##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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
December 31, 2001
|  |  |                                                                                                                                         
|  |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                                

Commission File Number 1-10981

SBS TECHNOLOGIES, INC.

|                                                                          |  |                                                
|------------------------------------------------------------------------- |  | -----------------------------------------------
|New Mexico
(State or other jurisdiction of
incorporation or organization) |  | 85-0359415
(IRS Employer Identification Number)

2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
(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 and (2) has been subject to such filing
requirements for the past 90 days.

YES X  NO

As of January 31, 2002, the Registrant had 14,581,437 shares of its common stock outstanding.





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TABLE OF CONTENTS



|                               |                                                                     |                                                           |  |  |  |  |  | 
|------------------------------ | ------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1  Condensed Financial Statements                            
|                               |                                                                     | Consolidated Balance Sheets                              
|                               |                                                                     | Consolidated Statements of Operations                    
|                               |                                                                     | Consolidated Statement of Changes in Stockholders Equity
|                               |                                                                     | Consolidated Statements of Cash Flows                    
|                               |                                                                     | Notes to Condensed Consolidated Financial Statements     
|                               | Item 2  Managements Discussion and Analysis                      
|                               | Item 3  Quantitative and Qualitative Disclosures about Market Risk
|PART II  OTHER INFORMATION   
|SIGNATURES                    
|EXHIBIT INDEX                 



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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Form 10-Q for the Quarter Ended December 31, 2001
Table of Contents

|                               |                                                                                                |  |                                                                                               |    |      |   | 
|------------------------------ | ---------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |                                                                                                |  |                                                                                               |    | Page |  
|                               |                                                                                                |  |                                                                                               |    |      |  
|PART I  FINANCIAL INFORMATION |                                                                                                |  |                                                                                               |   
|                               | Item 1  Condensed Financial Statements                                                        |  |                                                                                               |    |     
|                               |                                                                                                |  | Consolidated Balance Sheets
at December 31, 2001 and June 30, 2001                            |    |      | 2 | 
|                               |                                                                                                |  | Consolidated Statements of Operations, Six and
Three Months Ended December 31, 2001 and 2000  |    |      | 3 | 
|                               |                                                                                                |  | Consolidated Statement of Changes in Stockholders Equity,
Six Months Ended December 31, 2001 |    |      | 4 | 
|                               |                                                                                                |  | Consolidated Statements of Cash Flows,
Six Months Ended December 31, 2001 and 2000            |    |      | 5 | 
|                               |                                                                                                |  | Notes to Condensed Consolidated Financial Statements
as of December 31, 2001                  |    |      | 6 | 
|                               | Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |                                                                                               | 11 |     
|                               | Item 3  Quantitative and Qualitative Disclosures about Market Risk                            |  |                                                                                               | 19 |     
|PART II  OTHER INFORMATION    |                                                                                                |  | 20                                                                                            |   
|SIGNATURES                     |                                                                                                |  | 21                                                                                            |   
|EXHIBIT INDEX                  |                                                                                                |  | 22                                                                                            |   





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##### Table of Contents












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

---

|                            |                                                                                                                                                                       |                                            |                                      |        |         |              |        |        |          |  |  | 
|--------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ------ | ------- | ------------ | ------ | ------ | -------- |  |  | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         | December 31, |        |        | June 30, | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         | 2001         |        |        | 2001     | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         |              |        |        |          | 
|                            |                                                                                                                                                                       |                                            |                                      | Assets |         |              |        |        |          |  |  | 
|Current assets:             |                                                                                                                                                                       |                                            |                                      |        |         |              |        |       
|                            | Cash and cash equivalents                                                                                                                                             |                                            | $                                    | 25,745 |         |              |        | 9,734  |         
|                            | Receivables, net                                                                                                                                                      |                                            |                                      | 19,822 |         |              |        | 27,287 |         
|                            | Inventories                                                                                                                                                           |                                            |                                      | 22,883 |         |              |        | 40,752 |         
|                            | Deferred income taxes                                                                                                                                                 |                                            |                                      | 10,850 |         |              |        | 5,080  |         
|                            | Income tax receivable                                                                                                                                                 |                                            |                                      | 1,138  |         |              |        | 3,417  |         
|                            | Prepaid expenses                                                                                                                                                      |                                            |                                      | 951    |         |              |        | 1,125  |         
|                            | Other current assets                                                                                                                                                  |                                            |                                      | 250    |         |              |        | 802    |         
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|                            |                                                                                                                                                                       | Total current assets                       |                                      |        | 81,639  |              |        |        | 88,197   | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|Property and equipment, net |                                                                                                                                                                       |                                            | 11,942                               |        |         |              | 11,475 |       
|Intangible assets, net      |                                                                                                                                                                       |                                            | 39,035                               |        |         |              | 45,107 |       
|Deferred income taxes       |                                                                                                                                                                       |                                            | 353                                  |        |         |              |       |       
|Other assets                |                                                                                                                                                                       |                                            | 1,934                                |        |         |              | 2,393  |       
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|                            |                                                                                                                                                                       | Total assets                               |                                      | $      | 134,903 |              |        |        | 147,172  | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|                            |                                                                                                                                                                       |                                            | Liabilities and Stockholders Equity |        |         |              |        |        |          |  | 
|Current liabilities:        |                                                                                                                                                                       |                                            |                                      |        |         |              |        |       
|                            | Notes payable                                                                                                                                                         |                                            | $                                    |       |         |              |        | 2,500  |         
|                            | Accounts payable                                                                                                                                                      |                                            |                                      | 3,399  |         |              |        | 3,771  |         
|                            | Accrued representative commissions                                                                                                                                    |                                            |                                      | 591    |         |              |        | 821    |         
|                            | Accrued compensation                                                                                                                                                  |                                            |                                      | 3,655  |         |              |        | 4,071  |         
|                            | Other current liabilities                                                                                                                                             |                                            |                                      | 2,996  |         |              |        | 1,753  |         
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|                            |                                                                                                                                                                       | Total current liabilities                  |                                      |        | 10,641  |              |        |        | 12,916   | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|Deferred income taxes       |                                                                                                                                                                       |                                            |                                     |        |         |              | 461    |       
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|                            |                                                                                                                                                                       | Total liabilities                          |                                      |        | 10,641  |              |        |        | 13,377   | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|Stockholders equity:       |                                                                                                                                                                       |                                            |                                      |        |         |              |        |       
|                            | Common stock, no par value; 200,000,000 shares authorized, 14,552,793
issued and outstanding at December 31, 2001,
14,522,080 issued and outstanding at June 30, 2001 |                                            |                                      | 85,913 |         |              |        | 85,476 |         
|                            | Unearned compensation                                                                                                                                                 |                                            |                                      | (436   | )       |              |        | (478   | )       
|                            | Accumulated other comprehensive loss                                                                                                                                  |                                            |                                      | (5,258 | )       |              |        | (5,983 | )       
|                            | Retained earnings                                                                                                                                                     |                                            |                                      | 44,043 |         |              |        | 54,780 |         
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|                            |                                                                                                                                                                       | Total stockholders equity                 |                                      |        | 124,262 |              |        |        | 133,795  | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             
|                            |                                                                                                                                                                       | Total liabilities and stockholders equity |                                      | $      | 134,903 |              |        |        | 147,172  | 
|                            |                                                                                                                                                                       |                                            |                                      |        |         |             

