<PAGE>   1

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-Q

                            ------------------------

(MARK ONE)

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

                 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1999,

                                       OR

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

         FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .

                        COMMISSION FILE NUMBER: 0-26942

                            ------------------------

                        SMART MODULAR TECHNOLOGIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  CALIFORNIA                                     77-0200166
         (STATE OR OTHER JURISDICTION                         (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)
</TABLE>

                              4305 CUSHING PARKWAY
                           FREMONT, CALIFORNIA 94538
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 623-1231

                            ------------------------

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

     At May 31, 1999, there were 45,082,915 shares of the Registrant's common
stock, no par value, outstanding.

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<PAGE>   2

                        SMART MODULAR TECHNOLOGIES, INC.

                                   FORM 10-Q

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
                       PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Condensed Balance Sheets --
         As of April 30, 1999 and October 31, 1998...................    3

         Consolidated Condensed Statements of Income --
         For the Three and Six Months Ended April 30, 1999 and
         1998........................................................    4

         Consolidated Condensed Statements of Cash Flows --
         For the Six Months Ended April 30, 1999 and 1998............    5

         Notes to Consolidated Condensed Financial Statements........    6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................   10

Item 3.  Quantitative and Qualitative Disclosures About Market
         Risk........................................................   23

                        PART II. OTHER INFORMATION

Item 1.  Legal Proceedings...........................................   25

Item 2.  Changes in Securities.......................................   25

Item 3.  Defaults upon Senior Securities.............................   25

Item 4.  Submission of Matters to a Vote of Security Holders.........   25

Item 5.  Other Information...........................................   26

Item 6.  Exhibits and Reports on Form 8-K............................   26

Signatures...........................................................   27
</TABLE>

                                        2
<PAGE>   3

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

               SMART MODULAR TECHNOLOGIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED CONDENSED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                              APRIL 30,    OCTOBER 31,
                                                                1999          1998
                                                              ---------    -----------
<S>                                                           <C>          <C>
Current Assets:
  Cash and cash equivalents.................................  $ 94,413      $ 75,478
  Short term investments....................................    73,795        99,822
  Accounts receivable, net..................................   111,934        89,203
  Inventories...............................................    61,092        40,138
  Deferred income taxes.....................................     5,080         5,080
  Prepaid expenses and other................................    10,231        10,262
                                                              --------      --------
          Total current assets..............................   356,545       319,983
Property and equipment, net.................................    45,597        47,920
Other.......................................................     1,603         1,089
                                                              --------      --------
          Total assets......................................  $403,745      $368,992
                                                              ========      ========

                         LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable..........................................  $ 70,985      $ 64,335
  Accrued bonuses...........................................     2,573         4,545
  Other accrued expenses....................................     8,396         8,255
  Income taxes payable......................................    16,596        11,557
                                                              --------      --------
          Total current liabilities.........................    98,550        88,692

Long-term Liabilities:
  Deferred income taxes and other...........................       682           679
                                                              --------      --------
          Total liabilities.................................    99,232        89,371
                                                              --------      --------

Shareholders' Equity:
  Common stock, no par value
     Authorized -- 200,000,000 shares
     Outstanding -- 44,966,076 and 44,714,589 shares,
     respectively...........................................   132,903       132,941
  Retained earnings.........................................   171,610       146,680
                                                              --------      --------
          Total shareholders' equity........................   304,513       279,621
                                                              --------      --------
          Total liabilities and shareholders' equity........  $403,745      $368,992
                                                              ========      ========
</TABLE>

See the accompanying notes to these consolidated condensed financial statements.
                                        3
<PAGE>   4

               SMART MODULAR TECHNOLOGIES, INC. AND SUBSIDIARIES

                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED       SIX MONTHS ENDED
                                                       APRIL 30,               APRIL 30,
                                                  --------------------    --------------------
                                                    1999        1998        1999        1998
                                                  --------    --------    --------    --------
<S>                                               <C>         <C>         <C>         <C>
Net sales.......................................  $257,851    $181,421    $521,939    $384,262
Cost of sales...................................   225,667     150,314     459,759     318,073
                                                  --------    --------    --------    --------
Gross profit....................................    32,184      31,107      62,180      66,189
                                                  --------    --------    --------    --------
Operating Expenses:
  Research and development......................     2,724       2,295       5,180       4,441
  Sales, general and administrative.............    12,137       9,883      23,637      20,588
                                                  --------    --------    --------    --------
          Total operating expenses..............    14,861      12,178      28,817      25,029
                                                  --------    --------    --------    --------
Income from operations..........................    17,323      18,929      33,363      41,160
Other income, net...............................     1,536       1,588       3,282       3,515
                                                  --------    --------    --------    --------
Income before provision for income taxes........    18,859      20,517      36,645      44,675
Provision for income taxes......................     6,029       6,555      11,715      14,291
                                                  --------    --------    --------    --------
Net income......................................  $ 12,830    $ 13,962    $ 24,930    $ 30,384
                                                  ========    ========    ========    ========
Diluted net income per share....................  $   0.28    $   0.30    $   0.53    $   0.64
                                                  ========    ========    ========    ========
Weighted average common and common equivalent
  shares outstanding............................    46,378      47,202      46,774      47,209
                                                  ========    ========    ========    ========
Basic net income per share......................  $   0.28    $   0.33    $   0.55    $   0.71
                                                  ========    ========    ========    ========
Weighted average common shares outstanding......    45,108      42,892      45,045      42,682
                                                  ========    ========    ========    ========
</TABLE>

