##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

| |  |                                                                                                                                     
| |  | ------------------------------------------------------------------------------------------------------------------------------------
| |  | Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterlyperiod ended March 31, 2002
| |  |                                                                                                                                     
| |  | 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      NO

As of April 30, 2002, the Registrant had 14,582,295 shares of its common stock outstanding.





---

TABLE OF CONTENTS



|                                    |                                                                                       |                                                           |  |  |  |  |  | 
|----------------------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|                                    |                                                                                       | 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     
|                                    | Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                    | Quantitative and Qualitative Disclosures about Market Risk                           
|PART II  OTHER INFORMATION        
|SIGNATURES                         
|EXHIBIT INDEX                      
|EX-10.bn - Asset Purchase Agreement
|EX-10.bo - Separation Agreement    
|EX-10.bp - Employment Agreements   
|EX-10.bq - Employment Agreement    



---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Form 10-Q for the Quarter Ended March 31, 2002
Table of Contents

|                               |                                                                                                |                                                                                             |    |      |   | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |                                                                                                |                                                                                             |    | Page
|                               |                                                                                                |                                                                                             |    |     
|PART I  FINANCIAL INFORMATION |                                                                                                |                                                                                             |    |     
|                               | Item 1  Unaudited Condensed Financial Statements                                              |                                                                                             |    |      |  
|                               |                                                                                                | Consolidated Balance Sheets
at March 31, 2002 and June 30, 2001                             |    |      | 2 | 
|                               |                                                                                                | Consolidated Statements of Operations, Nine and
Three Months Ended March 31, 2002 and 2001  |    |      | 3 | 
|                               |                                                                                                | Consolidated Statement of Changes in Stockholders Equity,
Nine Months Ended March 31, 2002 |    |      | 4 | 
|                               |                                                                                                | Consolidated Statements of Cash Flows,
Nine Months Ended March 31, 2002 and 2001            |    |      | 5 | 
|                               |                                                                                                | Notes to Unaudited Condensed Consolidated Financial Statements
as of March 31, 2002         |    |      | 7 | 
|                               | Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                             |    | 12   |  
|                               | Item 3  Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                             |    | 20   |  
|PART II  OTHER INFORMATION    |                                                                                                |                                                                                             | 21 |     
|SIGNATURES                     |                                                                                                |                                                                                             | 22 |     
|EXHIBIT INDEX                  |                                                                                                |                                                                                             | 23 |     





---



##### Table of Contents






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

---

|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |          |         |  |  | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------ | ------ | ------- | --------- | ------ | -------- | ------- |  |  | 
|                                     |                                                                                                                                                                    |                                            |        |        |         | March 31, |        | June 30,
|                                     |                                                                                                                                                                    |                                            |        |        |         | 2002      |        | 2001    
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|Assets                               |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|Current assets:                      |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     | Cash and cash equivalents                                                                                                                                          |                                            | $      | 21,048 |         |           |        | 9,734    |        
|                                     | Receivables, net                                                                                                                                                   |                                            |        | 25,191 |         |           |        | 27,287   |        
|                                     | Inventories                                                                                                                                                        |                                            |        | 22,079 |         |           |        | 40,752   |        
|                                     | Deferred income taxes                                                                                                                                              |                                            |        | 11,222 |         |           |        | 5,080    |        
|                                     | Income tax receivable                                                                                                                                              |                                            |        | 2,714  |         |           |        | 3,417    |        
|                                     | Prepaid expenses                                                                                                                                                   |                                            |        | 1,729  |         |           |        | 1,125    |        
|                                     | Other current assets                                                                                                                                               |                                            |        | 996    |         |           |        | 802      |        
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     |                                                                                                                                                                    | Total current assets                       |        |        | 84,979  |           |        |          | 88,197  | 
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|Property and equipment, net          |                                                                                                                                                                    |                                            | 12,049 |        |         |           | 11,475 |         
|Goodwill, net                        |                                                                                                                                                                    |                                            | 23,698 |        |         |           | 29,266 |         
|Intangible assets, net               |                                                                                                                                                                    |                                            | 13,775 |        |         |           | 15,841 |         
|Deferred income taxes                |                                                                                                                                                                    |                                            | 309    |        |         |           |       |         
|Other assets                         |                                                                                                                                                                    |                                            | 1,204  |        |         |           | 2,393  |         
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     |                                                                                                                                                                    | Total assets                               |        | $      | 136,014 |           |        |          | 147,172 | 
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|Liabilities and Stockholders Equity |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|Current liabilities:                 |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     | Notes payable                                                                                                                                                      |                                            | $      |       |         |           |        | 2,500    |        
|                                     | Accounts payable                                                                                                                                                   |                                            |        | 4,295  |         |           |        | 3,771    |        
|                                     | Accrued representative commissions                                                                                                                                 |                                            |        | 505    |         |           |        | 821      |        
|                                     | Accrued compensation                                                                                                                                               |                                            |        | 3,155  |         |           |        | 4,071    |        
|                                     | Other current liabilities                                                                                                                                          |                                            |        | 3,808  |         |           |        | 1,753    |        
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     |                                                                                                                                                                    | Total current liabilities                  |        |        | 11,763  |           |        |          | 12,916  | 
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|Long-term liabilities:               |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     | Deferred income taxes                                                                                                                                              |                                            |        |       |         |           |        | 461      |        
|                                     | Other liabilities                                                                                                                                                  |                                            |        | 36     |         |           |        |         |        
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     |                                                                                                                                                                    | Total long-term liabilities                |        |        | 36      |           |        |          | 461     | 
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     |                                                                                                                                                                    | Total liabilities                          |        |        | 11,799  |           |        |          | 13,377  | 
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|Stockholders equity:                |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     | Common stock, no par value; 200,000,000 shares authorized,
14,612,157 issued and outstanding at March 31, 2002,
14,522,080 issued and outstanding at June 30, 2001 |                                            |        | 86,546 |         |           |        | 85,476   |        
|                                     | Unearned compensation                                                                                                                                              |                                            |        | (415   | )       |           |        | (478     | )      
|                                     | Accumulated other comprehensive loss                                                                                                                               |                                            |        | (5,572 | )       |           |        | (5,983   | )      
|                                     | Retained earnings                                                                                                                                                  |                                            |        | 43,656 |         |           |        | 54,780   |        
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     |                                                                                                                                                                    | Total stockholders equity                 |        |        | 124,215 |           |        |          | 133,795 | 
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         
|                                     |                                                                                                                                                                    | Total liabilities and stockholders equity |        | $      | 136,014 |           |        |          | 147,172 | 
|                                     |                                                                                                                                                                    |                                            |        |        |         |           |        |         