See accompanying notes to condensed consolidated financial statements

Page 2



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

---

|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |         |         |   |        |       |        | 
|------------------------------------------------------ | --------------------------------- | ----------------------- | ------- | ---------------------------- | ------- | - | ------------------------------ | ------ | ------ |  |  |  |  | ---- | ------- | ------- | ------- | - | ------ | ----- | ------ | 
|                                                       |                                   |                         |         | Six Months Ended December 31 |         |   | Three Months Ended December 31 |       
|                                                       |                                   |                         |         |                              |         |   |                                |       
|                                                       |                                   |                         |         | 2001                         |         |   | 2000                           |        |        |  |  |  |  | 2001 |         |         | 2000    |  
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |         |         |  
|Sales                                                  |                                   | $                       | 60,781  |                              |         |   | 92,795                         |        |        |  |  |  |  |      | 28,982  |         |         |   | 49,116 |      
|Cost of sales                                          |                                   |                         | 43,575  |                              |         |   | 48,309                         |        |        |  |  |  |  |      | 27,697  |         |         |   | 26,075 |      
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|                                                       |                                   | Gross profit            |         |                              | 17,206  |   |                                |        | 44,486 |  |  |  |  |      |         |         | 1,285   |   |        |       | 23,041 | 
|Selling, general and administrative expense            |                                   |                         | 18,684  |                              |         |   | 16,040                         |        |        |  |  |  |  |      | 9,769   |         |         |   | 8,107  |      
|Research and development expense                       |                                   |                         | 8,776   |                              |         |   | 9,927                          |        |        |  |  |  |  |      | 4,502   |         |         |   | 4,964  |      
|Restructuring charge                                   |                                   |                         | 322     |                              |         |   |                               |        |        |  |  |  |  |      | 137     |         |         |   |       |      
|Impairment of intangible assets                        |                                   |                         | 2,682   |                              |         |   |                               |        |        |  |  |  |  |      | 2,682   |         |         |   |       |      
|Amortization of intangible assets                      |                                   |                         | 3,853   |                              |         |   | 3,897                          |        |        |  |  |  |  |      | 1,925   |         |         |   | 1,923  |      
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|                                                       |                                   | Operating income (loss) |         |                              | (17,111 | ) |                                |        | 14,622 |  |  |  |  |      |         |         | (17,730 | ) |        |       | 8,047  | 
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|Interest and other income (expense), net               |                                   |                         | 277     |                              |         |   | (544                           | )      |        |  |  |  |  |      | (159    | )       |         |   | (190   | )    
|Foreign exchange gains (losses)                        |                                   |                         | 25      |                              |         |   | (63                            | )      |        |  |  |  |  |      | (24     | )       |         |   | 19     |      
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|                                                       |                                   |                         | 302     |                              |         |   | (607                           | )      |        |  |  |  |  |      | (183    | )       |         |   | (171   | )    
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|                                                       | Income (loss) before income taxes |                         |         | (16,809                      | )       |   |                                | 14,015 |        |  |  |  |  |      |         | (17,913 | )       |   |        | 7,876 |       
|Income tax expense (benefit)                           |                                   |                         | (6,072  | )                            |         |   | 4,740                          |        |        |  |  |  |  |      | (6,528  | )       |         |   | 2,927  |      
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|Net income (loss)                                      |                                   | $                       | (10,737 | )                            |         |   | 9,275                          |        |        |  |  |  |  |      | (11,385 | )       |         |   | 4,949  |      
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|Net income (loss) per common share                     |                                   | $                       | (0.74   | )                            |         |   | 0.68                           |        |        |  |  |  |  |      | (0.78   | )       |         |   | 0.36   |      
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        
|Net income (loss) per common share -
assuming dilution |                                   | $                       | (0.74   | )                            |         |   | 0.61                           |        |        |  |  |  |  |      | (0.78   | )       |         |   | 0.32   |      
|                                                       |                                   |                         |         |                              |         |   |                                |        |        |  |  |  |  |      |         |        

See accompanying notes to condensed consolidated financial statements

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SBS Technologies, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Thousands (except share amounts)
(Unaudited)

---

|                                                |                                          |  |            |   |  |          |        |   |               |             |      |          |  |   |          |     |        |        |         |   |  |   |         |     | 
|----------------------------------------------- | ---------------------------------------- |  | ---------- | - |  | -------- | ------ | - | ------------- | ----------- | ---- | -------- |  | - | -------- | --- | ------ | ------ | ------- | - |  | - | ------- | --- | 
|                                                |                                          |  | Common     |   |  |          |        |   |               | Accumulated |      |          |  |   |          |     | Total  |       
|                                                |                                          |  | stock      |   |  |          |        |   |               | other       |      |          |  |   |          |     | stock- |       
|                                                |                                          |  |            |   |  | Unearned |        |   | comprehensive |             |      | Retained |  |   | holders' |    
|                                                |                                          |  | Shares     |   |  | Amount   |        |   | compensation  |             |      | loss     |  |   | earnings |     |        | equity |        
|                                                |                                          |  |            |   |  |          |        |   |               |             |      |          |  |   |          |     |        |        |        
|Balance at June 30, 2001                        |                                          |  | 14,522,080 |   |  | $        | 85,476 |   |               | $           | (478 | )        |  | $ | (5,983   | )   |        | $      | 54,780  |   |  | $ | 133,795 |    
|Exercise of stock options and warrants          |                                          |  | 73,213     |   |  |          | 828    |   |               |             |     |          |  |   |         |     |        |        |        |   |  |   | 828     |    
|Stock repurchased and retired                   |                                          |  | (42,500    | ) |  |          | (488   | ) |               |             |     |          |  |   |         |     |        |        |        |   |  |   | (488    | )  
|Stock-based compensation                        |                                          |  |           |   |  |          | 14     |   |               |             | 42   |          |  |   |         |     |        |        |        |   |  |   | 56      |    
|Income tax benefit from stock
options exercised |                                          |  |           |   |  |          | 83     |   |               |             |     |          |  |   |         |     |        |        |        |   |  |   | 83      |    
|Net loss                                        |                                          |  |           |   |  |          |       |   |               |             |     |          |  |   |         |     |        |        | (10,737 | ) |  |   | (10,737 | )  
|Other comprehensive income:                     |                                          |  |            |   |  |          |        |   |               |             |      |          |  |   |          |     |        |        |         |   |  |   |         |    
|                                                | Foreign currency translation adjustments |  |            |  |  |          |        |  |               |             |      |         |  |   |          | 725 |        |        |         |  |  |   |         | 725 | 
|                                                |                                          |  |            |   |  |          |        |   |               |             |      |          |  |   |          |     |        |       
|Balance at December 31, 2001                    |                                          |  | 14,552,793 |   |  | $        | 85,913 |   |               | $           | (436 | )        |  | $ | (5,258   | )   |        | $      | 44,043  |   |  | $ | 124,262 |    
|                                                |                                          |  |            |   |  |          |        |   |               |             |      |          |  |   |          |     |        |       