See the accompanying notes to these consolidated condensed financial statements.
                                        4
<PAGE>   5

               SMART MODULAR TECHNOLOGIES, INC. AND SUBSIDIARIES

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                       FOR THE SIX MONTHS ENDED APRIL 30,
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                1999         1998
                                                              ---------    --------
<S>                                                           <C>          <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES...................  $      23    $ 36,352
                                                              ---------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of investments available-for-sale...............   (111,813)    (55,819)
  Maturities of investments available-for-sale..............    137,840      13,921
  Purchases of property and equipment.......................     (4,430)    (18,667)
  Proceeds from sale of property and equipment..............          7          32
                                                              ---------    --------
       Net cash provided by (used in) investing
        activities..........................................     21,604     (60,533)
                                                              ---------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from line of credit..............................     31,850       5,000
  Payments on line of credit................................    (31,850)     (5,000)
  Payments of capital lease obligations.....................       (156)       (578)
  Proceeds from sale of common stock........................      4,615       2,421
  Purchases of common stock.................................     (7,151)         --
                                                              ---------    --------
       Net cash (used in) provided by financing
        activities..........................................     (2,692)      1,843
                                                              ---------    --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........     18,935     (22,338)
CASH AND CASH EQUIVALENTS, beginning of period..............     75,478     111,331
                                                              ---------    --------
CASH AND CASH EQUIVALENTS, end of period....................  $  94,413    $ 88,993
                                                              =========    ========
</TABLE>

See the accompanying notes to these consolidated condensed financial statements.
                                        5
<PAGE>   6

               SMART MODULAR TECHNOLOGIES, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

  Basis of Presentation

     The Interim Consolidated Condensed Financial Statements of SMART Modular
Technologies, Inc., a California corporation, and subsidiaries (the "Company")
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. These Interim Consolidated Condensed
Financial Statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's fiscal 1998 Report on
Form 10-K as filed with the Securities and Exchange Commission on January 29,
1999.

     The Interim Consolidated Condensed Financial Statements for the second
quarter of fiscal 1999 reflect, in the opinion of management, all adjustments
(which include only the normal recurring adjustments) necessary for a fair
presentation of financial position, results of operations and cash flows for
such period. The Interim Consolidated Condensed Financial Statements for fiscal
1998 are provided for information purposes only. The results of operations for
the three and six month periods ended April 30, 1999 are not necessarily
indicative of the results that may be expected for the entire fiscal year ending
October 31, 1999, or any other future periods.

  Revenue Recognition

     Revenue is recognized upon shipment to the customer. The Company provides
for estimated future returns for inventory rebalancing, stock rotation,
established price protection arrangements and the estimated costs of warranty at
the time of sale.

  Net Income Per Share

     The Company computes net income per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No.
128 requires companies to compute net income per share under two different
methods, basic and diluted, and present per share data for all periods in which
a statement of operations is presented. Basic net income per share is computed
by dividing net income by the weighted average number of shares of common stock
outstanding during the period. Diluted net income per share is computed using
the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. Common stock equivalents consist of
stock options (using the treasury stock method) and are excluded from the
computation of diluted net income per share if their effect is anti-dilutive.

                                        6
<PAGE>   7
               SMART MODULAR TECHNOLOGIES, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

     The following table reconciles the amounts used in the computation of basic
and diluted net income per share (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                         THREE MONTHS           SIX MONTHS
                                                       ENDED APRIL 30,       ENDED APRIL 30,
                                                      ------------------    ------------------
                                                       1999       1998       1999       1998
                                                      -------    -------    -------    -------
<S>                                                   <C>        <C>        <C>        <C>
Net income available to common shareholders.........  $12,830    $13,962    $24,930    $30,384
                                                      =======    =======    =======    =======
Diluted net income per share:
  Weighted average common shares outstanding........   45,108     42,892     45,045     42,682
  Weighted average common stock options
     outstanding....................................    1,270      4,310      1,729      4,527
                                                      -------    -------    -------    -------
     Total weighted average common and common
       equivalents outstanding......................   46,378     47,202     46,774     47,209
                                                      =======    =======    =======    =======
     Diluted net income per share...................  $  0.28    $  0.30    $  0.53    $  0.64
                                                      =======    =======    =======    =======
Basic net income per share:
  Weighted average common shares outstanding........   45,108     42,892     45,045     42,682
                                                      -------    -------    -------    -------
     Total weighted average common shares
       outstanding..................................   45,108     42,892     45,045     42,682
                                                      =======    =======    =======    =======
     Basic net income per share.....................  $  0.28    $  0.33    $  0.55    $  0.71
                                                      =======    =======    =======    =======
</TABLE>

  Comprehensive Income

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its individual components. The statement
requires the disclosure of all changes in equity of an enterprise that result
from transactions and other economic events of the period other than
transactions with owners ("comprehensive income"). Effective November 1, 1998,
the Company adopted the provisions of SFAS No. 130. For the three and six months
ended April 30, 1999 and 1998, the Company had no material differences between
net income and comprehensive income. Accordingly, comprehensive income is the
same as net income for all periods presented.

