million.

Financing Activities

Our principal source of cash inflows from financing activities is
proceeds from the issuance of common stock associated with the exercise of
employee stock options.

---



Exchange Rates

Changes in foreign currency exchange rates during the three months ended
September 30, 2005 negatively impacted our cash balances by approximately
$52,000.  Due to our international operations, where transactions are recorded
in functional currencies other than the U.S. dollar, the effects of changes in
foreign currency exchange rates on existing cash balances during any given
period result in amounts on the consolidated statements of cash flows that may
not reflect the changes in the corresponding accounts on the consolidated
balance sheets.

Cash Requirements

On March 30, 2005, we entered into a revolving line of credit agreement
(Credit Agreement) with Wells Fargo Bank National Association.  The credit
agreement provides for borrowings for working capital and general corporate
purposes of up to $20 million and any outstanding borrowings are due and payable
in full on March 28, 2006.  The Credit Agreement is secured by a first priority
lien on substantially all assets of SBS.  Interest on borrowings is set forth in
each promissory note executed under the terms of the Credit Agreement and is
either payable on a variable basis at the Wells Fargo Bank prime rate or payable
for a fixed rate term of either one, two or three months at a rate of LIBOR plus
1.75%.

Effective on May 9, 2005, the Credit Agreement was amended (First Amendment
to Credit Agreement) to modify the minimum tangible net worth requirement
defined in Section 4.9(a) of the agreement to exclude the impact of foreign
currency translation adjustments from the minimum required balance.

The terms of the Credit Agreement, as amended, require SBS to comply with
certain financial and other covenants, including but not limited to:

- an Adjusted Tangible Net Worth balance of not less than $109,129,000, plus
50% of quarterly net income beginning with the quarter ended March 31, 2005,
excluding any loss quarters, plus all proceeds from equity offerings;

(Adjusted Tangible Net Worth defined as total stockholders' equity
minus the aggregate of any intangible assets; any treasury stock; any
receivables from stockholders, employees and/or affiliates; and foreign currency
translation adjustments)

- a Leverage Ratio of not greater than 0.50 to 1;

(Leverage Ratio defined as total liabilities divided by Tangible Net
Worth.  Tangible Net Worth defined as total stockholders' equity minus the
aggregate of any intangible assets; any treasury stock; and any receivables from
stockholders, employees and/or affiliates)

- a Quick Ratio of not less than 1.75 to 1;

(Quick Ratio calculated as total current assets excluding inventory,
divided by total current liabilities)

- an average Accounts Receivable Days Outstanding balance of no more than 90
days; and

(Accounts Receivable Days Outstanding calculated as average net trade
receivables divided by net sales for the period times the number of days in
reporting period)

- a requirement to maintain profitable operations defined as no more than two
(2) consecutive loss quarters or a net loss for the total fiscal year.

In addition, under the terms of the Credit Agreement, we are required to
maintain our primary operating accounts with Wells Fargo Bank or maintain a
balance of not less than $20 million on deposit with the bank.  As of September
30, 2005, our balance on deposit with the bank was in excess of $20 million.

As of the date of this report, we have no borrowings outstanding under the
Credit Agreement and we were in compliance with all financial covenants required
under the terms of the amended Credit Agreement as of September 30, 2005.

We believe the funds available under the revolving line of credit agreement
and our internally generated cash flows will provide us with sufficient capital
resources and liquidity to manage our operations, meet our contractual
obligations, and fund capital expenditures, excluding acquisitions, for at least
the next twelve months.  Because long-term cash flow cannot be predicted with
certainty, it is possible that we could require additional external financing in
the future and that the financing may not be available on terms acceptable to us
or at all.

---



Capital Resources

As of the date of this report, we do not have any material capital
expenditure commitments.

Contractual Obligations

SBS is committed under non-cancelable operating leases for buildings and
equipment that expire at various dates through fiscal 2015.  There was no
material change in our contractual obligations during the quarter ended
September 30, 2005.

Off-Balance Sheet Arrangements

As of September 30, 2005, we had no transactions that would be considered
off-balance sheet arrangements in accordance with the definition under SEC
rules.

Inflation

For the three month periods ended September 30, 2005 and 2004, we
experienced no significant impact from inflation.