See accompanying notes to condensed consolidated financial statements

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##### Table of Contents






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

---

|                                                  |                                                                                          |                                               |                                    |                                           |        |                  |        |        |        |         |        |  
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------------------------------------- | ---------------------------------- | ----------------------------------------- | ------ | ---------------- | ------ | ------ | ------ | ------- | ------ | -
|                                                  |                                                                                          |                                               |                                    |                                           |        | Six months ended |       
|                                                  |                                                                                          |                                               |                                    |                                           |        | December 31,     |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                  |       
|                                                  |                                                                                          |                                               |                                    |                                           |        | 2001             |        |        | 2000   |        
|                                                  |                                                                                          |                                               |                                    |                                           |        |                  |        |        |        |        
|Cash flows from operating activities:             |                                                                                          |                                               |                                    |                                           |        |                  |        |       
|                                                  | Net income (loss)                                                                        |                                               | $                                  | (10,737                                   | )      |                  |        | 9,275  |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|                                                  | Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |                                               |                                    |                                           |        |                  |        |        |       
|                                                  |                                                                                          | Depreciation                                  |                                    |                                           | 1,776  |                  |        |        | 1,143  |        
|                                                  |                                                                                          | Amortization of intangible assets             |                                    |                                           | 3,853  |                  |        |        | 3,897  |        
|                                                  |                                                                                          | Impairment of intangible assets               |                                    |                                           | 2,682  |                  |        |        |       |        
|                                                  |                                                                                          | Bad debt expense                              |                                    |                                           | 297    |                  |        |        | 467    |        
|                                                  |                                                                                          | Deferred income taxes                         |                                    |                                           | (6,562 | )                |        |        | (2,020 | )      
|                                                  |                                                                                          | Income tax benefit of stock options exercised |                                    |                                           | 83     |                  |        |        | 4,168  |        
|                                                  |                                                                                          | Loss on disposition of assets                 |                                    |                                           | 7      |                  |        |        | 14     |        
|                                                  |                                                                                          | Foreign exchange (gains) losses               |                                    |                                           | (25    | )                |        |        | 63     |        
|                                                  |                                                                                          | Stock-based compensation                      |                                    |                                           | 56     |                  |        |        | 14     |        
|                                                  |                                                                                          | Changes in assets and liabilities:            |                                    |                                           |        |                  |        |        |        |        
|                                                  |                                                                                          |                                               | Receivables                        |                                           |        | 7,330            |        |        |        | (3,092  | )     
|                                                  |                                                                                          |                                               | Inventories                        |                                           |        | 18,057           |        |        |        | (14,965 | )     
|                                                  |                                                                                          |                                               | Prepaids and other assets          |                                           |        | 1,188            |        |        |        | (154    | )     
|                                                  |                                                                                          |                                               | Accounts payable                   |                                           |        | (420             | )      |        |        | 4,350   |       
|                                                  |                                                                                          |                                               | Accrued representative commissions |                                           |        | (239             | )      |        |        | 171     |       
|                                                  |                                                                                          |                                               | Accrued compensation               |                                           |        | (440             | )      |        |        | 275     |       
|                                                  |                                                                                          |                                               | Income taxes                       |                                           |        | 2,260            |        |        |        | (140    | )     
|                                                  |                                                                                          |                                               | Other current liabilities          |                                           |        | 1,200            |        |        |        | (20     | )     
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|                                                  |                                                                                          |                                               |                                    | Net cash provided by operating activities |        |                  | 20,366 |        |        |         | 3,446  |  
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|Cash flows from investing activities:             |                                                                                          |                                               |                                    |                                           |        |                  |        |       
|                                                  | Acquisition of property and equipment                                                    |                                               |                                    | (2,231                                    | )      |                  |        | (2,165 | )     
|                                                  | Other                                                                                    |                                               |                                    |                                          |        |                  |        | 396    |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|                                                  |                                                                                          |                                               |                                    | Net cash used by investing activities     |        |                  | (2,231 | )      |        |         | (1,769 | )
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|Cash flows from financing activities:             |                                                                                          |                                               |                                    |                                           |        |                  |        |       
|                                                  | Payments on notes payable                                                                |                                               |                                    | (2,500                                    | )      |                  |        | (8,500 | )     
|                                                  | Repurchase and retirement of common stock                                                |                                               |                                    | (488                                      | )      |                  |        |       |       
|                                                  | Proceeds from exercise of stock options and warrants                                     |                                               |                                    | 828                                       |        |                  |        | 6,811  |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|                                                  |                                                                                          |                                               |                                    | Net cash used by financing activities     |        |                  | (2,160 | )      |        |         | (1,689 | )
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|Effect of exchange rate changes on cash           |                                                                                          |                                               | 36                                 |                                           |        |                  | 55     |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|Net change in cash and cash equivalents           |                                                                                          |                                               | 16,011                             |                                           |        |                  | 43     |       
|Cash and cash equivalents at beginning of period  |                                                                                          |                                               | 9,734                              |                                           |        |                  | 3,595  |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|Cash and cash equivalents at end of period        |                                                                                          | $                                             | 25,745                             |                                           |        |                  | 3,638  |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|Supplemental disclosure of cash flow information: |                                                                                          |                                               |                                    |                                           |        |                  |        |       
|                                                  | Interest paid                                                                            |                                               | $                                  | 15                                        |        |                  |        | 1,047  |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 
|                                                  | Income taxes (received) paid, net                                                        |                                               | $                                  | (1,868                                    | )      |                  |        | 2,782  |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                 

See accompanying notes to condensed consolidated financial statements

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##### Table of Contents






SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 2001
(Unaudited)

---



|1) |  | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The accounting policies as set forth in SBS Technologies, Inc.s (SBS)
Annual Report on Form 10-K for the year ended June 30, 2001 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 a
full year.
|  
|2) |  | Receivables, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | Receivables, net consist of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                     |  |              |        |   |          |  |        |  
|------------------------------------ |  | ------------ | ------ | - | -------- |  | ------ | -
|                                     |  | December 31, |        |   | June 30, | 
|Thousands                            |  | 2001         |        |   | 2001     | 
|                                     |  |              |        |   |          | 
|Accounts receivable                  |  |              | 21,013 |   |          |  | 28,267 |  
|Less allowance for doubtful accounts |  |              | (1,191 | ) |          |  | (980   | )
|                                     |  |              |        |   |          | 
|                                     |  |              | 19,822 |   |          |  | 27,287 |  
|                                     |  |              |        |   |          | 



|3) |  | Inventories                          
|-- |  | -------------------------------------
|  
|   |  | Inventories consist of the following:

|                              |  |              |        |  |          |  |        | 
|----------------------------- |  | ------------ | ------ |  | -------- |  | ------ | 
|                              |  | December 31, |        |  | June 30, | 
|Thousands                     |  | 2001         |        |  | 2001     | 
|                              |  |              |        |  |          | 
|Raw materials                 |  |              | 12,869 |  |          |  | 22,743 | 
|Work in process               |  |              | 5,269  |  |          |  | 6,873  | 
|Finished goods                |  |              | 4,184  |  |          |  | 9,892  | 
|Inventory consigned to others |  |              | 561    |  |          |  | 1,244  | 
|                              |  |              |        |  |          | 
|                              |  |              | 22,883 |  |          |  | 40,752 | 
|                              |  |              |        |  |          | 



|4) |  | Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On December 26, 2001, the SBS Board of Directors approved SBS plan to
exit its legacy PCI Chassis product line. This product line was
associated with SBS acquisition of SBS Technologies, Inc. Industrial
Computers (formerly Micro Alliance) in November, 1997. In conjunction
with the acquisition, SBS recorded approximately $4.5 million of
goodwill, of which $2.7 million was unamortized at December 26, 2001.
Based on SBS decision to exit the PCI Chassis product line, the
remaining unamortized goodwill was determined to be impaired and
was written off as the fair value of projected future cash flows was zero.

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SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 2001
(Unaudited)

---



|5) |  | Earnings Per Share                                                                                                                                                                                                                
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Net income (loss) per common share is based on weighted average shares
outstanding. Net income (loss) per common share  assuming dilution
includes the dilutive effects of potential common shares outstanding
during the period.
|  
|   |  | A reconciliation of the numerator and denominator of the per share and
per share  assuming dilution calculations follow:                                                                                                         

|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |   |  |  |        | 
|---------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------------ |  | ------ | ---- |  | - | ------- | - |  |  | ------ | 
|                                                                                   |  | Six months ended |         |   | Three months ended | 
|Thousands except per share amounts                                                 |  | December 31,     |         |   | December 31,       | 
|                                                                                   |  |                  |         |   |                    | 
|                                                                                   |  | 2001             |         |   | 2000               |  |        | 2001 |  |   | 2000    |  
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Net Income (Loss) Per Common
Share                                                 |  |                  |         |   |                    |  |        |      |  |   |         |   |  |  |        | 
|Net income (loss)                                                                  |  | $                | (10,737 | ) |                    |  | 9,275  |      |  | $ | (11,385 | ) |  |  | 4,949  | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Weighted-average common shares
outstanding used in earnings per
share computations |  |                  | 14,526  |   |                    |  | 13,632 |      |  |   | 14,523  |   |  |  | 13,823 | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Net income (loss) per common share                                                 |  | $                | (0.74   | ) |                    |  | 0.68   |      |  | $ | (0.78   | ) |  |  | 0.36   | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Net Income (Loss) Per Common
Share  Assuming Dilution                             |  |                  |         |   |                    |  |        |      |  |   |         |   |  |  |        | 
|Net income (loss)                                                                  |  | $                | (10,737 | ) |                    |  | 9,275  |      |  | $ | (11,385 | ) |  |  | 4,949  | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Weighted-average common shares
outstanding used in earnings per
share computations |  |                  | 14,526  |   |                    |  | 15,088 |      |  |   | 14,523  |   |  |  | 15,346 | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Net income (loss) per common
share  assuming dilution                             |  | $                | (0.74   | ) |                    |  | 0.61   |      |  | $ | (0.78   | ) |  |  | 0.32   | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Shares Used in per Share
Computations                                              |  |                  |         |   |                    |  |        |      |  |   |         |   |  |  |        | 
|Average outstanding common shares                                                  |  |                  | 14,526  |   |                    |  | 13,632 |      |  |   | 14,523  |   |  |  | 13,823 | 
|Incremental shares from assumed
conversions  potential common
shares              |  |                  |        |   |                    |  | 1,456  |      |  |   |        |   |  |  | 1,523  | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  
|Shares used in net income (loss)
per common share  assuming
dilution computations |  |                  | 14,526  |   |                    |  | 15,088 |      |  |   | 14,523  |   |  |  | 15,346 | 
|                                                                                   |  |                  |         |   |                    |  |        |      |  |   |         |  



| |  | Due to the reported net loss for the six and three months ended
December 31, 2001, 301,783 and 274,989 potential common shares,
respectively, were not included in the computation of net loss per
common share  assuming dilution because the effect would be
anti-dilutive. For the six and three months ended December 31, 2000,
options to purchase 19,111 and 17,029 shares of common stock,
respectively, were outstanding but were not included in the computation
of net income per common share  assuming dilution because the
options exercise prices were greater than the average market price of
the common shares.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 2001(Continued)
(Unaudited)