  Effect of Recent Accounting Pronouncements

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
establishes annual and interim reporting standards for an enterprise's business
segments and related disclosures about its products, services, geographic areas
of operations and major customers. The Company is required to adopt the
provisions of SFAS No. 131 beginning with its annual report on Form 10-K for the
fiscal year ended October 31, 1999 and for all subsequent interim periods. The
Company does not expect the adoption of SFAS No. 131 to have a material effect
on the Company's consolidated financial statements.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Investments and Hedging Activities." The statement
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company does not expect the adoption of SFAS
No. 133 to have a material effect on the Company's consolidated financial
statements.

                                        7
<PAGE>   8
               SMART MODULAR TECHNOLOGIES, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

  Inventories

     Inventories are stated at the lower of cost (first-in, first-out) or market
and include material, labor and manufacturing costs. Inventories consist of the
following (in thousands):

<TABLE>
<CAPTION>
                                                              APRIL 30,    OCTOBER 31,
                                                                1999          1998
                                                              ---------    -----------
<S>                                                           <C>          <C>
Raw materials...............................................   $39,295       $24,210
Work-in-process.............................................     8,101         7,379
Finished goods..............................................    13,696         8,549
                                                               -------       -------
          Total.............................................   $61,092       $40,138
                                                               =======       =======
</TABLE>

 2. LINE OF CREDIT:

     In June 1997, the Company entered into an unsecured revolving bank line of
credit agreement that expired in May 1999. Borrowings under this agreement were
limited to $20.0 million and bore interest at either the bank's prime rate (7.8%
at April 30, 1999) or a spread over LIBOR (5.0% at April 30, 1999), at the
Company's option. The Company was required to maintain specified levels of
tangible net worth and comply with certain other covenants. As of April 30, 1999
and October 31, 1998, no borrowings were outstanding under this agreement and
the Company was in compliance with all covenants related to the line of credit.

     In May 1999, the Company entered into an unsecured revolving bank line of
credit agreement that expires in May 2000. Borrowings under this agreement are
limited to $30.0 million and bear interest at either the bank's prime rate or a
spread over LIBOR, at the Company's option. The Company is required to maintain
specified levels of tangible net worth and comply with certain other covenants
related to this line of credit.

3. STOCK REPURCHASE:

     On May 25, 1998, the Company's Board of Directors authorized the repurchase
from time to time of up to 4,000,000 shares of the Company's Common Stock
through open market purchases. During the fiscal year ended October 31, 1998,
the Company repurchased 620,000 shares of its Common Stock in the open market at
an average purchase price of $14.80 per share and a total cost of approximately
$9.2 million. During the first six months of fiscal 1999, the Company
repurchased 445,000 shares of its Common Stock in the open market at an average
purchase price of $16.07 per share and a total cost of approximately $7.2
million.

4. LITIGATION:

     The Company and certain of its officers and directors have been named as
defendants in six securities class action lawsuits filed in the United States
District Court for the Northern District of California, Boren v. SMART Modular
Technologies, Inc., et al., No. C 98 20692 JW (PVT) (filed July 1, 1998),
Woszczak v. SMART Modular Technologies, Inc., et al., No. C 98 2617 JL (filed
July 2, 1998), Bisson v. SMART Modular Technologies, Inc., et al., No. C 98
20714 JF (filed July 8, 1998), D'Amato v. SMART Modular Technologies, Inc., et
al., No. C 98 2804 PJH (filed July 16, 1998), Cha v. SMART Modular Technologies,
Inc., et al., No. C 98 2833 BZ (filed July 17, 1998) and Chang v. SMART Modular
Technologies, Inc., et al., No. C 98 3151 SI (filed August 13, 1998)
(collectively, the "Federal Actions"). The plaintiffs in the Federal Actions
allege that defendants made material misrepresentations and omissions during the
period from July 1, 1997 through May 21, 1998 in violation of Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The
Federal Actions were consolidated on October 9, 1998, and a consolidated
complaint was filed on November 30, 1998 (the "Federal Complaint").

     On October 22, 1998, a putative securities class action lawsuit, captioned
Reagan v. SMART Modular Technologies, Inc., et al., Case No. H204162-5 (the
"State Complaint"), was filed against the Company and

                                        8
<PAGE>   9
               SMART MODULAR TECHNOLOGIES, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

certain of its officers and directors in the Superior Court of the State of
California, County of Alameda (the "Superior Court"). The State Complaint
alleges violations of Sections 25400 and 25500 of the California Corporations
Code and seeks unspecified damages on behalf of a purported class of purchasers
of SMART common stock during the period from July 1, 1997 through May 21, 1998.
The factual allegations of the State Complaint are nearly identical to the
factual allegations contained within the Federal Complaint. On February 22,
1999, the Superior Court granted the Company's motion to stay the State
Complaint pending the resolution of the Federal Complaint.

     The Company believes that all claims related to the state and federal
securities actions are without merit and intends to defend itself vigorously
against these actions. Currently, the Company is unable to estimate the
financial impact of the state and federal securities actions.

                                        9
<PAGE>   10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     In addition to other areas of this Management's Discussion and Analysis of
Financial Condition and Results of Operations, the fourth and sixth paragraphs
of the Overview Section, the Gross Profit Section, the Research and Development
Section, the Sales, General and Administrative Section, the Provision for Income
Taxes Section and the first and third paragraphs of the Liquidity and Capital
Resources Section contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the factors set forth in "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Factors that May Affect Future
Results." In particular, note the factors entitled "Significant Customer
Concentration," "Product Concentration; Dependence on Memory Market,"
"Dependence on Semiconductor, Computer, Telecommunications and Networking
Industries," "Intense Competition," "Fluctuations in Operating Results,"
"Dependence on Sole or Limited Sources of Supply," "Rapid Technological Change"
and "International Sales." The discussion of those factors is incorporated
herein by this reference as if said discussion was fully set forth at this
point.