Business Outlook

In summary, this past quarter was marked by lower than expected revenue
and earnings results, but strong bookings performance.  Our business experienced
short term fluctuations due to supplier problems and customer delays, but we
believe that our fiscal year goals are still achievable.  We continue to look at
and improve our operating costs, but will not deviate from our strategic plan.
We believe we are successfully executing our strategy, which we believe will
deliver growth in sales and earnings over the next several years.

In the communications market, we are continuing to see strong interest and
increased proposal activity for our new family of AdvancedMCTM products.
In addition, we have placed product for evaluation and test with
telecommunications equipment manufacturers' research and development labs. We
believe the market opportunities are progressing as planned, with the remainder
of fiscal year 2006 targeted to capture new design wins and low rate initial
production, with significant production to follow in fiscal year 2007.

We were pleased with the results of our business development activities in
the government market. This quarter, we had seven excellent design wins and
strong bookings for follow on production for several preexisting design wins.
Increased production orders in the government market are one of the key
indicators for our anticipated second half growth.

In the commercial market, we are continuing to pursue opportunities for
semiconductor manufacturing equipment, image processing, and medical electronics
applications.  These are segments of the market that require high performance
solutions which are a good fit for our product portfolio.

As discussed in previous press releases, based on our forecasts, we expect
that a significant amount of our revenue growth for fiscal year 2006 will occur
in the second half of the fiscal year.  This is due to two primary factors.
First, we expect revenues from AdvancedMC products to begin to ramp up during
the later part of the year.  Second, based on customers' forecasts, orders for
military systems will increase as we progress through the fiscal year.

Based on our backlog and our customers' forecasts, we expect sales for the
second quarter of fiscal year 2006 ending  December 31, 2005 to be between $37
million and $39 million.  For the fiscal year ending June 30, 2006, we continue
to expect sales to be between $165 million and $175 million.

Management expects that corporate representatives of SBS will
meet privately during the quarter with investors, investment analysts, the media
and others and may reiterate the Business Outlook published in this Form 10-Q.
Unless a notice stating otherwise is published or filed with the Securities and
Exchange Commission on Form 8-K, the public can continue to rely on this
Business Outlook as representing our current expectations on matters covered.
At the same time, this Form 10-Q and the included Business Outlook will remain
publicly available on our Web site (

Recently Issued Accounting Standards

In May 2005, the FASB, as part of an effort to conform to
international accounting standards, issued SFAS No. 154, Accounting
Changes and Error Corrections, (SFAS 154).  SFAS 154 is effective for
accounting changes and corrections of

---

errors made in fiscal years beginning
after Dec. 15, 2005 or beginning on July 1, 2006.  SFAS 154 requires that
all voluntary changes in accounting principles be retrospectively applied to
prior financial statements as if that principle had always been used, unless it
is impracticable to do so. When it is impracticable to calculate the effects on
all prior periods, SFAS No. 154 requires that the new principle be applied
to the earliest period practicable. SFAS 154 also redefines
"restatement" as the revising of previously issued financial
statements to reflect the correction of an error. The adoption of SFAS
No. 154 is not anticipated to have a material effect on our financial
position or results of operations.

Item 3- Quantitative and Qualitative
Disclosures about Market Risk

Our principal investment is cash invested in either money market accounts
or in overnight repurchase agreements.  Due to the nature of these investments,
we believe that the market risk related to these investments is minimal.  As a
result of our German and Canadian operating and financing activities, we are
exposed to market risk from changes in foreign currency exchange rates.  At
present we do not utilize any derivative instruments to manage this risk.

Currency translation.  The results of operations of our foreign
subsidiaries are translated into U.S. dollars at the average exchange rates for
each period concerned. The balance sheets of foreign subsidiaries are translated
into U.S. dollars at the closing exchange rates. Any adjustments resulting from
the translation are recorded as translation adjustments in other comprehensive
income.  Foreign currency exchange rate exposure is most significant with
respect to the euro.  For the three months ended September 30, 2005 compared to
the same period of the prior fiscal year, the impact to net sales by changes in
foreign currencies, primarily the euro, was not significant.