---



|6) |  | Comprehensive Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Comprehensive loss for the six and three months ended December 31, 2001
was ($10.0) million and ($8.2) million, respectively. Comprehensive
income for the six and three months ended December 31, 2000 was $9.1
million and $6.2 million, respectively. The difference between
comprehensive income (loss) and net income (loss) was related to
foreign currency translation adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|7) |  | Segment Financial Data                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | In July 2001, SBS segment structure was redefined in conjunction with
managements realignment of operations and market development efforts.
SBS operates through three operating segments: the Communications
Group, the Commercial Group, and the Government Group. The
Communications Group consists of SBS Technologies, Inc., Communications
Products and SDL Communications Inc. The Commercial Group consists of
SBS Technologies, Inc., Connectivity Products and SBS Technologies,
Inc., Modular I/O. The Government Group consists of SBS avionics and
telemetry division, SBS Technologies, Inc., Embedded Computers, and
SBS German operations. These segments are based primarily on the
markets and customers that are served and have managers who report
directly to the chief operating decision-maker. SBS Technologies,
Inc., Industrial Computers (Industrial Computers) focuses on SBS
system sales, a portion of which is included in each Groups sales, a
result of SBS decision in the quarter ended December 31, 2001 to
report its system business by end market, to better address customer
focus. For the quarter ended September 30, 2001, SBS systems business
was reported as a separate segment. Reportable segments for all periods
presented have been restated to conform to the current segment
reporting structure.
|  
|   |  | SBS measures its segments results of
operations based on income before income taxes and before allocation of
corporate overhead expenses, other than sales and marketing costs,
amortization and impairment of goodwill and intangibles from acquisitions, corporate
interest income and expense, and acquired in-process research and
development charges associated with purchase business combinations.
Beginning July 1, 2001, for consistency with prior periods, corporate
sales and marketing costs have been allocated among segments.
These allocations were pro-rata based on sales for each SBS subsidiary
receiving benefit. Industrial Computers operating assets and operating
costs have also been allocated in a similar manner, including the
write-down of certain inventory associated with the decision to exit
the legacy PCI chassis product line. The accounting policies used to
measure segment results of operations are the same as those referred to
in Note 1.                                                                                                                                                                                                                                                                                                                                                                    

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SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 2001(Continued)
(Unaudited)

---

|                            |                                 |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |       |           |   |  |  |         |   | 
|--------------------------- | ------------------------------- |  | ---- |  |  | ----- | -------------- | - | ----- | ---------- | ------ | ----- | ---------- |  | ------------- | ------- |  | ----- | --------- | - |  |  | ------- | - | 
|                            |                                 |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |       | Corporate |   |  |  |         |  
|                            |                                 |  |      |  |  |       | Communications |   |       | Commercial |        |       | Government |  |               | and un- |  |       |           |   | 
|Thousands                   |                                 |  |      |  |  | Group |                |   | Group |            |        | Group |            |  | allocated (1) |         |  | Total |          
|                            |                                 |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |       |          
|                            | Six months ended
December 31,   |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |       |           |   |  |  |         |   | 
|Gross Sales                 |                                 |  | 2001 |  |  |       | 15,134         |   |       |            | 20,729 |       |            |  | 25,485        |         |  |       |          |   |  |  | 61,348  |  
|Inter-segment sales         |                                 |  |      |  |  |       | (107           | ) |       |            | (339   | )     |            |  | (121          | )       |  |       |          |   |  |  | (567    | )
|                            |                                 |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |      
|Sales to external customers |                                 |  |      |  |  |       | 15,027         |   |       |            | 20,390 |       |            |  | 25,364        |         |  |       |          |   |  |  | 60,781  |  
|                           
|Gross Sales                 |                                 |  | 2000 |  |  |       | 44,405         |   |       |            | 26,343 |       |            |  | 23,641        |         |  |       |          |   |  |  | 94,389  |  
|Inter-segment sales         |                                 |  |      |  |  |       | (579           | ) |       |            | (632   | )     |            |  | (383          | )       |  |       |          |   |  |  | (1,594  | )
|                            |                                 |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |      
|Sales to external customers |                                 |  |      |  |  |       | 43,826         |   |       |            | 25,711 |       |            |  | 23,258        |         |  |       |          |   |  |  | 92,795  |  
|                           
|Segment profit (loss)       |                                 |  | 2001 |  |  |       | (6,230         | ) |       |            | (2,925 | )     |            |  | 5,008         |         |  |       | (12,662   | ) |  |  | (16,809 | )
|(Income before taxes)       |                                 |  | 2000 |  |  |       | 12,252         |   |       |            | 4,740  |       |            |  | 4,925         |         |  |       | (7,902    | ) |  |  | 14,015  |  
|                            | Three months ended
December 31, |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |       |           |   |  |  |         |   | 
|Gross Sales                 |                                 |  | 2001 |  |  |       | 7,379          |   |       |            | 9,608  |       |            |  | 12,377        |         |  |       |          |   |  |  | 29,364  |  
|Inter-segment sales         |                                 |  |      |  |  |       | (39            | ) |       |            | (247   | )     |            |  | (96           | )       |  |       |          |   |  |  | (382    | )
|                            |                                 |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |      
|Sales to external customers |                                 |  |      |  |  |       | 7,340          |   |       |            | 9,361  |       |            |  | 12,281        |         |  |       |          |   |  |  | 28,982  |  
|                           
|Gross Sales                 |                                 |  | 2000 |  |  |       | 24,078         |   |       |            | 13,923 |       |            |  | 12,121        |         |  |       |          |   |  |  | 50,122  |  
|Inter-segment sales         |                                 |  |      |  |  |       | (393           | ) |       |            | (516   | )     |            |  | (97           | )       |  |       |          |   |  |  | (1,006  | )
|                            |                                 |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |      
|Sales to external customers |                                 |  |      |  |  |       | 23,685         |   |       |            | 13,407 |       |            |  | 12,024        |         |  |       |          |   |  |  | 49,116  |  
|                           
|Segment profit (loss)       |                                 |  | 2001 |  |  |       | (7,161         | ) |       |            | (4,285 | )     |            |  | 1,506         |         |  |       | (7,973    | ) |  |  | (17,913 | )
|(Income before taxes)       |                                 |  | 2000 |  |  |       | 6,716          |   |       |            | 2,303  |       |            |  | 2,694         |         |  |       | (3,837    | ) |  |  | 7,876   |  
|                            | As of December 31,              |  |      |  |  |       |                |   |       |            |        |       |            |  |               |         |  |       |           |   |  |  |         |   | 
|Total Assets                |                                 |  | 2001 |  |  |       | 16,777         |   |       |            | 14,665 |       |            |  | 21,003        |         |  |       | 82,458    |   |  |  | 134,903 |  
|                            |                                 |  | 2000 |  |  |       | 37,858         |   |       |            | 23,175 |       |            |  | 24,000        |         |  |       | 63,573    |   |  |  | 148,606 |  



| |  | (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 sales and marketing costs, substantially all interest expense, interest income,
and amortization and impairment of intangible assets from acquisitions. Corporate assets primarily
include cash and cash equivalents, related party notes receivable, deferred and current income
tax assets, corporate property and equipment, and intangible assets.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 2001(Continued)
(Unaudited)

---



|8) |  | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Effective March 9, 2001, Grahame E. Rance was appointed to the positions
of President and Chief Executive Officer of SBS and member of the Board
of Directors. Mr. Rance succeeded Christopher J. Amenson, who remained
as Chairman of the Board of Directors of SBS until November 8, 2001, at
which time Mr. Rance was appointed as Chairman. As part of his
compensation package, Mr. Rance received a $1,893,750 interest free loan
from SBS, paid in cash on April 4, 2001. Forgiveness of the loan will
occur ratably over six annual anniversaries of Mr. Rances employment
with SBS. At December 31, 2001, the balance on the loan was $1,665,124.
Additionally, Mr. Rance received a $570,000 interest free loan from SBS
that was repaid upon the sale of his former home during the quarter
ended December 31, 2001.              
|  
|9) |  | Restructuring Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | On December 26, 2001, as a result of continued unfavorable economic and
market conditions, the decision to exit the legacy PCI Chassis product
line, and continued manufacturing consolidation efforts, the SBS Board
of Directors approved a restructuring plan. The restructuring plan
allows for a 10% workforce reduction, to be completed through March 31,
2002. In December, 13 employees were notified that their jobs would be
eliminated as part of this restructuring plan, and as a result, during
the quarter ended December 31, 2001, SBS recorded approximately $150,000
in restructuring costs, consisting primarily of severance and employee
related costs. As of December 31, 2001, cash payments of approximately
$6,000 had been made; the remaining $144,000 will be paid through the
quarter ending September 30, 2002.
|  
|   |  | With respect to the restructuring plan approved on July 18, 2001, cash
payments of approximately $58,000 were made during the quarter ended
December 31, 2001; total cash payments of $164,000 were made through
December 31, 2001; $14,000 of the original restructuring charge was
reversed during the quarter ended December 31, 2001 as a result of the
decision not to terminate an originally notified employee; the remaining
$7,000 will be paid during the next quarter.                                                                                                                                                                                                                                                                                                                                                             