OVERVIEW

     The Company commenced operations in 1989 and initially focused on the
design and manufacture of standard memory modules for OEMs and semiconductor
manufacturers. Standard memory modules implement industry standard
specifications, primarily utilize DRAM and are designed to be incorporated into
a wide variety of electronic equipment. In 1991, the Company expanded its
design, manufacturing and marketing efforts to offer specialty memory modules
and PC card memory products. The Company expanded its PC card communication
product line through the acquisition of Apex Data, Inc. ("Apex") in July 1995.
The Company further expanded its product line to include embedded computer
modules through the acquisition of RISQ Modular Systems, Inc. ("RISQ") in July
1996.

     Over the last eight fiscal quarters, SMART's gross margin has ranged from
11.4% to 17.3%. One of the primary factors affecting gross margin has been the
proportion of the Company's memory products manufactured on either a turnkey or
consignment basis. Products manufactured on a turnkey basis are designed and
manufactured by the Company with purchased memory devices. Products manufactured
on a consignment basis are generally designed and manufactured by the Company
with memory devices which are owned and supplied by the customer. While products
manufactured on a turnkey basis typically have lower gross margin than products
manufactured on a consignment basis, products manufactured on a turnkey basis
generally contribute greater net sales and higher gross profit per unit than
products manufactured on a consignment basis. Currently, a substantial majority
of the Company's net sales is derived from sales of products manufactured on a
turnkey basis.

     The other primary factors affecting the Company's gross margin have been
the mix between sales of specialty memory modules, standard memory modules,
communication card products and embedded computer modules as well as changes in
average memory densities used in the Company's memory products. Currently, a
significant majority of the Company's net sales are derived from the sales of
standard memory modules which typically have lower gross margin than the
Company's specialty memory modules. The Company's embedded computer modules have
historically generated the Company's highest gross margin, followed by the
Company's PC card communication products. Both of these product lines currently
contribute a relatively small portion of the Company's net sales.

     The Company expects that its net sales and gross margin will continue to
vary significantly based on these and other factors, including the mix of
products sold and the manufacturing services provided, the channels through
which the Company's products are sold, changes in product selling prices and
component costs, the level of manufacturing efficiencies achieved and pricing by
competitors. The selling prices of the Company's products have declined in the
past and the Company expects that prices could continue to decline in the
future. In particular, during fiscal 1998, the selling prices of the Company's
products declined due to significant declines in DRAM semiconductor prices and
declines in SRAM and Flash semiconductor prices. Moreover, since the beginning
of calendar 1999, declines in the selling prices of certain of the Company's

                                       10
<PAGE>   11

existing products have continued due to significant declines in DRAM
semiconductor prices. Because a substantial portion of the Company's net sales
are attributable to the resale of semiconductor memory devices, declines in the
prices of these components would have a material adverse effect on the Company's
net sales and could have a material adverse effect on the Company's business,
financial condition and results of operations. Accordingly, the Company's
ability to maintain or increase net sales will be highly dependent upon its
ability to increase unit sales volumes of existing products and to introduce and
sell new products in quantities sufficient to compensate for the anticipated
declines in selling prices. Declining product selling prices may also materially
and adversely affect the Company's gross margin unless the Company is able to
reduce its cost per unit to offset declines in product selling prices. There can
be no assurance that the Company will be able to increase unit sales volumes,
introduce and sell new products or reduce its cost per unit. In addition, the
Company's business has in the past been subject to seasonality, although the
Company believes such seasonality has been masked by its growth. The Company
expects that its business will experience more significant seasonality to the
extent it continues to sell a material portion of its products in Europe and to
the extent its exposure to the personal computer market remains significant.

     The Company primarily sells its products to OEMs and semiconductor
manufacturers in the computer, networking and telecommunications industries. A
relatively small number of customers have accounted for a significant percentage
of the Company's net sales. For fiscal 1998, fiscal 1997 and fiscal 1996, the
Company's ten largest customers accounted for 87%, 86% and 71% of net sales,
respectively. For fiscal 1998, the Company's largest customer was Compaq
Computer Corporation ("Compaq"), which accounted for 62% of net sales. For
fiscal 1997, the Company's three largest customers were Compaq, Cisco Systems,
Inc. ("Cisco") and Hewlett-Packard Company ("Hewlett-Packard"), which accounted
for 53%, 12% and 11% of net sales, respectively. In fiscal 1996, the Company's
three largest customers were Cisco, Hewlett-Packard and IBM Corporation ("IBM"),
which accounted for 19%, 15% and 12% of net sales, respectively. During these
periods, no other customers accounted for more than 10% of net sales.