See accompanying notes to unaudited condensed consolidated financial statements

Page 2





---



##### Table of Contents






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

---

|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |        | 
|------------------------------------------------------ | ----------------------- | - | -------------------------- | ------- | --------------------------- |  | ------- | ------ | ---- |  | ------ | ------ | - |  | ------ | ------ | 
|                                                       |                         |   | Nine Months Ended March 31 |         | Three Months Ended March 31
|                                                       |                         |   |                            |         |                            
|                                                       |                         |   | 2002                       |         | 2001                        |  | 2002    |        | 2001
|                                                       |                         |   |                            |         |                             |  |         |        |     
|Sales                                                  |                         | $ | 90,475                     |         |                             |  | 141,285 |        |      |  | 29,694 |        |   |  | 48,490 |       
|Cost of sales                                          |                         |   | 58,043                     |         |                             |  | 74,172  |        |      |  | 14,466 |        |   |  | 25,863 |       
|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |       
|                                                       | Gross profit            |   |                            | 32,432  |                             |  |         | 67,113 |      |  |        | 15,228 |   |  |        | 22,627 | 
|Selling, general and administrative expense            |                         |   | 28,650                     |         |                             |  | 24,302  |        |      |  | 9,965  |        |   |  | 8,262  |       
|Research and development expense                       |                         |   | 13,396                     |         |                             |  | 15,006  |        |      |  | 4,621  |        |   |  | 5,078  |       
|Restructuring charge                                   |                         |   | 572                        |         |                             |  |        |        |      |  | 251    |        |   |  |       |       
|Impairment of intangible assets                        |                         |   | 2,682                      |         |                             |  |        |        |      |  |       |        |   |  |       |       
|Amortization of intangible assets                      |                         |   | 5,658                      |         |                             |  | 5,832   |        |      |  | 1,805  |        |   |  | 1,936  |       
|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |       
|                                                       | Operating income (loss) |   |                            | (18,526 | )                           |  |         | 21,973 |      |  |        | (1,414 | ) |  |        | 7,351  | 
|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |       
|Interest and other income (expense), net               |                         |   | 421                        |         |                             |  | (653    | )      |      |  | 144    |        |   |  | (109   | )     
|Foreign exchange gains (losses)                        |                         |   | 24                         |         |                             |  | (140    | )      |      |  | (1     | )      |   |  | (77    | )     
|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |       
|                                                       |                         |   | 445                        |         |                             |  | (793    | )      |      |  | 143    |        |   |  | (186   | )     
|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |       
|Income (loss) before income taxes                      |                         |   | (18,081                    | )       |                             |  | 21,180  |        |      |  | (1,271 | )      |   |  | 7,165  |       
|Income tax expense (benefit)                           |                         |   | (6,957                     | )       |                             |  | 7,532   |        |      |  | (885   | )      |   |  | 2,792  |       
|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |       
|Net income (loss)                                      |                         | $ | (11,124                    | )       |                             |  | 13,648  |        |      |  | (386   | )      |   |  | 4,373  |       
|                                                       |                         |   |                            |         |                             |  |         |        |      |  |        |        |   |  |        |       
|Net income (loss) per common share                     |                         | $ | (0.76                      | )       |                             |  | 0.99    |        |      |  | (0.03  | )      |   |  | 0.31   |       
|Net income (loss) per common share -
assuming dilution |                         | $ | (0.76                      | )       |                             |  | 0.90    |        |      |  | (0.03  | )      |   |  | 0.29   |       

See accompanying notes to unaudited condensed consolidated financial statements

Page 3





---



##### Table of Contents






SBS Technologies, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income (Loss)
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          |                                          |  | 132,577    |   |          |   | 1,394         |   |             |   |         |   |        |   |       |     |  |   |        |   |  |   | 1,394   |    
|Stock repurchased and retired                   |                                          |  | (42,500    | ) |          |   | (488          | ) |             |   |         |   |        |   |       |     |  |   |        |   |  |   | (488    | )  
|Stock-based compensation                        |                                          |  |           |   |          |   | 21            |   |             |   | 63       |   |        |   |       |     |  |   |        |   |  |   | 84      |    
|Income tax benefit from stock
options exercised |                                          |  |           |   |          |   | 143           |   |             |   |         |   |        |   |       |     |  |   |        |   |  |   | 143     |    
|Net loss                                        |                                          |  |           |   |          |   |              |   |             |   |         |   |        |   |       |     |  |   | (11,124 | ) |  |   | (11,124 | )  
|Other comprehensive income:                     |                                          |  |            |   |          |   |               |   |             |   |          |   |        |   |        |     |  |   |         |   |  |   |         |    
|                                                | Foreign currency translation adjustments |  |            |  |          |   |               |  |             |   |          |  |        |   |        | 411 |  |   |         |  |  |   |         | 411 | 
|                                                |                                          |  |            |   |          |   |               |   |             |   |          |   |        |   |        |     |  |   |         |   |  |   |         |    
|Balance at March 31, 2002                       |                                          |  | 14,612,157 |   |          | $ | 86,546        |   |             | $ | (415     | ) |        | $ | (5,572 | )   |  | $ | 43,656  |   |  | $ | 124,215 |    
|                                                |                                          |  |            |   |          |   |               |   |             |   |          |   |        |   |        |     |  |   |         |   |  |   |         |    