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##### Table of Contents






SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001

---

The following discussion and analysis should be read in conjunction with SBS
Financial Statements and Notes thereto. Information discussed herein, other
than statements of historical fact, that addresses future financial
performance, activities, events or developments that SBS or management intends,
expects, projects, believes or anticipates will or may occur in the future are
forward-looking statements. These statements are based upon certain
assumptions and assessments made by management of SBS in light of its
experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes to be appropriate.
The forward-looking statements included in this Form 10-Q are also subject to a
number of risks, uncertainties, and other factors which could cause the actual
results to differ materially from those contained in the forward-looking
statements. These include but are not limited to economic, competitive, supply
and demand, governmental and technological factors affecting SBS operations,
markets, products, services, prices, a high degree of uncertainty and rapid
change in the markets addressed by SBS products, customer demand for SBS
products, and other risk factors listed in the Companys Form 10-K for the year
ended June 30, 2001. These forward-looking statements are not guarantees of
future performance, and actual results, developments and business decisions may
differ from those expressed or implied by these forward-looking statements.

Results of Operations

Six Months Ended December 31, 2001 Compared To Six Months Ended December 31, 2000

Sales.For the six-month period ended December 31, 2001, sales decreased
34.5%, or $32.0 million, from $92.8 million for the six-month period ended
December 31, 2000, to $60.8 million. Unit shipments increased among all
product lines within the Government Group segment. Unit shipments declined
within the Communications Group, primarily due to depressed market
and economic conditions and delays of shipments by several of
the Groups telecommunications infrastructure customers. Current unfavorable
economic and market conditions combined with delays from several customers
resulted in a decline of unit shipments within the Commercial Group. SBS
expects that consolidated sales for the quarter ending March 31, 2002 will be
consistent with the quarter ended December 31, 2001. Actual results may vary.

Gross Profit.For the six-month period ended December 31, 2001, gross profit
decreased 61.3%, or $27.3 million, from $44.5 million for the six-month period
ended December 31, 2000, to $17.2 million. This decrease was primarily due to
$185,000 of expenditures associated with the SBS manufacturing consolidation
and cost reduction efforts and a $12.4 million inventory write-down. The
write-down consisted of inventory associated with programs that are not
anticipated to come back to their previous forecasts, inventory associated with
SBS decision to exit its legacy PCI chassis product line, and inventory
associated with SBS products that will no longer be marketed. Additionally,
the implementation of a new inventory management methodology associated with
the consolidation of SBS manufacturing operations contributed to the inventory
write-down. The consolidation efforts include a reduction in the number of
material handling employees and inventory specialists, a reduction in the
amount of floor space for the storage of inventory, and the adoption of a
purchasing methodology based on projected component part demand to achieve
manufacturing and material handling efficiencies. This new methodology
calculates the maximum level of inventory to be maintained by comparing
historical usage over a fixed period of time to forecasted future demand. The
consolidation efforts and new inventory methodology resulted in a reduction in
required inventory levels. Excluding the $12.6 million of charges noted above,
for the six-month period ended December 31, 2001, gross profit as a percentage
of sales would have been 49.0%, compared to 47.9% for the six-month period
ended December 31, 2000. This favorable gross margin resulted primarily from
the change in sales mix to higher margin products in the six-month period ended
December 31, 2001. Based on managements expectations of sales projections for
the third quarter of fiscal 2002, gross profit as a percentage of sales is
expected to be consistent with the 47.8% experienced during the quarter ended
December 31, 2001, excluding the $12.6 million of charges. Actual results may
vary.

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SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(continued)

---

Selling, General and Administrative Expense.For the six-month period ended
December 31, 2001, selling, general and administrative (SG&A) expense increased
16.5%, or $2.7 million from $16.0 million for the six-month period ended
December 31, 2000, to $18.7 million. This increase is primarily due to an
increase in SBS sales personnel associated with the realignment of its
business, the addition of a corporate business development department and a
corporate business planning and process department, increases in executive
compensation, relocation expenses for recently hired employees, additional
information technology department personnel, depreciation and consulting
expenses associated with the implementation of SBS customer relationship
management system, and costs associated with the termination of SBS proposed
acquisition of Interactive Circuit Systems (ICS) in the quarter ended
December 31, 2001. This increase, combined with the decrease in sales,
resulted in an increase in SG&A expense as a percentage of sales to 30.7% in
the six month period ended December 31, 2001 from 17.3% in the six-month period
ended December 31, 2000.

Research and Development Expense.For the six-month period ended December 31,
2001, research and development (R&D) expense decreased 11.6%, or $1.1 million
from $9.9 million for the six-month period ended December 31, 2000, to $8.8
million. This decrease is primarily due to the Governments Groups reduction
in material and consulting costs associated with development programs that were
completed in fiscal 2001, combined with the Communications Groups R&D
personnel reduction resulting from depressed business conditions. For the
six-month period ended December 31, 2001, R&D expense as a percentage of sales
increased to 14.4% from 10.7% in the six-month period ended December 31, 2000,
primarily due to the decrease in sales volume.

Impairment of Assets.For the six-month period ended December 31, 2001, the
$2.7 million asset impairment charge represents the write-off of the remaining
goodwill recorded in connection with the acquisition of Industrial Computers
(formerly Micro Alliance) in November 1997 due to SBS decision in the quarter
ended December 31, 2001 to exit the PCI chassis business.

Interest and Other Income (Expense), Net. For the six-month period ended
December 31, 2001, net interest and other income of $277,000 consisted
primarily of a recovery from insurance of $307,000, and interest income
associated with surplus cash, partially offset by a $323,000 charge related to
an other-than-temporary decline in SBS investment in a software company. The
investment in the software company is currently valued at approximately
$177,000. For the six-month period ended December 31, 2000, net interest
expense of $544,000 consisted primarily of interest expense associated with
borrowings used to fund the acquisition of SDL, partially offset by interest
income associated with surplus cash.

Income Tax Expense (Benefit).For the six-month periods ended December 31,
2001 and 2000, income tax expense (benefit) represented effective rates of
36.1% and 33.8%, respectively. A tax benefit related to the net loss was
recorded in fiscal 2002 primarily due to SBS ability to realize the benefit
through tax loss carrybacks to prior periods. The increase in the effective
income tax rate was primarily due to a higher percentage of foreign source
pre-tax income and reduced benefits from certain tax planning strategies due to
the net loss in fiscal 2002.

Earnings Per Share.For the six-month period ended December 31, 2001, net loss
per common share was $0.74 compared to net income per share of $0.68 for the
six-month period ended December 31, 2000. For the six-month period ended
December 31, 2001, net loss per common share-assuming dilution was $0.74
compared to net income per common share-assuming dilution of $0.61 for the six-month
period ended December 31, 2000. Excluding the $12.4 million inventory
write-down, the $2.7 million asset impairment charge, the $185,000 of
expenditures associated with SBS manufacturing consolidation and cost
reduction efforts, and the $322,000 of restructuring charges, which total
$15.6 million ($10.1 million after tax), net loss per common share and net loss
per common share  assuming dilution for the six-month period ended December
31, 2001 would have been approximately $0.04.

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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(continued)

---

Review of Business Segments

SBS is managed and operates through three operating segments: the
Communications Group, the Commercial Group, and the Government Group.

The following is a discussion of sales to external customers and segment profit
for each reportable segment. SBS does not allocate to these segments corporate
overhead other than corporate sales and marketing costs, substantially all
of the amortization expense associated with
acquisitions, asset impairment charges, substantially all interest income
earned on cash balances, interest expense associated with SBS borrowing
facilities and acquired in-process research and development charges. This
measure of segment profit described above is referred to in this review as
Segment Profit.