     The Company expects that sales to relatively few customers will continue to
account for a significant percentage of its net sales in the foreseeable future.
However, there can be no assurance that any of these customers or any of the
Company's other customers will continue to utilize the Company's products at
current levels, if at all. The Company is the sole source provider of certain
products to some of its customers. Recently, certain of these customers have
begun to increase the number of sources for these products. The emergence of
additional sources could cause the Company's customers to reduce orders to the
Company. The Company has experienced significant changes in the composition of
its major customer base and expects that this variability will continue in the
future. For example, sales to Compaq, which represented less than 10% of net
sales in fiscal 1996, represented 62% and 53% of the Company's net sales in
fiscal 1998 and fiscal 1997, respectively. The loss of any major customer or any
reduction in orders by any such customer would have a material adverse effect on
the Company's business, financial condition and results of operations.

                                       11
<PAGE>   12

RESULTS OF OPERATIONS:

     The following table sets forth certain consolidated condensed statements of
income data of the Company expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED      SIX MONTHS ENDED
                                                            APRIL 30,              APRIL 30,
                                                        ------------------      ----------------
                                                         1999        1998       1999       1998
                                                        ------      ------      -----      -----
<S>                                                     <C>         <C>         <C>        <C>
Net sales.............................................  100.0%      100.0%      100.0%     100.0%
Cost of sales.........................................   87.5        82.9        88.1       82.8
                                                        -----       -----       -----      -----
Gross profit..........................................   12.5        17.1        11.9       17.2
Operating expenses:
  Research and development............................    1.1         1.3         1.0        1.2
  Selling, general and administrative.................    4.7         5.4         4.5        5.4
                                                        -----       -----       -----      -----
          Total operating expenses....................    5.8         6.7         5.5        6.5
                                                        -----       -----       -----      -----
Income from operations................................    6.7        10.4         6.4       10.7
Other income, net.....................................    0.6         0.9         0.6        0.9
                                                        -----       -----       -----      -----
Income before provision for income taxes..............    7.3        11.3         7.0       11.6
Provision for income taxes............................    2.3         3.6         2.2        3.7
                                                        -----       -----       -----      -----
Net income............................................    5.0%        7.7%        4.8%       7.9%
                                                        =====       =====       =====      =====
</TABLE>

  Net Sales

     Net sales consist of sales of specialty and standard memory products, PC
cards, embedded computer modules and communication card products, less returns
and discounts. Net sales for the second quarter of fiscal 1999 increased 42.1%
to $257.9 million from $181.4 million for the same period of fiscal 1998. Net
sales for the six months ended April 30, 1999 increased 35.8% to $521.9 million
from $384.3 million for the same period of fiscal 1998. The increase in net
sales for the three and six month periods ended April 30, 1999 was primarily due
to an increase in the average memory densities incorporated into the Company's
standard memory products as compared to the same periods of fiscal 1998. In
addition, an increase in net sales of communication card products further
contributed to the increase in net sales as compared to the same periods of
fiscal 1998. These increases were partially offset by a decrease in net sales of
specialty memory products as compared to the same periods of fiscal 1998.

  Gross Profit

     Cost of sales includes the costs of semiconductor devices and other
components and materials purchased by the Company for its products, as well as
the direct labor and overhead costs associated with manufacturing. Gross profit
increased 3.5% to $32.2 million for the second quarter of fiscal 1999 from $31.1
million for the same period of fiscal 1998. Gross margin decreased to 12.5% for
the second quarter of fiscal 1999 from 17.1% for the comparable period of fiscal
1998. Gross profit for the first six months of fiscal 1999 decreased 6.1% to
$62.2 million from $66.2 million for the same period of fiscal 1998. Gross
margin decreased to 11.9% for the first six months of fiscal 1999 from 17.2% for
the comparable period of fiscal 1998. The decrease in gross margin for the three
and six month periods ended April 30, 1999 was principally due to an increase in
the proportion of the Company's net sales derived from its higher density
standard memory products as compared to the same periods of fiscal 1998. Gross
margin also decreased due to an increase in the proportion of the Company's
products manufactured on a turnkey basis versus those manufactured on a
consignment basis as compared to the same periods of fiscal 1998. The Company
expects gross margin to continue to be affected in future periods by, among
other things, changes in the cost of memory devices used in the production of
the Company's products, changes in the sales mix of the Company's products, the
average memory densities incorporated into the Company's memory products and
changes in the proportion of products manufactured on a turnkey basis versus
those manufactured on a consignment basis.

                                       12
<PAGE>   13

  Research and Development

     Research and development expenses consist primarily of the costs associated
with the design and testing of new products. These costs relate primarily to
compensation of personnel involved with development efforts, materials and
outside design and testing services. Research and development expenses increased
18.7% to $2.7 million for the second quarter of fiscal 1999 from $2.3 million
during the same period of fiscal 1998 and totaled 1.1% and 1.3% of net sales for
the second quarter of fiscal 1999 and fiscal 1998, respectively. For the first
six months of fiscal 1999, research and development expenses increased 16.6% to
$5.2 million from $4.4 million during the same period of fiscal 1998 and totaled
1.0% and 1.2% of net sales for the first six months of fiscal 1999 and fiscal
1998, respectively. The Company expects that its research and development
expenses will increase in absolute dollars in future periods to the extent that
the Company expands its research and development efforts.