See accompanying notes to unaudited condensed consolidated financial statements

Page 4





---



##### Table of Contents






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

---

|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |         |       |         |        |  
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------------------------------------- | ---------------------------------- | ----------------------------------------- | ------ | ----------------- | ------ | ------- | ----- | ------- | ------ | -
|                                                  |                                                                                          |                                               |                                    |                                           |        | Nine months ended
|                                                  |                                                                                          |                                               |                                    |                                           |        | March 31,        
|                                                  |                                                                                          |                                               |                                    |                                           |        |                  
|                                                  |                                                                                          |                                               |                                    |                                           |        | 2002              |        | 2001   
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|Cash flows from operating activities:             |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  | Net income (loss)                                                                        |                                               | $                                  | (11,124                                   | )      |                   |        | 13,648  |      
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  | Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                               |                                    |                                           |        |                   |        |         |      
|                                                  |                                                                                          | Depreciation                                  |                                    |                                           | 2,778  |                   |        |         | 1,784 |        
|                                                  |                                                                                          | Amortization of intangible assets             |                                    |                                           | 5,658  |                   |        |         | 5,832 |        
|                                                  |                                                                                          | Impairment of intangible assets               |                                    |                                           | 2,682  |                   |        |         |      |        
|                                                  |                                                                                          | Bad debt expense                              |                                    |                                           | 362    |                   |        |         | 527   |        
|                                                  |                                                                                          | Deferred income taxes                         |                                    |                                           | (6,673 | )                 |        |         | (367  | )      
|                                                  |                                                                                          | Income tax benefit of stock options exercised |                                    |                                           | 143    |                   |        |         | 5,262 |        
|                                                  |                                                                                          | (Gain) loss on disposition of assets          |                                    |                                           | (7     | )                 |        |         | 14    |        
|                                                  |                                                                                          | Foreign exchange (gains) losses               |                                    |                                           | (24    | )                 |        |         | 140   |        
|                                                  |                                                                                          | Stock-based compensation                      |                                    |                                           | 84     |                   |        |         | 28    |        
|                                                  |                                                                                          | Changes in assets and liabilities:            |                                    |                                           |        |                   |        |         |       |        
|                                                  |                                                                                          |                                               | Receivables                        |                                           |        | 1,871             |        |         |       | (4,511  | )     
|                                                  |                                                                                          |                                               | Inventories                        |                                           |        | 19,476            |        |         |       | (17,885 | )     
|                                                  |                                                                                          |                                               | Prepaids and other assets          |                                           |        | 407               |        |         |       | (466    | )     
|                                                  |                                                                                          |                                               | Accounts payable                   |                                           |        | 458               |        |         |       | 904     |       
|                                                  |                                                                                          |                                               | Accrued representative commissions |                                           |        | (324              | )      |         |       | 44      |       
|                                                  |                                                                                          |                                               | Accrued compensation               |                                           |        | (1,029            | )      |         |       | 6       |       
|                                                  |                                                                                          |                                               | Income taxes                       |                                           |        | 484               |        |         |       | (716    | )     
|                                                  |                                                                                          |                                               | Other current liabilities          |                                           |        | 1,569             |        |         |       | 36      |       
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  |                                                                                          |                                               |                                    | Net cash provided by operating activities |        |                   | 16,791 |         |       |         | 4,280  |  
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|Cash flows from investing activities:             |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  | Business acquisition                                                                     |                                               |                                    | (1,034                                    | )      |                   |        |        |      
|                                                  | Acquisition of property and equipment                                                    |                                               |                                    | (2,839                                    | )      |                   |        | (4,769  | )    
|                                                  | Other                                                                                    |                                               |                                    |                                          |        |                   |        | 396     |      
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  |                                                                                          |                                               |                                    | Net cash used by investing activities     |        |                   | (3,873 | )       |       |         | (4,373 | )
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|Cash flows from financing activities:             |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  | Payments on notes payable                                                                |                                               |                                    | (2,500                                    | )      |                   |        | (10,500 | )    
|                                                  | Repurchase and retirement of common stock                                                |                                               |                                    | (488                                      | )      |                   |        |        |      
|                                                  | Proceeds from exercise of stock options and warrants                                     |                                               |                                    | 1,394                                     |        |                   |        | 9,514   |      
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  |                                                                                          |                                               |                                    | Net cash used by financing activities     |        |                   | (1,594 | )       |       |         | (986   | )
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|Effect of exchange rate changes on cash           |                                                                                          |                                               | (10                                | )                                         |        |                   | 45     |        
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|Net change in cash and cash equivalents           |                                                                                          |                                               | 11,314                             |                                           |        |                   | (1,034 | )      
|Cash and cash equivalents at beginning of period  |                                                                                          |                                               | 9,734                              |                                           |        |                   | 3,595  |        
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|Cash and cash equivalents at end of period        |                                                                                          | $                                             | 21,048                             |                                           |        |                   | 2,561  |        
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|Supplemental disclosure of cash flow information: |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  | Interest paid                                                                            |                                               | $                                  | 15                                        |        |                   |        | 1,294   |      
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        
|                                                  | Income taxes (received) paid, net                                                        |                                               | $                                  | (910                                      | )      |                   |        | 3,258   |      
|                                                  |                                                                                          |                                               |                                    |                                           |        |                   |        |        

See accompanying notes to unaudited condensed consolidated financial statements

Page 5





---



##### Table of Contents



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

---

|                                                                        |                                |  |                   |      |      |  |  |   | 
|----------------------------------------------------------------------- | ------------------------------ |  | ----------------- | ---- | ---- |  |  | - | 
|                                                                        |                                |  | Nine months ended
|                                                                        |                                |  | March 31,        
|                                                                        |                                |  |                  
|                                                                        |                                |  | 2002              |      | 2001
|                                                                        |                                |  |                   |      |     
|Summary of assets acquired and liabilities assumed through acquisition: |                                |  |                   |      |      |  |  |  
|                                                                        | Inventories                    |  |                   | 681  |      |  |  |  | 
|                                                                        | Prepaids and other assets      |  |                   | 17   |      |  |  |  | 
|                                                                        | Property and equipment         |  |                   | 472  |      |  |  |  | 
|                                                                        | Deferred income taxes          |  |                   | 224  |      |  |  |  | 
|                                                                        | Identifiable intangible assets |  |                   | 215  |      |  |  |  | 
|                                                                        | Accrued expenses               |  |                   | (149 | )    |  |  |  | 
|                                                                        | Deferred revenue               |  |                   | (426 | )    |  |  |  | 

See accompanying notes to unaudited condensed consolidated financial statements

Page 6





---



##### Table of Contents






SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002(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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                     |  |           |        |          |  |  |        |  
|------------------------------------ |  | --------- | ------ | -------- |  |  | ------ | -
|                                     |  | March 31, |        | June 30,
|Thousands                            |  | 2002      |        | 2001    
|                                     |  |           |        |         
|Accounts receivable                  |  |           | 26,396 |          |  |  | 28,267 |  
|Less allowance for doubtful accounts |  |           | (1,205 | )        |  |  | (980   | )
|                                     |  |           |        |          |  |  |        |  
|                                     |  |           | 25,191 |          |  |  | 27,287 |  
|                                     |  |           |        |          |  |  |        |  



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

|                              |  |           |        |          |  |  |        | 
|----------------------------- |  | --------- | ------ | -------- |  |  | ------ | 
|                              |  | March 31, |        | June 30,
|Thousands                     |  | 2002      |        | 2001    
|                              |  |           |        |         
|Raw materials                 |  |           | 11,139 |          |  |  | 22,743 | 
|Work in process               |  |           | 5,586  |          |  |  | 6,873  | 
|Finished goods                |  |           | 5,354  |          |  |  | 9,892  | 
|Inventory consigned to others |  |           |       |          |  |  | 1,244  | 
|                              |  |           |        |         
|                              |  |           | 22,079 |          |  |  | 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 in the quarter ended December 31, 2001, as the fair value
of projected future cash flows was zero.