Communications Group

For the six-month period ended December 31, 2001, Communications Group sales to
external customers decreased 65.7%, or $28.8 million, from $43.8 million for
the six-month period ended December 31, 2000 to $15.0 million. This decrease
is primarily due to depressed market and economic conditions and delays of
shipments by several of the Groups telecommunications infrastructure
customers. SBS expects that sales in the quarter ending March 31, 2002 will be
consistent with the quarter ended December 31, 2001. Actual results may vary.

For the six-month period ended December 31, 2001, Communications Group Segment
Loss was ($6.2) million, compared to Segment Profit of $12.3 million for the
six-month period ended December 31, 2000. This decrease was primarily due to
the decrease in sales, combined with a $7.6 million inventory write-down. The
inventory write-down was associated with programs that are not anticipated to
come back to their previous forecasts and with SBS decision to exit its legacy
PCI chassis product line. This was partially offset by a reduction of SG&A
expense, primarily due to the resignation of two SDL Communications, Inc.
executives, as well as lower sales and marketing costs due to SBS pro-rata
allocation of certain corporate SG&A expenses among segments, based on sales,
and a reduction in R&D personnel resulting from depressed business conditions.

Commercial Group

For the six-month period ended December 31, 2001, Commercial Group sales to
external customers decreased 20.7%, or $5.3 million from $25.7 million for the
six-month period ended December 31, 2000 to $20.4 million. Sales of the
Groups general purpose I/O products and computer connectivity and expansion
unit products decreased 40.0%, and 11.4%, respectively, primarily as a result
of unfavorable economic and market conditions and several customer delays of
shipments. Sales of the Groups system products increased 13.0%, primarily due
to an increase in sales to semiconductor manufacturers. SBS expects that
sales in the quarter ending March 31, 2002 will be slightly lower than
the quarter ended December 31, 2001. Actual results may vary.

For the six-month period ended December 31, 2001, Commercial Group Segment Loss
was ($2.9) million, compared to Segment Profit of $4.7 million for the
six-month period ended December 31, 2000. This decrease was primarily due to
the decrease in sales, $185,000 of expenditures associated with SBS
manufacturing consolidation and cost reduction efforts, and a $3.8 million
inventory write-down. The inventory write-down consisted of inventory
associated with SBS decision to exit its legacy PCI chassis product line and
inventory associated with products that will no longer be marketed.
Additionally, the implementation of the new inventory management methodology
associated with the consolidation of manufacturing operations contributed to
the inventory write-down.

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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(continued)

---

Government Group

For the six-month period ended December 31, 2001, Government Group sales to
external customers increased 9.1%, or $2.1 million, from $23.3 million for the
six-month period ended December 31, 2000 to $25.4 million. Sales of the Groups
avionics and telemetry products increased 9.8%, primarily due to the release of
the conduction-cooled PMC design, an increase in sales of the PMC2 board, and
an increase in sales of integrated avionics and telemetry products. Sales of
the Groups computer processor products increased 9.4%, primarily due to the
focus on high volume production business in the quarter ended September 30,
2001, partially offset by weak demand in the quarter ended December 31, 2001.
SBS expects a slight increase in Government Group sales in the quarter ending
March 31, 2002. Actual results may vary.

For the six-month period ended December 31, 2001, Government Group Segment
Profit increased 1.7%, or $83,000 from $4.9 million for the six-month period
ended December 31, 2000 to $5.0 million. This increase was primarily due to
the gross profit contribution from the increase in sales and the reduction in
R&D material and consulting costs associated with avionics and telemetry
development programs that were completed during fiscal 2001, partially offset
by a $1.0 million inventory write-down and an increase in SG&A expense. The
majority of the write-down was based on the implementation of the new inventory
management methodology associated with the consolidation of SBS manufacturing
operations. The increase in SG&A expenses was primarily due to an increase in
sales and marketing costs due to SBS pro-rata allocation of certain corporate
SG&A expenses among segments, based on sales. For the same reasons, Segment
Profit as a percentage of sales decreased from 21.2% for the six-month period
ended December 31, 2000 to 19.7% for the six-month period ended December 31,
2001.

Three Months Ended December 31, 2001 Compared To Three Months Ended December 31, 2000

Sales.For the three-month period ended December 31, 2001, sales decreased
41.0%, or $20.1 million, from $49.1 million for the three-month period ended
December 31, 2000, to $29.0 million. Unit shipments increased within the
Governments Groups avionics and telemetry product line, but declined in the
computer processor product line due to weak demand. Unit shipments declined
within the Communications Group and the Commercial Group due to continued
depressed market and economic conditions and customer delays of shipments.
SBS expects that consolidated sales in the quarter ending March 31, 2002 will
be consistent with the quarter ended December 31, 2001.
Actual results may vary.

Gross Profit.For the three-month period ended December 31, 2001, gross profit
decreased 94.4%, or $21.7 million, from $23.0 million for the three-month
period ended December 31, 2000, to $1.3 million. This decrease was primarily
due to $185,000 of expenditures associated with SBS manufacturing
consolidation and cost reduction efforts and a $12.4 million inventory
write-down. The write-down consisted of inventory associated with programs that
are not anticipated to come back to their previous forecasts, inventory
associated with SBS decision to exit its legacy PCI chassis product line, and
inventory associated with SBS products that will no longer be marketed.
Additionally, the implementation of a new inventory management methodology
associated with the consolidation of SBS manufacturing operations contributed
to the inventory write-down. The consolidation efforts include a reduction in
the number of material handling employees and inventory specialists, a
reduction in the amount of floor space for the storage of inventory, and the
adoption of a purchasing methodology based on projected component part demand
to achieve manufacturing and material handling efficiencies. This new
methodology calculates the maximum level of inventory to be maintained by
comparing historical usage over a fixed period of time to forecasted future
demand. The consolidation efforts and new inventory methodology resulted in a
reduction in required inventory levels. Excluding

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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(continued)

---

the $12.6 million of charges noted above, for the three month period ended
December 31, 2001, gross profit as a percentage of sales would have been 47.8%,
compared to 46.9% for the three-month period ended December 31, 2000. Based on
managements expectations of sales projections for the third quarter of fiscal
2002, gross profit as a percentage of sales is expected to be consistent with
the 47.8% experienced during the quarter ended December 31, 2001, excluding the
$12.6 million of charges. Actual results may vary.

Selling, General and Administrative Expense.For the three-month period ended
December 31, 2001, selling, general and administrative (SG&A) expense increased
20.5%, or $1.7 million from $8.1 million for the three-month period ended
December 31, 2000, to $9.8 million. This increase is primarily due to an
increase in SBS sales personnel associated with the realignment of its
business, the addition of a corporate business development department and a
corporate business planning and process department, increases in executive
compensation, relocation expenses for recently hired employees, additional
information technology department personnel, depreciation and consulting
expenses associated with the implementation of SBS customer relationship
management system, and costs associated with SBS proposed acquisition of ICS,
terminated in the quarter ended December 31, 2001. This increase, combined
with the decrease in sales, resulted in an increase in SG&A expense as a
percentage of sales to 33.7% in the three month period ended December 31, 2001
from 16.5% in the three-month period ended December 31, 2000.

Research and Development Expense.For the three-month period ended December
31, 2001, research and development (R&D) expense decreased 9.3%, or $462,000
from $5.0 million for the three-month period ended December 31, 2000, to $4.5
million. This decrease is primarily due to the Government Groups reduction in
material and consulting costs associated with development programs that were
completed in fiscal 2001, combined with the Communications Groups R&D
personnel reduction resulting from depressed business conditions. For the
three-month period ended December 31, 2001, R&D expense as a percentage of
sales increased to 15.5% from 10.1% in the three-month period ended December
31, 2000, primarily due to the decrease in sales volume.

Impairment of Assets.For the three-month period ended December 31, 2001, the
$2.7 million asset impairment charge represents the write-off of the remaining
goodwill recorded in connection with the acquisition of Industrial Computers
(formerly Micro Alliance) in November 1997 due to SBS decision in the quarter
ended December 31, 2001 to exit the PCI chassis business.

Interest and Other Income (Expense), Net. For the three-month period ended
December 31, 2001, net interest and other expense of $159,000 consisted
primarily of a $323,000 charge related to an other-than-temporary decline in
SBS investment in a software company. The investment in the software company
is currently valued at approximately $177,000, partially offset by interest
income associated with surplus cash. For the three-month period ended December
31, 2000, net interest and other expense of $190,000 consisted primarily of
interest expense associated with borrowings used to fund the acquisition of
SDL, partially offset by interest income associated with surplus cash.