  Sales, General and Administrative

     Sales, general and administrative expenses consist primarily of personnel
costs (including salaries, performance-based bonuses, commissions and employee
benefits), facilities and equipment costs, costs related to advertising and
marketing and other support costs including utilities, insurance and
professional fees. Sales, general and administrative expenses incurred during
the second quarter of fiscal 1999 totaled $12.1 million, representing an
increase of 22.8% from $9.9 million for the same period of fiscal 1998. Sales,
general and administrative expenses totaled 4.7% and 5.4% of net sales for the
second quarter of fiscal 1999 and fiscal 1998, respectively. For the first six
months of fiscal 1999, sales, general and administrative expenses totaled $23.6
million, representing an increase of 14.8% from $20.6 million incurred during
the same period of fiscal 1998. Sales, general and administrative expenses
totaled 4.5% and 5.4% of net sales for the first six months of fiscal 1999 and
fiscal 1998, respectively. The increases in sales, general and administrative
expenses in absolute dollars for the three and six month periods ended April 30,
1999 were due in part to growth in the Company's staffing and infrastructure,
particularly in its international operations. The Company expects that its
sales, general and administrative expenses will increase in absolute dollars in
future periods to the extent that the Company expands its staffing, information
systems and other systems and personnel in connection with the expansion of the
Company's infrastructure.

  Other Income, Net

     Other income, net consists primarily of interest income, less interest
expense. Interest expense is attributable to the Company's utilization of its
line of credit and interest paid on certain capital lease obligations. Interest
income results from investment of cash balances. As compared to the same periods
of fiscal 1998, interest income earned during the three and six months ended
April 30, 1999 decreased due to a reduction in cash available for investment
resulting from an increase in the proportion of the Company's working capital
being used to finance higher net sales as compared to the same period of fiscal
1998.

  Provision for Income Taxes

     Provisions for income taxes were $6.0 million and $6.6 million for the
second quarter of fiscal 1999 and fiscal 1998, respectively, resulting in an
effective tax rate of 32.0% in both periods. For the first six months of fiscal
1999 and fiscal 1998, the Company provided $11.7 million and $14.3 million for
income taxes, respectively, resulting in an effective tax rate of 32.0% in both
periods. The Company expects its effective tax rate in future periods to be
affected by, among other things, changes in the proportion of income contributed
to the Company by its foreign operations.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, SMART has used funds generated primarily from operations,
certain borrowings, capital leases and equity financings to support its
operations, acquire capital equipment and finance inventory and accounts
receivable. For the first six months of fiscal 1999, the Company generated cash
from operating activities totaling approximately $23,000. The cash provided by
operating activities during the first six months

                                       13
<PAGE>   14

of fiscal 1999 primarily resulted from net income generated during the period,
increases in accounts payable and income taxes payable and depreciation on
capital equipment and was partially offset by increases in accounts receivable
and inventories. For the first six months of fiscal 1998, the Company generated
cash from operating activities totaling $36.4 million. At April 30, 1999, the
Company had $168.2 million in cash, cash equivalents and short-term investments,
and $258.0 million in working capital. At October 31, 1998, the Company had
$175.3 million in cash, cash equivalents and short-term investments and $231.3
million in working capital. The Company primarily funds its liquidity
requirements from utilization of existing cash balances and amounts borrowed
under its existing line of credit. The Company expects to fund any future
liquidity requirements from a combination of available cash balances and certain
short-term borrowings under its line of credit. The Company currently
anticipates that its working capital requirements will continue to increase in
future periods to the extent that the Company's operations continue to expand.

     On April 30, 1999, the Company had an unsecured revolving bank line of
credit agreement with a term expiring in May 1999. Borrowings under this
agreement were limited to $20.0 million and bore interest at either the bank's
prime rate or a spread over LIBOR, at the Company's option. The Company was
required to maintain specified levels of tangible net worth and comply with
certain other covenants. As of April 30, 1999 and October 31, 1998, no
borrowings were outstanding under this agreement and the Company was in
compliance with all covenants related to the line of credit.

     In May 1999, the Company entered into an unsecured revolving bank line of
credit agreement that expires in May 2000. Borrowings under this agreement are
limited to $30.0 million and bear interest at either the bank's prime rate or a
spread over LIBOR, at the Company's option. The Company is required to maintain
specified levels of tangible net worth and comply with certain other covenants
related to this line of credit.

     Capital expenditures totaled $4.4 million for the first six months of
fiscal 1999 and $33.3 million for the fiscal year ended October 31, 1998. These
expenditures were primarily for manufacturing and test equipment and the
expansion of the Company's existing manufacturing operations. SMART anticipates
spending between $15.0 million and $20.0 million on capital expenditures during
all of fiscal 1999 related to the continued expansion of the Company's
manufacturing operations and related equipment.

     SMART has entered into certain capital lease arrangements. The outstanding
principal on these obligations was approximately $20,000 and $176,000 at April
30, 1999 and October 31, 1998, respectively.

     On May 25, 1998, the Company's Board of Directors authorized the repurchase
from time to time of up to 4,000,000 shares of the Company's Common Stock
through open market purchases. During the fiscal year ended October 31, 1998,
the Company repurchased 620,000 shares of its Common Stock in the open market at
an average purchase price of $14.80 per share and a total cost of approximately
$9.2 million. During the first six months of fiscal 1999, the Company
repurchased 445,000 shares of its Common Stock in the open market at an average
purchase price of $16.07 per share and a total cost of approximately $7.2
million.