Page 7





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002
(Unaudited)

---



|5) |  | Business Acquisitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On March 4, 2002, SBS completed the acquisition of certain assets and
assumed certain liabilities of Essential Communications, a division of
publicly held Intrusion Inc., for approximately $1.0 million. Founded
in 1992, Essential develops and delivers early stage InfiniBand®
products. SBS plans to utilize Essentials InfiniBand product
expertise and industry relationships to build on its current InfiniBand
efforts in the enterprise server and storage markets. As required under
the purchase method of accounting, Essentials results of operations
have been combined with SBS since the date of acquisition. The
purchase price has been allocated to the underlying assets acquired and
liabilities assumed based on their estimated fair values. In
conjunction with the purchase price allocation, SBS recorded
approximately $215,000 of identifiable intangibles which will be
amortized over a two year period. Proforma results of operations are
not presented as Essentials results of operations in fiscal 2002 and
2001 were not considered material to SBS consolidated results of
operations.
|  
|6) |  | 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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|---------------------------------------------------------------------------------- |  | ----------------- | ------- | ------------------ |  | ---- | ------ | ---- |  | - | ------ | - |  |  | ------ | 
|                                                                                   |  | Nine months ended |         | Three months ended
|Thousands except per share amounts                                                 |  | March 31,         |         | March 31,         
|                                                                                   |  |                   |         |                   
|                                                                                   |  | 2002              |         | 2001               |  | 2002 |        | 2001
|                                                                                   |  |                   |         |                    |  |      |        |     
|Net
Income (Loss) Per Common Share                                                 |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Net income (loss)                                                                  |  | $                 | (11,124 | )                  |  |      | 13,648 |      |  | $ | (386   | ) |  |  | 4,373  | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Weighted-average common shares
outstanding used in earnings per
share computations |  |                   | 14,545  |                    |  |      | 13,776 |      |  |   | 14,584 |   |  |  | 14,071 | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Net income (loss) per common share                                                 |  | $                 | (0.76   | )                  |  |      | 0.99   |      |  | $ | (0.03  | ) |  |  | 0.31   | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Net Income (Loss) Per Common
Share  Assuming Dilution                             |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Net income (loss)                                                                  |  | $                 | (11,124 | )                  |  |      | 13,648 |      |  | $ | (386   | ) |  |  | 4,373  | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Weighted-average common shares
outstanding used in earnings per
share computations |  |                   | 14,545  |                    |  |      | 15,170 |      |  |   | 14,584 |   |  |  | 15,340 | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Net income (loss) per common
share  assuming dilution                             |  | $                 | (0.76   | )                  |  |      | 0.90   |      |  | $ | (0.03  | ) |  |  | 0.29   | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Shares Used in per Share
Computations                                              |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Average outstanding common shares                                                  |  |                   | 14,545  |                    |  |      | 13,776 |      |  |   | 14,584 |   |  |  | 14,071 | 
|Incremental shares from assumed
conversions  potential common
shares              |  |                   |        |                    |  |      | 1,394  |      |  |   |       |   |  |  | 1,269  | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 
|Shares used in net income (loss)
per common share  assuming
dilution computations |  |                   | 14,545  |                    |  |      | 15,170 |      |  |   | 14,584 |   |  |  | 15,340 | 
|                                                                                   |  |                   |         |                    |  |      |        |      |  |   |        |   |  |  |        | 

Page 8





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002
(Unaudited)

---



|   |  | Due to the reported net loss for the nine and three months ended March
31, 2002, 281,304 and 240,348 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
nine and three months ended March 31, 2001, options to purchase 259,629
and 749,697 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|7) |  | Comprehensive Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Comprehensive loss for the nine and three months ended March 31, 2002
was ($10.7) million and ($0.7) million, respectively. Comprehensive
income for the nine and three months ended March 31, 2001 was $12.2
million and $3.1 million, respectively. The difference between
comprehensive income (loss) and net income (loss) was related to
foreign currency translation adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|8) |  | 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 are included in each Groups sales, a
result of SBS decision in the quarter ended December 31, 2001 to
report its systems business by end market, in order 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.                                                                                                                                                                                                                                                                                                                                                                                

Page 9





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002 (Continued)
(Unaudited)

---

|                                   |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |   |  | 
|---------------------------------- |  |  | ---- |  |  | ----- | ------ | -------------- |  | ---------- | ------ | ------------ |  | ------- | ------ | - |  |  | ------- | --------- |  |  | ------- | - |  | 
|                                   |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         | Corporate |  |  |         |  
|                                   |  |  |      |  |  |       |        | Communications |  | Commercial |        | Government   |  | and un- |        |   |  | 
|Thousands                          |  |  |      |  |  | Group |        | Group          |  | Group      |        | Allocated(1) |  | Total  
|                                   |  |  |      |  |  |       |        |                |  |            |        |              |  |        
|Nine-month period
ended March 31,  |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |  
|Gross Sales                        |  |  | 2002 |  |  |       | 23,256 |                |  |            | 29,927 |              |  |         | 38,461 |   |  |  |        |           |  |  | 91,644  |  
|Inter-segment
sales                |  |  |      |  |  |       | (184   | )              |  |            | (788   | )            |  |         | (197   | ) |  |  |        |           |  |  | (1,169  | )
|                                   |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |  
|Sales to external customers        |  |  |      |  |  |       | 23,072 |                |  |            | 29,139 |              |  |         | 38,264 |   |  |  |        |           |  |  | 90,475  |  
|Gross Sales                        |  |  | 2001 |  |  |       | 66,021 |                |  |            | 41,580 |              |  |         | 37,099 |   |  |  |        |           |  |  | 144,700 |  
|Inter-segment
sales                |  |  |      |  |  |       | (915   | )              |  |            | (1,707 | )            |  |         | (793   | ) |  |  |        |           |  |  | (3,415  | )
|                                   |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |  
|Sales to external customers        |  |  |      |  |  |       | 65,106 |                |  |            | 39,873 |              |  |         | 36,306 |   |  |  |        |           |  |  | 141,285 |  
|Segment profit (loss)              |  |  | 2002 |  |  |       | (6,722 | )              |  |            | (2,736 | )            |  |         | 9,002  |   |  |  | (17,625 | )         |  |  | (18,081 | )
|(Income before taxes)              |  |  | 2001 |  |  |       | 18,391 |                |  |            | 6,789  |              |  |         | 7,900  |   |  |  | (11,900 | )         |  |  | 21,180  |  
|Three-month period
ended March 31, |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |  
|Gross Sales                        |  |  | 2002 |  |  |       | 8,122  |                |  |            | 9,198  |              |  |         | 12,977 |   |  |  |        |           |  |  | 30,297  |  
|Inter-segment sales                |  |  |      |  |  |       | (76    | )              |  |            | (449   | )            |  |         | (78    | ) |  |  |        |           |  |  | (603    | )
|                                   |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |  
|Sales to external customers        |  |  |      |  |  |       | 8,046  |                |  |            | 8,749  |              |  |         | 12,899 |   |  |  |        |           |  |  | 29,694  |  
|Gross Sales                        |  |  | 2001 |  |  |       | 21,616 |                |  |            | 15,237 |              |  |         | 13,458 |   |  |  |        |           |  |  | 50,311  |  
|Inter-segment sales                |  |  |      |  |  |       | (336   | )              |  |            | (1,076 | )            |  |         | (409   | ) |  |  |        |           |  |  | (1,821  | )
|                                   |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |  
|Sales to external customers        |  |  |      |  |  |       | 21,280 |                |  |            | 14,161 |              |  |         | 13,049 |   |  |  |        |           |  |  | 48,490  |  
|Segment profit (loss)              |  |  | 2002 |  |  |       | (492   | )              |  |            | 189    |              |  |         | 3,994  |   |  |  | (4,962  | )         |  |  | (1,271  | )
|(Income before taxes)              |  |  | 2001 |  |  |       | 6,139  |                |  |            | 2,049  |              |  |         | 2,976  |   |  |  | (3,999  | )         |  |  | 7,165   |  
|As of March 31,                    |  |  |      |  |  |       |        |                |  |            |        |              |  |         |        |   |  |  |         |           |  |  |         |  
|Total Assets                       |  |  | 2002 |  |  |       | 16,331 |                |  |            | 18,697 |              |  |         | 22,884 |   |  |  | 78,102  |           |  |  | 136,014 |  
|                                   |  |  | 2001 |  |  |       | 40,857 |                |  |            | 23,450 |              |  |         | 25,201 |   |  |  | 60,443  |           |  |  | 149,951 |  