Currency transaction exposure.  Currency transaction exposure
arises where a business or company makes actual sales and purchases in a
currency other than its own functional currency. We generally source raw
materials and sell our products within our local markets in their functional
currencies and therefore have limited currency transaction exposure.

Item 4- Controls and Procedures

Quarterly Controls Evaluation and Related CEO and CFO Certifications

As of the end of the period covered by this Quarterly Report on Form 10-Q,
we evaluated the effectiveness of the design and operation of
"disclosure controls and procedures" (Disclosure Controls).  The
controls evaluation was done under the supervision and with the participation of
management, including our Chief Executive Officer (CEO) and Chief Financial
Officer (CFO).

Attached as Exhibits to this Quarterly Report on Form 10-Q are certifications
of the CEO (Exhibit 31.1) and the CFO (Exhibit 31.2), which are required in
accordance with Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange
Act). This Controls and Procedures section includes the information concerning
the controls evaluation referred to in the certifications and it should be read
in conjunction with the certifications for a more complete understanding of the
topics presented.

Disclosure Controls and Internal Controls

Disclosure Controls are procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act, such as
this Quarterly Report, is recorded, processed, summarized and reported within
the time periods specified in the U.S. Securities and Exchange Commission's
rules and forms. Disclosure Controls are also designed to ensure that the
information is accumulated and communicated to our management, including the CEO
and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal control over financial reporting (Internal Controls) are procedures
which are designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures that: (1)
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of SBS; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of SBS are being made
only in accordance with authorizations of management and directors of SBS; and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of SBS' assets that could have a
material effect on the financial statements.  To the extent that components
of our Internal Controls are included in our Disclosure Controls, they are
included in the scope of our quarterly controls evaluation.

---



Limitations on the Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our
Disclosure Controls or Internal Controls will prevent all error and all fraud. A
control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system's objectives will be
met.  Further, the design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and breakdowns can occur because of simple error
or mistake. Controls can also be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and we cannot assure that any
design will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with policies or
procedures. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Conclusions

Based on our controls evaluation (with the participation of our CEO and
CFO), as of the end of the period covered by this report, our CEO and CFO have
concluded that our disclosure controls and procedures (as defined in Rules 13a-
15(e) and 15d-15(e) under the Exchange Act) are effective to provide reasonable
assurance that information required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.

There were no changes to our internal control over financial reporting during
the quarter ended September 30, 2005 that materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

---



PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

We are subject to various claims that arise in the ordinary course of our
business. In our opinion, the amount of ultimate liability with respect to these
actions will not materially affect our financial position, results of
operations, or liquidity. We are not a party to, and none of our property is
subject to, any material pending legal proceedings.  We know of no material
proceedings contemplated by governmental authorities.

Item 6 - Exhibits



03.i 	(1)	Restated Articles of Incorporation.

03.ii	(1)	Second Restated and Amended Bylaws.

04.a	(1)	Article VI of the Restated Articles of Incorporation, as
included in the Restated Articles of Incorporation of SBS Technologies,
Inc.

04.b	(1)	Articles I and II of the Second Restated and Amended Bylaws of
SBS Technologies, Inc.

04.c	(1)	Form of certificate evidencing Common Stock.

04.1	(1)	Rights Agreement dated September 15, 1997 between SBS
Technologies, Inc. and First Security Bank (now Wells Fargo), National
Association, as Rights Agent, which includes the form of Right Certificate as
Exhibit A and the Summary of Rights to Purchase Common Stock as Exhibit B.2 and
Agreement to Serve as Rights Agent; on January 21, 1998, pursuant to Section 21
of the Shareholder Rights Agreement dated September 15, 1997, we appointed
Norwest Bank Minnesota N.A. (now Wells Fargo) as Successor Rights Agent.

10.cs	(1)	Amendment #3 to Lease between Oakview Eagan Investors, LLC (a
Delaware Limited Liability Company), as successor in interest to Lutheran
Brotherhood, (a Minnesota Corporation), and SBS Technologies, Inc., Commercial
Group, formerly known as Bit 3 Computer Corporation, a wholly-owned subsidiary
of SBS Technologies, Inc., dated July 12, 2005, together with the original lease
agreement dated September 5, 1997 (the "original lease"), as amended
by amendment #1 dated December 23, 1997, and amendment #2 dated May 22, 2002.