  Year 2000 Readiness Disclosure; Information Technology Transition

     Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning with 21st
century dates, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with such Year 2000 requirements. Significant uncertainty exists concerning the
potential effects associated with such compliance. The Company has licensed a
new management information system that is Year 2000 compliant. In February 1999,
the Company replaced its existing management information system at its
headquarters in Fremont, California with the new management information system.
By mid 1999, the Company intends to replace its existing management information
systems at its other worldwide facilities with the new information system. The
implementation of the new system will impact almost all phases of the Company's
operations (e.g., planning, manufacturing, finance and accounting).
Implementation of the new system and transition from the existing system to the
new system will require substantial financial resources, time and personnel.
There can be no assurance that the new system will be completely implemented in
time to avoid any Year 2000 compliance problems, or that the Company will not
experience problems, delays or unanticipated additional costs in
                                       14
<PAGE>   15

implementing the new management information system that could have a material
adverse effect on the Company's business, financial condition and results of
operations, particularly during the periods in which the new system is brought
online. The new system will be centrally operated from one location for all of
the Company's facilities worldwide. Each of the Company's facilities will
remotely access the new system via a wide area network. There can be no
assurance that the Company will not experience interruption of use of the new
system due to telecommunications problems or otherwise that could have a
material adverse effect on the Company's business, financial condition and
results of operations.

     During the second quarter of fiscal 1998, the Company began a Year 2000
assessment of its management information system, other information technology
systems, non-information technology systems, products and key suppliers. Items
identified and under review include manufacturing and test equipment,
telecommunications systems and equipment and computer systems and equipment. In
addition, the Company is assessing the Year 2000 compliance of its products. The
Company intends to have its Year 2000 assessment, testing, remediation efforts
and development of necessary contingency plans complete by the year 2000, the
total cost of which has not yet been determined. To date, however, costs
incurred to address Year 2000 compliance issues have not been material. Costs
related to Year 2000 compliance issues continue to be funded through operating
cash flows. There can be no assurance that the Company will be able to complete
its Year 2000 assessment, testing, remediation efforts and development of
necessary contingency plans by the year 2000. Any failure to complete the Year
2000 assessment, testing, remediation efforts and development of necessary
contingency plans prior to the year 2000 could have a material adverse effect on
the Company's business, financial condition and results of operations.

     During the third quarter of fiscal 1998, the Company initiated formal
communications with its key suppliers of raw materials and services. Although a
number of respondents indicated that their products are or will be Year 2000
compliant prior to the year 2000 and that they expect their operations and
services will continue uninterrupted, there can be no assurance that the
Company's key suppliers have, or will have information technology systems,
non-information technology systems and products that are Year 2000 compliant.
Similarly, there can be no assurance that the Company's customers have or will
have information technology systems, non-information technology systems and
products that are Year 2000 compliant. Any Year 2000 compliance problem facing
the Company, its customers or suppliers could have a material adverse effect on
the Company's business, financial condition and results of operations.

FACTORS THAT MAY AFFECT FUTURE RESULTS

     The Company's business, financial condition and results of operations could
be impacted by a number of factors including without limitation the following
factors.

  Significant Customer Concentration

     A relatively small number of customers have accounted for a significant
percentage of the Company's net sales. For fiscal 1998, fiscal 1997 and fiscal
1996, the Company's ten largest customers accounted for 87%, 86% and 71% of net
sales, respectively. For fiscal 1998, the Company's largest customer was Compaq,
which accounted for 62% of net sales. In fiscal 1997, the Company's three
largest customers were Compaq, Cisco and Hewlett-Packard, which accounted for
53%, 12% and 11% of net sales, respectively. In fiscal 1996, the Company's three
largest customers were Cisco, Hewlett-Packard and IBM, which accounted for 19%,
15% and 12% of net sales, respectively. During these periods, no other customers
accounted for more than 10% of net sales. The Company expects that sales to
relatively few customers will continue to account for a significant percentage
of its net sales in the foreseeable future. However, there can be no assurance
that any of these customers or any of the Company's other customers will
continue to utilize the Company's products at current levels, if at all. The
Company is the sole source provider of certain products to some of its
customers. Recently, certain of these customers have begun to increase the
number of sources for these products. The emergence of additional sources could
cause the Company's customers to reduce orders to the Company. The Company has
experienced significant changes in the composition of its major customer base
and expects that this variability will continue in the future. For example,
sales to Compaq, which represented less than 10% of net sales in fiscal 1996,
represented 62% and 53% of the Company's net sales in fiscal 1998 and fiscal
1997,
                                       15
<PAGE>   16

respectively. The loss of any major customer or any reduction in orders by any
such customer would have a material adverse effect on the Company's business,
financial condition and results of operations.

     The Company has no firm long-term volume commitments from any of its major
customers and generally enters into individual purchase orders with its
customers, in certain cases under master agreements governing the terms and
conditions of the relationship. The Company has experienced cancellations of
orders and fluctuations in order levels from period to period and expects it
will continue to experience such cancellations and fluctuations in the future.
Customer purchase orders may be canceled and order volume levels can be changed,
canceled or delayed with limited or no penalties. The replacement of canceled,
delayed or reduced purchase orders with new business cannot be assured.
Moreover, the Company's business, financial condition and results of operations
will depend in significant part on its ability to obtain orders from new
customers, as well as on the financial condition and success of its customers.
Therefore, any adverse factors affecting any of the Company's customers or their
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.