---

|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 10





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002 (Continued)
(Unaudited)

---



|9)  |  | 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 was to
occur ratably over six annual anniversaries of Mr. Rances employment
with SBS. At March 31, 2002, the balance on the loan was $1,596,742.
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.                                        
|   
|    |  | On April 26, 2002, at its regularly schedule Board meeting, Mr.
Christopher J. Amenson was elected Chairman of the Board of Directors
and Chief Executive Officer and Mr. David H. Greig was elected President
and Chief Operating Officer. Former Chairman and Chief Executive
Officer, Grahame E. Rance, resigned to pursue other opportunities. As
part of the Separation Agreement between Mr. Rance and SBS, the
unamortized portion of the loan to Mr. Rance was forgiven, Mr. Rance
will receive 8 months base pay, he will return
30,000 restricted shares
of SBS common stock, 5,000 of which are vested and 25,000 of which are
unvested. This will result in a compensation charge of approximately
$2.0 million in the quarter ending June 30, 2002.                                                                                                       
|   
|10) |  | 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
allowed for a 10% workforce reduction, to be completed through March 31,
2002. During the quarters ended December 31, 2001 and March 31, 2002,
54 employees were notified that their jobs would be eliminated as part
of this restructuring plan, and as a result, SBS recorded approximately
$150,000 and $258,000, respectively, in restructuring costs, consisting
of severance and employee related costs. As of March 31, 2002, cash
payments of approximately $281,000 had been made; the remaining $127,000
will be paid through the quarter ending September 30, 2002.
|   
|    |  | With respect to the restructuring plan approved on July 18, 2001, total
cash payments of $164,000 were made through March 31, 2002; $21,000 of
the original restructuring charge was reversed as a result of the
decision not to terminate certain originally notified employees. There
will be no further payments related to the July restructuring plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Page 11





---



##### Table of Contents






SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002

---

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 forward-looking statements include expected
sales, gross margin and earnings-per-share results for the quarter ending June
30, 2002, expectations of internally-generated cash flows, expectations of
completion of the proposed amendment to SBS credit facility, and expectations
of SG&A cost reductions. 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. These
assumptions and assessments include the volume and product mix of sales,
estimates of costs and inventory and receivable levels based on preliminary
information, and other items. 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, subjectivity and discretion of
bank management regarding the proposed amendment to SBS bank facility,
successful completion of cost reduction plans, 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 materially from those
expressed or implied by these forward-looking statements.

Results of Operations

Nine Months Ended March 31, 2002 Compared To Nine Months Ended March 31, 2001

Sales.For the nine-month period ended March 31, 2002, sales decreased 36.0%,
or $50.8 million, from $141.3 million for the nine-month period ended March 31,
2001, to $90.5 million. Unit shipments increased within the Government Group
segment, except for shipments of the Groups system products, which declined
slightly. Unit shipments declined within the Communications Group, primarily
due to depressed market and economic conditions and continued delays of
shipment dates 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. However, Commercial Group sales were favorably impacted
by approximately $700,000 of sales related to the products acquired from the
Essential Communications asset acquisition completed on March 4, 2002. SBS
expects fiscal 2003 sales from Essential to be between $4.0 and $5.0 million.
SBS expects that consolidated sales for the quarter ending June 30, 2002 will
be consistent with the quarter ended March 31, 2002. Actual results may vary
materially.

Gross Profit.For the nine-month period ended March 31, 2002, gross profit
decreased 51.7%, or $34.7 million, from $67.1 million for the nine-month period
ended March 31, 2001, to $32.4 million. This decrease was primarily due to the
decrease in sales combined with $185,000 of expenditures associated with the
SBS manufacturing consolidation and cost reduction efforts and a $12.4 million
inventory write-down recorded
during the second quarter of fiscal 2002. 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 included 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 nine-month period ended March
31, 2002, gross profit as a percentage of sales would have been 49.7%, compared
to 47.5% for the nine-month period ended March 31, 2001. This favorable gross
margin resulted primarily from the change in sales mix to higher margin
products in the nine-month period ended March 31, 2002. Based on managements
expectations of sales projections for the fourth quarter of fiscal 2002, gross
profit as a percentage of sales is expected to be slightly lower than the 49.7%
experienced during the nine-month period ended March 31, 2002, excluding the
$12.6 million of charges. Actual results may vary materially.

Page 12





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

---

Selling, General and Administrative Expense.For the nine-month period ended
March 31, 2002, selling, general and administrative (SG&A) expense increased
17.9%, or $4.3 million from $24.3 million for the nine-month period ended March
31, 2001, to $28.6 million. This increase was 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 31.7% in the nine month period ended
March 31, 2002 from 17.2% in the nine-month period ended March 31, 2001.

Research and Development Expense.For the nine-month period ended March 31,
2002, research and development (R&D) expense decreased 10.7%, or $1.6 million
from $15.0 million for the nine-month period ended March 31, 2001, to $13.4
million. This decrease was 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
expenditure reduction resulting from depressed business conditions. For the
nine-month period ended March 31, 2002, R&D expense as a percentage of sales
increased to 14.8% from 10.6% in the nine-month period ended March 31, 2001,
primarily due to the decrease in sales volume.

Impairment of Assets.For the nine-month period ended March 31, 2002, the $2.7
million asset impairment charge represented the write-off of the remaining
goodwill recorded in connection with the acquisition of Industrial Computers
(formerly Micro Alliance) in November 1997. This write-off was the
result of SBS decision in the quarter
ended December 31, 2001 to exit the PCI chassis business.