Income Tax Expense (Benefit).For the three-month periods ended December 31,
2001, income tax expense (benefit) represented effective rates of 36.4% and
37.2 % respectively. A tax benefit related to the net loss was recorded in
fiscal 2002 primarily due to SBS ability to realize the benefit through tax
loss carrybacks to prior periods.

Earnings Per Share.For the three-month period ended December 31, 2001, net
loss per common share was $0.78 compared to net income per common share of
$0.36 for the three-month period ended December 31, 2000. For the three-month
period ended December 30, 2001, net loss per common share-assuming dilution was
$0.78 compared to net income per common share  assuming dilution of $0.32 for
the three-month period ended December 30, 2000. Excluding the $12.4 million
inventory write-down, the $2.7 million asset impairment charge, the $185,000 of
expenditures associated with the Commercial Groups consolidation and cost
reduction efforts, and the $137,000 restructuring charge, all of which total
$15.4 million ($10.0 million after tax), net loss per common share and net loss
per common share  assuming dilution for the three-month period ended December
31, 2001 would have been approximately $0.10.

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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(Continued)

---

Review of Business Segments

SBS is managed and operates through three operating segments: the
Communications Group, the Commercial Group, and the Government Group.

The following is a discussion of sales to external customers and segment profit
for each reportable segment. SBS does not allocate to these segments corporate
overhead other than corporate sales and marketing costs, substantially all of the
amortization expense associated with
acquisitions, asset impairment charges, substantially all interest income
earned on cash balances, interest expense associated with SBS borrowing
facilities and acquired in-process research and development charges. This
measure of segment profit described above is referred to in this review as
Segment Profit.

Communications Group

For the three-month period ended December 31, 2001, Communications Group sales
to external customers decreased 69.0%, or $16.3 million, from $23.7 million for
the three-month period ended December 31, 2000 to $7.3 million. This decrease
was primarily due to the continued effect of depressed market and economic
conditions as well as customer delays of shipments. SBS expects that sales in
the quarter ending March 31, 2002 will be consistent with the quarter ended
December 31, 2001. Actual results may vary.

For the three-month period ended December 31, 2001, Communications Group
Segment Loss was ($7.2) million, compared to Segment Profit of $6.7 million for
the three-month period ended December 31, 2000. This decrease was primarily
due to the decrease in sales combined with a $7.6 million inventory write-down
associated with programs that are not anticipated to come back to their
previous forecasts and with SBS decision the exit its legacy PCI chassis
product line. This decrease was partially offset by a reduction in R&D
personnel resulting from depressed business conditions, as well as a reduction
in SG&A expense, resulting primarily from the resignation of two SDL
Communications, Inc. executives, and a reduction in sales and marketing costs
due to SBS pro-rata allocation of certain corporate SG&A expenses, based on
sales.

Commercial Group

For the three-month period ended December 31, 2001, Commercial Group sales to
external customers decreased 30.2%, or $4.0 million from $13.4 million for the
three-month period ended December 31, 2000 to $9.4 million. Sales of the
Groups general purpose I/O products, computer connectivity and expansion unit
products, and system products decreased 50.6%, 12.6%, and 13.3%, respectively,
primarily as a result of current unfavorable economic and market conditions and
several customer delays of shipments. SBS expects that sales in the quarter
ending March 31, 2002 will be slightly lower than the quarter ended December
31, 2001. Actual results may vary.

For the three-month period ended December 31, 2001, Commercial Group Segment
Loss was ($4.3) million, compared to Segment Profit of $2.3 million for the
three-month period ended December 31, 2000. This decrease was primarily due to
the decrease in sales among the Groups product lines, $185,000 of expenditures
associated with SBS manufacturing consolidation and cost reduction efforts,
and a $3.8 million inventory write-down. The inventory write-down consisted of
inventory associated with SBS decision to exit its legacy PCI chassis product
line and inventory associated with Commercial Group products that will no
longer be marketed. Additionally, the implementation of the new inventory
management methodology associated with the consolidation of manufacturing
operations contributed to the inventory write-down.

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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(Continued)

---

Government Group

For the three-month period ended December 31, 2001, Government Group sales to
external customers increased 2.1%, or $257,000, from $12.0 million for the
three-month period ended December 31, 2000 to $12.3 million. Sales of the
Groups avionics and telemetry products increased 13.0%, primarily due to an
increase in sales of the PMC2 board and an increase in sales of integrated
avionics and telemetry products. Sales of the Groups computer processor
products decreased 8.5%, primarily due to a decrease in unit shipments,
resulting from weak demand. SBS expects a slight increase in Government Group
sales in the quarter ending March 31, 2002. Actual results may vary.

For the three-month period ended December 31, 2001, Government Group Segment
Profit decreased 44.1%, or $1.2 million from $2.7 million for the three-month
period ended December 31, 2000 to $1.5 million. This decrease was primarily
due to a $1.0 million inventory write-down and an increase in SG&A expense.
The majority of the inventory write-down was based on the implementation of the
new inventory management
methodology associated with the consolidation of the manufacturing operations.
The increase in SG&A expenses was primarily due to an increase in sales and
marketing costs due to SBS pro-rata allocation of certain corporate SG&A
expenses among segments, based on sales. The decrease in Segment Profit was
partially offset by a reduction in R&D material and consulting costs associated
with avionics and telemetry development programs that were completed during
fiscal 2001. For the same reasons, Segment Profit as a percentage of sales
decreased from 22.4% for the three-month period ended December 31, 2000 to
12.3% for the three-month period ended December 31, 2001.

Liquidity and Capital Resources

SBS uses a combination of the sale of equity securities, internally generated
funds and bank borrowings to finance its acquisitions, working capital
requirements, capital expenditures and operations.

Cash totaled $25.7 million at December 31, 2001, an increase of $16.0 million
from June 30, 2001. This increase was the result of $20.4 million of cash flow
from operations and $0.8 million of proceeds from the exercise of stock
options, partially offset by $2.2 million of expenditures for capital
equipment, $2.5 million of payments on SBS line of credit, and $0.5 million
paid to repurchase shares of SBS common stock pursuant to a repurchase plan
adopted by the Board of Directors on September 14, 2001 and implemented from
September 20 to September 26, 2001. During the six-month period ended December
31, 2001, accounts receivable declined, consistent with the decline in sales.
Inventory declined $17.9 million, $12.4 million of which was due to an
inventory write-down (see Gross Profit above). The remaining $5.5 million
decline is consistent with the decline in sales volume. Liabilities were in
line with the current level of business.

As of December 31, 2001, there were no borrowings drawn on SBS $30.0 million
Credit Agreement (Agreement) with Bank of America, N.A. (the Bank). At
December 31, 2001, SBS was out of compliance with the fixed charge coverage
ratio covenant of the Agreement, but obtained a waiver from the Bank. Although
there were no borrowings on the Agreement at December 31, 2001, the calculation
of EBIDTA indicates that under the Agreements senior funded debt to EBITDA
ratio requirement of 1.25 to 1, SBS ability to draw under the Agreement would
be limited to approximately $12.3 million. SBS and the Bank are currently
negotiating a modification to the financial covenants which may include an
exclusion of the inventory write-down of $12.4 million from the EBITDA
calculation. If the fixed charge coverage ratio is adjusted and the inventory
write-down is excluded, SBS borrowing capacity under the Agreement would be
limited to approximately $10.5 million to $15.9 million, based on SBS EBITDA
projections, through the expiration of the Agreement in December, 2002. If the
$12.4 million inventory write-down is not excluded from the EBITDA calculation,
SBS could be precluded from borrowing under the Agreement. If SBS is precluded
from borrowing under the Agreement, growth through acquisition will be
substantially limited.

Management believes that SBS internally generated funds will be sufficient
to finance its current operations and capital expenditures, excluding
acquisitions, for the next twelve months.

For the six-month period ended December 31, 2001, there was no significant
impact from inflation.

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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(Continued)

---

New Accounting Standards

In October, 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS 144
supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, but retains many of the fundamental
provisions of SFAS 121. SFAS 144 also supersedes APB Opinion No. 30,
Reporting the Results of Operations, Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. SFAS 144 retains the requirement in Opinion 30 to
report separately discontinued operations and extends that reporting to a
component of an entity that either has been disposed of or is classified as
held for sale. SFAS 144 is effective for fiscal years beginning after December
15, 2001 and interim periods within those fiscal years. Early application is permitted.
SBS does not expect the adoption of SFAS 144 to have a material impact on its financial
statements or results of operations.