10.ct	(1)	SBS Technologies, Inc. FY 2006 Employee Bonus Plan

10.cu	(1)	SBS Technologies, Inc. FY 2006 Executive Incentive Plan

10.cv	(1)	SBS Technologies, Inc. FY 2006 Long-term Executive Incentive
Plan

14	(1)	Code of Ethics.

31.1	(1)	Certification of the Company's Chief Executive Officer under
Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	(1)  	Certification of the Company's Chief Financial Officer under
Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	(1)	Certification of the Chief Executive Officer, Pursuant to 18
U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

32.2	(1)  	Certification of the Chief Financial Officer, Pursuant to 18
U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

(1)   See Exhibit Index

---



SIGNATURES

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



SBS TECHNOLOGIES, INC.
	(Registrant)

By: /s/ Clarence W. Peckham
	Clarence W. Peckham
	Chief Executive Officer

By: /s/ James E. Dixon Jr.	James E. Dixon Jr.Executive Vice President and 
Chief Financial Officer



Date: November 8, 2005



---





|INDEX TO EXHIBITS
|-----------------
|                 
|Exhibit Number   

|3.i   | Restated Articles of Incorporation dated November 10,
2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |      |           |       |            | X
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | --------- | ----- | ---------- | -
|3.ii  | Second Restated and Amended By-laws dated November 13,
2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 10-Q | 001-10981 | 3.ii  | 12-31-2003 |  
|4.a   | Article VI of the Articles of Incorporation, as amended, as
included in the Articles of Incorporation of SBS Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                                                                       |      |           |       |            | X
|4.b   | Articles I and II of the Second Restated and Amended By-laws of
SBS Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                | 10-Q | 001-10981 | 3.ii  | 12-31-2003 |  
|4.c   | Form of certificate evidencing Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 10-Q | 001-10981 | 4.c   | 3-31-2001  |  
|4.1   | Rights Agreement dated as of September 15, 1997 between SBS
Technologies, Inc. and First Security Bank (now Wells Fargo), National
Association, as Rights Agent, which includes the form of Right Certificate as
Exhibit A, and the Summary of Rights to Purchase Common Stock as Exhibit B.2.
Agreement to Serve as Rights Agent.  On January 21, 1998, pursuant to Section 21
of the Rights Agreement, SBS appointed Norwest Bank Minnesota, N.A. (now Wells
Fargo) as Successor Rights Agent.                                      | 10-K | 001-10981 | 4.1   | 6-30-2002  |  
|10.cs | Amendment #3 to Lease between Oakview Eagan Investors, LLC (a
Delaware Limited Liability Company), as successor in interest to Lutheran
Brotherhood, (a Minnesota Corporation), and SBS Technologies, Inc., Commercial
Group, formerly known as Bit 3 Computer Corporation, a wholly-owned subsidiary
of SBS Technologies, Inc., dated July 12, 2005, together with the original lease
agreement dated September 5, 1997 (the "original lease"), as amended
by amendment #1 dated Dec. 23, 1997, and amendment #2 dated May 22,
2002. | 8-K  | 001-10981 | 10.cs | 7-13-2005  |  
|10.ct | SBS Technologies FY 2006 Employee Bonus Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 8-K  | 001-10981 | 10.ct | 7-28-2005  |  
|10.cu | SBS Technologies FY 2006 Executive Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 8-K  | 001-10981 | 10.cu | 7-28-2005  |  
|10.cv | SBS Technologies FY 2006 Long-Term Executive Incentive
Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 8-K  | 001-10981 | 10.cv | 7-28-2005  |  
|14    | Code of Ethics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 8-K  | 001-10981 | 14    | 11-21-2003 |  
|31.1  | Section 302 certification of Clarence W. Peckham, Chief
Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                             |      |           |       |            | X
|31.2  | Section 302 certification of James E. Dixon Jr., Chief Financial
Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                              |      |           |       |            | X
|32.1  | Section 906 certification of Clarence W. Peckham, Chief
Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                             |      |           |       |            | X
|32.2  | Section 906 certification of James E. Dixon Jr., Chief Financial
Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                              |      |           |       |            | X