Interest and Other Income (Expense), Net. For the nine-month period ended
March 31, 2002, net interest and other income of $421,000 consisted primarily
of a recovery from insurance of $307,000, and interest income
associated with surplus cash, partially offset by the fiscal 2002 second
quarter $323,000 write-down related to an other-than-temporary decline in the
fair value of SBS investment in a software company. The investment in the
software company is currently valued at approximately $177,000. For the
nine-month period ended March 31, 2001, net interest expense of $653,000
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 nine-month periods ended March 31, 2002
and 2001, income tax expense (benefit) represented effective rates of (38.5)%
and 35.6%, 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 benefit recorded for the nine-month
period ended March 31, 2002 includes approximately $475,000 of amounts realized
from tax planning strategies in excess of previous estimates.

Earnings Per Share.For the nine-month period ended March 31, 2002, net loss
per common share was $(0.76) compared to net income per share of $0.99 for the
nine-month period ended March 31, 2001. For the nine-month period ended March
31, 2002, net loss per common share-assuming dilution was $(0.76) compared to
net income per common share-assuming dilution of $0.90 for the nine-month
period ended March 31, 2001. 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 $572,000 of restructuring charges, which total approximately $15.8
million ($10.3 million after tax, excluding the amounts realized from income
tax planning strategies in excess of previous estimates, recorded in the
quarter ended March 31, 2002), net loss per common share and net loss per
common share  assuming dilution for the nine-month period ended March 31, 2002
would have been approximately $0.06.

Page 13





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(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
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, acquired
in-process research and development charges, and corporate overhead other than
corporate sales and marketing costs. This measure of segment profit described
above is referred to in this review as Segment Profit.

Communications Group

For the nine-month period ended March 31, 2002, Communications Group sales to
external customers decreased 64.6%, or $42.0 million, from $65.1 million for
the nine-month period ended March 31, 2001 to $23.1 million. This decrease was
primarily due to depressed market and economic conditions and continued delays
of shipment dates by several of the Groups telecommunications infrastructure
customers. SBS expects that the Groups sales in the quarter ending June 30,
2002 will be significantly lower than sales in the quarter ended March 31, 2002, primarily
due to continued depressed market conditions. Actual results may vary
materially.

For the nine-month period ended March 31, 2002, Communications Group Segment
Loss was ($6.7) million, compared to Segment Profit of $18.4 million for the
nine-month period ended March 31, 2001. This decrease was primarily due to the
decrease in sales, restructuring charges and 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 lower sales and marketing costs
attributable to SBS pro-rata allocation of certain corporate SG&A expenses
among segments, based on sales, and a reduction in R&D expenditures resulting
from depressed business conditions.

Commercial Group

For the nine-month period ended March 31, 2002, Commercial Group sales to
external customers decreased 26.9%, or $10.8 million from $39.9 million for the
nine-month period ended March 31, 2001 to $29.1 million. Sales of the Groups
general purpose I/O products and computer connectivity and expansion unit
products decreased 33.5%, primarily as a result of unfavorable economic and
market conditions and several customer delays of shipments. Sales of the
Groups system products were consistent with the nine-month period ended March
31, 2001. The Groups results were favorably impacted by approximately
$700,000 in sales of product acquired in connection with the asset acquisition
of Essential Communications. SBS expects fiscal 2003 sales from Essential to be
between $4.0 and $5.0 million. SBS expects that the Groups sales in the
quarter ending June 30, 2002 will be higher than sales in the quarter ended
March 31, 2002, primarily due to an increase in sales to semiconductor
manufacturers. Actual results may vary materially.

For the nine-month period ended March 31, 2002, Commercial Group Segment Loss
was ($2.7) million, compared to Segment Profit of $6.8 million for the
nine-month period ended March 31, 2001. This decrease was primarily due to the
decrease in sales, $185,000 of expenditures associated with SBS manufacturing
consolidation and cost reduction efforts, restructuring charges, additional R&D
expense due to the Essential Communications asset acquisition 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. The impact of the decrease in sales was partially
offset by higher margins in the quarter ended March 31, 2002, as the Group
began to realize benefits from its manufacturing consolidation efforts.

Page 14





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

---

Government Group

For the nine-month period ended March 31, 2002, Government Group sales to
external customers increased 5.4%, or $2.0 million, from $36.3 million for the
nine-month period ended March 31, 2001 to $38.3 million. Sales of the Groups
avionics and telemetry products increased 9.1%, 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. Unit
shipments of the Groups computer processor products increased 3.1%, primarily
due to the focus on high volume production business in the quarter ended
September 30, 2001, partially offset by weak demand in the quarters ended
December 31, 2001 and March 31, 2002. The increase in volume was partially
offset by the negative impact of changes in exchange rates of
approximately
$126,000. SBS expects that Government Group sales in the quarter ending June
30, 2002 will be slightly higher than the quarter ended March 31, 2002. Actual
results may vary materially.

For the nine-month period ended March 31, 2002, Government Group Segment Profit
increased 13.9%, or
$1.1 million from $7.9 million for the nine-month period ended March 31, 2001
to $9.0 million. This increase was primarily due to the gross profit
contribution from the increase in sales, favorable gross margins in the quarter
ended March 31, 2002 as the Group shipped several high margin orders, and the
reduction in R&D material and consulting costs associated with avionics and
telemetry development programs that were completed during fiscal 2001. This
increase was partially offset by a $1.0 million inventory write-down,
restructuring charges, 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 SBS manufacturing
operations. The increase in SG&A expense 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.

Three Months Ended March 31, 2002 Compared To Three Months Ended March 31, 2001

Sales.For the three-month period ended March 31, 2002, sales decreased
38.8%, or $18.8 million, from $48.5 million for the three-month period ended
March 31, 2001, to $29.7 million. Unit shipments increased within the
Government 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 shipment dates.
However, Commercial Group sales were favorably impacted by approximately
$700,000 of sales related to the products acquired from the Essential
Communications asset acquisition completed on March 4, 2002. SBS expects
fiscal 2003 sales from Essential to be between $4.0 and $5.0 million. SBS
expects that consolidated sales in the quarter ending June 30, 2002 will be
consistent with the quarter ended March 31, 2002. Actual results may vary
materially.

Gross Profit.For the three-month period ended March 31, 2002, gross profit
decreased 32.7%, or $7.4 million, from $22.6 million for the three-month period
ended March 31, 2001, to $15.2 million. Gross profit as a percentage of sales
increased to 51.3% from 46.7% in the three-month period ended March 31, 2001,
primarily due to the decline in Communications and Commercial Group product
sales, which historically had lower margins than Government Group sales.
Additionally, the Government Group shipped several orders with higher than
normal profit margins during the three-month period ended March 31, 2002. Based
on managements expectations of sales for the fourth quarter of fiscal 2002,
gross profit as a percentage of sales is expected to be slightly lower than the
third quarter of fiscal 2002. Actual results may vary materially.