In June, 2001, the FASB issued SFAS 143 Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated retirement costs. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or normal use of the asset. SFAS
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The fair value of the liability is added
to the carrying amount of the associated asset and this additional carrying
amount is depreciated over the life of the asset. The liability is accreted at
the end of each period through charges to operating expense. If the obligation
is settled for other than the carrying amount of the liability, SBS will
recognize a gain or loss on settlement. SBS is required to adopt the
provisions of SFAS 143 for the quarter ending September 30, 2002. SBS does not
expect the adoption of SFAS 143 to have a material impact on its financial
statements or results of operations.

In July 2001, the FASB issued SFAS 141, Business Combinations, and SFAS 142,
Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001 as well as all purchase method business combinations completed after
June 30, 2001. SFAS 141 also specifies criteria that intangible assets acquired
in a purchase method business combination must meet to be recognized and
reported apart from goodwill. Any purchase price allocable to an assembled
workforce may not be accounted for separately. SFAS 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually in accordance
with the provisions of SFAS 142. SFAS 142 will also require that intangible
assets with estimable useful lives be amortized over their respective estimated
useful lives to their estimated residual values, if any, and reviewed for
impairment in accordance with SFAS 144, which supersedes SFAS 121.

SBS is required to adopt the provisions of SFAS 141 on July 1, 2002. Before the
adoption of SFAS 142, goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be amortized and
tested for impairment in accordance with the appropriate pre-SFAS 142
accounting requirements.

SFAS 141 will require, upon adoption of SFAS 142, that SBS evaluate its
existing intangible assets and goodwill that were acquired in prior purchase
business combinations, and make any necessary reclassifications in order to
conform with the new criteria in Statement 141 for recognition apart from
goodwill. Upon adoption of SFAS 142, SBS will be required to reassess the
useful lives and residual values of all intangible assets acquired, and make
any necessary amortization period adjustments by the end of the first interim
period after adoption. In addition, to the extent an intangible asset is
identified as having an indefinite useful life, SBS will be required to test
the intangible asset for impairment in accordance with the provisions of SFAS
142 within the first interim period. Any impairment loss will be measured as of
the date of adoption and recognized as the cumulative effect of a change in
accounting principle in the first interim period.

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##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 2001
(Continued)

---

In connection with SFAS 142s transitional goodwill impairment evaluation, SBS
will be required to perform an assessment of whether there is an indication
that goodwill is impaired as of the date of adoption. To
accomplish this, SBS must identify its reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. SBS will then have up to six months from the date
of adoption to determine the fair value of each reporting unit and compare it
to the reporting units carrying amount. To the extent a reporting units
carrying amount exceeds its fair value, an indication exists that the reporting
units goodwill may be impaired and SBS must perform the second step of the
transitional impairment test. In the second step, SBS must compare the implied
fair value of the reporting units goodwill, determined by allocating the
reporting units fair value to all of its assets (recognized and unrecognized)
and liabilities in a manner similar to a purchase price allocation in
accordance with SFAS 141, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in SBS statement of earnings.

Because of the extensive effort needed to comply with adopting SFAS 141 and
SFAS 142, it is not practicable to reasonably estimate the impact of adopting
these standards on SBS financial statements at the date of this report,
including whether it will be required to recognize any transitional impairment
losses as the cumulative effect of a change in accounting principle.

Business Outlook

Consistent with SBS press release dated January 15, 2002, management expects
SBS financial results for the third quarter of fiscal 2002 to be similar to
the second quarter of fiscal 2002, excluding the $10.0 million (after tax) of
charges previously discussed. Actual results may vary.




Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the information on this risk that was
provided in the SBS Form 10-K for the year ended June 30, 2001.

Page 19



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##### Table of Contents






PART II  OTHER INFORMATION

Item 1. Legal Proceedings  None

Item 2. Changes in Securities  None

Item 3. Defaults by the Company upon its Senior Securities  None

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



| |  | The following items were submitted to a vote and approved at the Annual
Meeting of Stockholders held on November 8, 2001:
| |  | -------------------------------------------------------------------------------------------------------------------------

TABULATION OF VOTES

|                                                                                                   |                        |     |            |            |          |  |                  |        |                 |  |       |  | 
|-------------------------------------------------------------------------------------------------- | ---------------------- | --- | ---------- | ---------- | -------- |  | ---------------- | ------ | --------------- |  | ----- |  | 
|                                                                                                   |                        |     |            |            |          |  | Against or       |        | Abstentions and
|Item Voted                                                                                         |                        | For |            |            | Withheld |  | Broker Non-Votes
|                                                                                                   |                        |     |            |            |          |  |                 
|Election of Directors:                                                                             |                        |     |            |            |          |  |                  |        |                 |  |       | 
|                                                                                                   | Christopher J. Amenson |     |            | 13,760,918 |          |  |                  | 37,462 |                 |  |       |  | 
|                                                                                                   | Warren W. Andrews      |     |            | 13,766,518 |          |  |                  | 31,862 |                 |  |       |  | 
|                                                                                                   | Lawrence A. Bennigson  |     |            | 13,766,418 |          |  |                  | 31,962 |                 |  |       |  | 
|                                                                                                   | Peter D. Fenner        |     |            | 13,761,348 |          |  |                  | 37,032 |                 |  |       |  | 
|                                                                                                   | Louis C. Golm          |     |            | 13,761,518 |          |  |                  | 36,862 |                 |  |       |  | 
|                                                                                                   | Grahame E. Rance       |     |            | 13,758,435 |          |  |                  | 39,945 |                 |  |       |  | 
|                                                                                                   | Alan F. White          |     |            | 13,766,518 |          |  |                  | 31,862 |                 |  |       |  | 
|Ratification of KPMG LLP
as the Companys
independent auditor for
fiscal year
ending June 30, 2002 |                        |     | 13,777,296 |            |          |  | 14,784           |        |                 |  | 6,300 | 

Item 5. Other Information  None

Item 6. Exhibits and Reports on Form 8-K.



| | (a) |  | Exhibits (exhibit reference numbers refer to Item 601 of Regulation S-K)
| | --- |  | ------------------------------------------------------------------------

|      |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----- |  |  | --- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|03.i  |  |  | (1) |  |  | Restated Articles of Incorporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|03.ii |  |  | (1) |  |  | 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 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, SBS appointed Norwest Bank Minnesota
N.A. (now Wells Fargo) as Successor Rights Agent



| | (b) |  | Reports on Form 8-K   On February 11, 2002, SBS filed Form
8-K, relating to a change in the amount of an inventory write-down
discussed in SBS January 15, 2002 press release announcing its
unaudited financial results for the period ended December 31, 2001.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (1) |  | See Exhibit Index                                                                                                                                                                                                                                                 

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##### Table of Contents






SIGNATURES

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

|                        |  |                                                                                                                    
|----------------------- |  | -------------------------------------------------------------------------------------------------------------------
|                        |  | SBS TECHNOLOGIES, INC.                                                                                             
|                       
|Date: February 14, 2002 |  | /s/ Grahame E. RanceChief Executive Officer
and President                                                          
|                       
|Date: February 14, 2002 |  | /s/ James E. Dixon, Jr.Vice President,
Finance and Administration;
Chief Financial Officer, Secretary and
Treasurer

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##### Table of Contents






SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|03.i    (1)    |  | Restated Articles of Incorporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|03.ii   (2)    |  | Restated and Amended Bylaws                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|04.a   (3)     |  | Article VI of the Restated Articles of Incorporation,
as included in the Restated Articles of Incorporation
of SBS Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                                                          
|04.b   (4)     |  | Articles I and II of the Restated and Amended Bylaws of
SBS Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|04.c   (5)     |  | Form of certificate evidencing Common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|04.1   (6)     |  | 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, SBS
appointed Norwest Bank Minnesota N.A. (now Wells Fargo) as
Successor Rights Agent



|(1) |  | Incorporated by reference to Exhibit 3.i, of the Registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to Exhibit 3.ii, of the Registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.                                                                  
|   
|(3) |  | Incorporated by reference to Exhibit 3.i, of the Registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.                                                                   
|   
|(4) |  | Incorporated by reference to Exhibit 3.ii, of the Registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.                                                                  
|   
|(5) |  | Incorporated by reference to Exhibit 4.c, of the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.                                                                       
|   
|(6) |  | Incorporated by reference to Exhibit 4.1 to the Registrants Form 8-K filed September 23, 1997, and
to Exhibit 99.1a of the Registrants Quarterly Report on
Form 10-Q for quarter ended March 31, 1998.

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