Page 15





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

---

Selling, General and Administrative Expense.For the three-month period ended
March 31, 2002, selling, general and administrative (SG&A) expense increased
20.6%, or $1.7 million from $8.3 million for the three-month period ended March
31, 2001, to $10.0 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,
additional information technology department personnel, and depreciation and
consulting expenses associated with the implementation of SBS customer
relationship management system. This
increase, combined with the decrease in sales, resulted in an increase in SG&A
expense as a percentage of sales to 33.6% in the three month period ended March
31, 2002 from 17.0% in the three-month period ended March 31, 2001.

Research and Development Expense.For the three-month period ended March 31,
2002, research and development (R&D) expense decreased 9.0%, or $457,000 from
$5.1 million for the three-month period ended March 31, 2001, to $4.6 million.
This decrease was primarily due to a decrease in R&D expenditures within the
Communications Group resulting from depressed business conditions, partially
offset by an increase in R&D resulting from programs associated with the asset
acquisition of Essential Communications. For the three-month period ended
March 31, 2002, R&D expense as a percentage of sales increased to 15.6% from
10.5% in the three-month period ended March 31, 2001, primarily due to the
decrease in sales volume.

Interest and Other Income (Expense), Net. For the three-month period ended
March 31, 2002, net interest and other income of $144,000 consisted primarily
of interest income associated with surplus cash. For the three-month period
ended March 31, 2001, net interest and other expense of ($109,000) 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 March 31,
2002 and 2001, income tax expense (benefit) represented effective rates of
(69.6)% and 39.0% 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 benefit recorded in the
three-month period ended March 31, 2002 includes amounts realized from tax
planning strategies in excess of previous estimates of approximately $475,000.

Earnings Per Share.For the three-month period ended March 31, 2002, net loss
per common share was $(0.03) compared to net income per common share of $0.31
for the three-month period ended March 31, 2001. For the three-month period
ended March 31, 2002, net loss per common share-assuming dilution was $(0.03)
compared to net income per common share  assuming dilution of $0.29 for the
three-month period ended March 31, 2001. For the three-month period ended
March 31, 2002, net loss per common share and net loss per common share -
assuming dilution, includes a benefit of $0.03 per share due to amounts realized from tax planning strategies in excess of previous estimates.

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
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, acquired
in-process research and development charges, and corporate overhead other than
corporate sales and marketing costs, This measure of segment profit described
above is referred to in this review as Segment Profit.

Page 16





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

---

Communications Group

For the three-month period ended March 31, 2002, Communications Group sales to
external customers decreased 62.2%, or $13.3 million, from $21.3 million for
the three-month period ended March 31, 2001 to $8.0 million. This decrease was
primarily due to the continued effect of depressed market and economic
conditions as well as customer delays of shipment dates. SBS expects that
sales in the quarter ending June 30, 2002 will be significantly lower than sales the quarter
ended March 31, 2002, primarily due to continued depressed market conditions.
Actual results may vary materially.

For the three-month period ended March 31, 2002, Communications Group Segment
Loss was ($492,000), compared to Segment Profit of $6.1 million for the
three-month period ended March 31, 2001. This decrease was primarily due to
the decrease in sales, partially offset by a reduction in R&D expenditures
resulting from depressed business conditions, as well as a reduction in SG&A
expense, resulting primarily from 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 March 31, 2002, Commercial Group sales to
external customers decreased 38.2%, or $5.5 million from $14.2 million for the
three-month period ended March 31, 2001 to $8.7 million. Sales of the Groups
general purpose I/O products and computer connectivity and expansion unit
products decreased 46.3% and sales of the Groups system products decreased
27.4%. These decreases were primarily a result of current unfavorable economic
and market conditions and several customer delays of shipment dates. The
Groups results were favorably impacted by approximately $700,000 of sales
associated with products acquired in connection with the Essential
Communications asset acquisition. SBS expects fiscal 2003 sales from
Essential to be between $4.0 and $5.0 million. SBS expects that the Groups
sales in the quarter ending June 30, 2002 will be higher than sales in quarter
ended March 31, 2002, primarily due to an increase in sales to semiconductor
manufacturers. Actual results may vary materially.

For the three-month period ended March 31, 2002, Commercial Group Segment
Profit was $189,000, compared to Segment Profit of $2.0 million for the
three-month period ended March 31, 2001. This decrease was primarily due to
the decrease in sales and additional R&D expense resulting from programs
associated with the Essential Communications asset acquisition, partially
offset by higher margins, as the Group began to realize benefits from its
manufacturing consolidation efforts.

Government Group

For the three-month period ended March 31, 2002, Government Group sales to
external customers decreased 1.1%, or $150,000, from $13.0 million for the
three-month period ended March 31, 2001 to $12.9 million. Sales of the Groups
avionics and telemetry products increased 7.6%, primarily due to an increase in
sales of the PMC2 board and an increase in sales of integrated avionics and
telemetry products. Unit shipments of the Groups computer processor products
decreased 6.8%, resulting from weak demand. Sales of computer processor
products were also negatively impacted by the effect of changes in exchange
rates of approximately $160,000. SBS expects Government Group sales in the
quarter ending June 30, 2002 to be slightly higher with the quarter ended March
31, 2002. Actual results may vary materially.

For the three-month period ended March 31, 2002, Government Group Segment
Profit increased 34.2%, or $1.0 million from $3.0 million for the three-month
period ended March 31, 2001 to $4.0 million. This increase was primarily due
to favorable gross margins, as the Group shipped several orders with higher
than normal gross margins in the quarter ended March 31, 2002. This was
partially offset by an increase in SG&A expense, primarily attributable 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.

Page 17





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

---

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 $21.0 million at March 31, 2002, an increase of $11.3 million from
June 30, 2001. This increase was the result of $16.8 million of cash flow from
operations and $1.4 million of proceeds from the exercise of stock options,
partially offset by $2.8 million of expenditures for capital equipment, $2.5
million of payments on SBS line of credit, $1.0 million expended for the
Essential Communications asset purchase, 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 nine-month period ended March 31, 2002,
accounts receivable declined, consistent with the decline in sales. Inventory
declined $18.7 million, $12.4 million of which was due to an inventory
write-down (see Gross Profit above). The remaining decline was consistent
with the decline in sales volume. Liabilities were in line with the current
level of business.

As of March 31, 2002, there were no borrowings drawn on SBS $30.0 million
Credit Agreement (Agreement) with Bank of America, N.A. (the Bank). At
March 31, 2002, SBS was out of compliance with the fixed charge coverage ratio
covenant of the Agreement, but obtained a waiver from the Bank, commencing on
March 31, 2002 and ending on the earlier of May 31, 2002 or the date of
execution of an amendment to the Agreement acceptable to the Bank which
modifies the fixed charge coverage ratio. SBS and the Bank are currently
negotiating this amendment to the Agreement. Management expects to complete
the amendment by May 31, 2002, but cannot assure that it will be completed
then. Although there were no borrowings under the Agreement at March 31, 2002,
the calculation of EBITDA indicates that under the senior funded debt to EBITDA
ratio requirement of 1.25 to 1, SBS is currently unable to borrow under the
Agreement. If SBS does not obtain an amendment, it will be precluded from
borrowing under the agreement for the foreseeable future, or the Agreement may
be terminated by the Bank, resulting in substantial limitations on growth by
acquisition.

Management believes that SBS internally generated funds will be sufficient to
finance its current operations and capital expenditures, excluding
acquisitions, for at least the next twelve months. Because long-term cash flow
cannot be predicted with certainty, it is possible that SBS could require
external financing in the future, and that that financing may not be available
on terms acceptable to SBS or at all.

For the nine-month period ended March 31, 2002, there was no significant impact
from inflation.

Page 18





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(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.

Page 19





---



##### Table of Contents



SBS Technologies, Inc. and Subsidiaries
Managements Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(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. At March
31, 2002, the amount of unamortized goodwill was approximately $23.7 million.
Goodwill amortization for the nine and three months ended March 31, 2002 was
$3.4 million and $1.0 million, respectively. Goodwill amortization for the
nine and three months ended March 31, 2001 was $3.5 million and $1.2 million,
respectively.

Business Outlook

On April 28, 2002 SBS issued a press release announcing a change in senior
management and plans for significant SG&A cost reductions, with a goal of
returning SBS to profitability as soon as possible. As a result of the senior
management change, and in accordance with the Separation Agreement between
Grahame E. Rance, former CEO and Chairman of the Board, SBS expects to record a
compensation charge of approximately $2.0 million in the quarter
ending June 30,
2002. The specifics of the cost reduction plan will be communicated as final
decisions are reached over the next few weeks.

Consistent with SBS press release dated April 16, 2002, SBS management expects
sales for the fourth quarter to be similar to the third quarter. Earnings per
share are expected to be similar to the third quarter,
excluding the $2.0 million compensation charge, costs associated with SG&A
reductions, and the $0.03 per-share benefit from tax planning strategies
recognized in the third quarter.




Quantitative and Qualitative Disclosures about Market Risk

SBS liquid investment is cash invested in either money market accounts or in
overnight repurchase agreements. Due to the nature of these investments, SBS
believes that the market risk related to these investments is minimal. SBS
revolving credit facility provides for interest on borrowings based on the
prime rate or LIBOR in accordance with the LIBOR margin defined in the
Agreement. There are no outstanding borrowings under the facility at the
date of this report.

SBS, as a result of its German operating and financing activities, is exposed
to market risk from changes in foreign currency exchange rates. To date, SBS
has not entered into any foreign exchange forward contracts to reduce its
exposure to changes in foreign currency exchange rates.

Page 20





---



##### 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  None              
|       
|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
|
| | 10.bn |  | (1) |  |  | Asset Purchase Agreement dated as of March
4, 2002, by and among SBS Technologies, Inc. Connectivity
Products, SBS Technologies, Inc. and
Intrusion Inc. with respect to certain assets of its Essential Communications Division                                                                                                                                                                                                                                                                                              
|
| | 10.bo |  | (1) |  |  | Separation Agreement between Grahame Rance and SBS Technologies, Inc.,
effective April 26, 2002, dated April 28, 2002                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | 10.bp |  | (1) |  |  | Employment
agreements between David Greig and SBS Technologies,
Inc., Clarence Peckham and SBS Technologies, Inc., and James E. Dixon, Jr. and
SBS Technologies, Inc., effective April 26, 2002, dated May 9, 2002                                                                                                                                                                                                                                                                                                            
|
| | 10.bq |  | (1) |  |  | Employment agreement between Christopher J. Amenson and SBS
Technologies, Inc., effective April 26, 2002, dated April 26, 2002                                                                                                                                                                                                                                                                                                                                                                                                



| | (b) |  | Reports on Form 8-K   On April 30, 2002, SBS filed Form 8-K,
relating to changes in senior management, effective April 26, 2002.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| | (1) |  | See Exhibit Index                                                                                                                

Page 21





---



##### Table of Contents






SIGNATURES

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

|                   |  |                                                                                             
|------------------ |  | --------------------------------------------------------------------------------------------
|                   |  | SBS TECHNOLOGIES, INC.                                                                      
|                   |  |                                                                                             
|                   |  |                                                                                             
|Date: May 15, 2002 |  | /s/ Christopher J. Amenson                                                                  
|                   |  |                                                                                             
|                   |  | Chief Executive Officer
and Chairman of the Board                                           
|                   |  |                                                                                             
|                   |  |                                                                                             
|Date: May 15, 2002 |  | /s/ James E. Dixon, Jr.                                                                     
|                   |  |                                                                                             
|                   |  | Vice President,
Finance and Administration;
Chief Financial Officer, Secretary and
Treasurer

Page 22





---



##### Table of Contents






SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX

|               |     |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                  |                              
|-------------- | --- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | -----------------------------
|Exhibit Number |     |  | Description |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Method of Filing
|               |     |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                 
|03.i           | (1) |  |             | Restated Articles of Incorporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                  |                             
|              
|03.ii          | (2) |  |             | 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           | (2) |  |             | Articles I and II of the Restated and Amended Bylaws
of SBS Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                  |                             
|              
|04.c           | (3) |  |             | Form of certificate evidencing Common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                  |                             
|              
|04.1           | (4) |  |             | 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 |                  |                             
|              
|10.bn          |     |  |             | Asset Purchase Agreement dated as of March 4, 2002,
by and
among SBS Technologies, Inc. Connectivity Products,
SBS
Technologies, Inc. and Intrusion Inc. with respect to
certain assets
of its Essential Communications Division                                                                                                                                                                                                                                                                                                |                  | filed electronically herewith
|              
|10.bo          |     |  |             | Separation Agreement between Grahame Rance and SBS
Technologies, Inc. effective April 26, 2002                                                                                                                                                                                                                                                                                                                                                                                                                                  |                  | filed electronically herewith
|              
|10.bp          |     |  |             | Employment Agreements between David Greig and SBS
Technologies, Inc., Clarence Peckham and SBS
Technologies,
Inc., and James E. Dixon, Jr. and SBS Technologies,
Inc.,
effective April 26, 2002, dated May 9, 2002                                                                                                                                                                                                                                                                                                              |                  | filed electronically herewith
|              
|10.bq          |     |  |             | Employment
Agreement between Christopher J. Amenson
and SBS Technologies, Inc., effective April 26, 2002,
dated
April 26, 2002.                                                                                                                                                                                                                                                                                                                                                                                                 |                  | filed electronically herewith



---

|(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 4.c, of the Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001.                                                                      
|   
|(4) |  | 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 10Q for quarter ended March 31, 1998.

Page 23