  Product Concentration; Dependence on Memory Market

     A substantial majority of the Company's net sales is derived from memory
products. The market for memory products is characterized by frequent
transitions in which products rapidly incorporate new features and performance
standards. A failure to develop products with required feature sets or
performance standards or a delay as short as a few months in bringing a new
product to market could significantly reduce the Company's net sales for a
substantial period, which would have a material adverse effect on the Company's
business, financial condition and results of operations.

     The market for semiconductor memory devices has been cyclical. The industry
has experienced significant economic downturns at various times, characterized
by diminished product demand, accelerated erosion of average selling prices and
production overcapacity. During fiscal 1998, there were significant declines in
DRAM semiconductor prices and declines in SRAM and Flash semiconductor prices.
Since the beginning of calendar 1999, there have been significant declines in
DRAM semiconductor prices. Because a substantial portion of the Company's net
sales are attributable to the resale of semiconductor memory devices, declines
in the prices of these components would have a material adverse effect on the
Company's net sales and could have a material adverse effect on the Company's
business, financial condition and results of operations.

  Dependence on Semiconductor, Computer, Telecommunications and Networking
Industries

     The Company may experience substantial period-to-period fluctuations in
future operating results due to factors affecting the semiconductor, computer,
telecommunications and networking industries. From time to time, each of these
industries has experienced downturns, often in connection with, or in
anticipation of, declines in general economic conditions. A decline or
significant shortfall in growth in any one of these industries could have a
material adverse impact on the demand for the Company's products and therefore a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, changes in end user demand for the products
sold by any individual OEM customer can have a rapid and exaggerated effect on
demand for the Company's products from that customer in any given period,
particularly in the event that the OEM customer has accumulated excess
inventories of products purchased from the Company. There can be no assurance
that the Company's net sales and results of operations will not be materially
and adversely affected in the future due to changes in demand from individual
customers or cyclical changes in the semiconductor, computer,
telecommunications, networking or other industries utilizing the Company's
products.

  Intense Competition

     The memory module, communication card and embedded computer subsystem
industries are intensely competitive. Each of these markets includes a large
number of competitive companies, several of which have achieved a substantial
market share. Certain of the Company's competitors in each of these markets have

                                       16
<PAGE>   17

substantially greater financial, marketing, technical, distribution and other
resources, greater name recognition, lower cost structures and larger customer
bases than the Company. In the memory module market, the Company competes
against semiconductor manufacturers that maintain captive memory module
production capabilities, including Samsung. The Company also competes with
independent memory module manufacturers, including Celestica Inc., MCMS, Inc.,
PNY Electronics, Inc. and Simple Technology Incorporated. In the computer
systems reseller market for memory modules, the Company primarily competes with
companies such as Kingston Technology, Inc., Viking Technology, Inc. and Vision
Tek, Inc. In the communication card market, the Company competes with GVC, TDK
and U.S. Robotics, Inc. (a subsidiary of 3Com Corporation), among others. In the
embedded computer subsystem market, the Company competes with Force Computers
Inc. (a subsidiary of Solectron Corporation), Motorola and Radisys Corporation,
among others. The Company faces competition from current and prospective
customers that evaluate the Company's capabilities against the merits of
manufacturing products internally. In addition, certain of the Company's
competitors, such as Samsung, are significant suppliers to the Company. These
suppliers have the ability to manufacture competitive products at lower costs
than the Company as a result of their higher levels of integration and therefore
have the ability to sell competitive products at lower prices than the Company's
products. The Company also faces competition from new and emerging companies
that have recently entered or may in the future enter the markets in which the
Company participates.

     The Company expects its competitors to continue to improve the performance
of their current products, to reduce their current product sales prices and to
introduce new products that may offer greater performance and improved pricing,
any of which could cause a decline in sales or loss of market acceptance of the
Company's products. There can be no assurance that enhancements to or future
generations of competitive products will not be developed that offer better
prices or technical performance features than the Company's products. To remain
competitive, the Company must continue to provide technologically advanced
products and manufacturing services, maintain quality levels, offer flexible
delivery schedules, deliver finished products on a reliable basis, reduce
manufacturing and testing costs and compete favorably on the basis of price. In
addition, increased competitive pressure has led in the past and may continue to
lead to intensified price competition, resulting in lower prices and gross
margin, which could materially adversely affect the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will be able to compete successfully in the future.

  Fluctuations in Operating Results

     The Company's results of operations and gross margin have fluctuated
significantly from period to period in the past and may in the future continue
to fluctuate significantly from period to period. The primary factors that have
affected and may in the future affect the Company's results of operations
include the partial or complete loss of a principal customer or the reduction in
orders from a customer due to, among other things, excess product inventory
accumulation by such customer, adverse changes in the mix of products sold by
the Company, and the inability to procure required components. Other factors
that have affected and may in the future affect the Company's results of
operations include fluctuating market demand for and declines in the selling
prices of the Company's products, decreases or increases in the costs of the
components of the Company's products, market acceptance of new products and
enhanced versions of the Company's products, the Company's competitors selling
products that compete with the Company's products at lower prices or on better
terms than the Company's products, delays in the introduction of new products
and enhancements to existing products, manufacturing inefficiencies associated
with the start up of new product introductions, and the Company's semiconductor
customers manufacturing memory modules, internally or with other third parties,
outside of the United States due to concerns about United States antidumping
investigations and laws.

     The Company's operating results may also be affected by the timing of new
product announcements and releases by the Company or its competitors, the timing
of significant orders, the ability to produce products in volume, delays,
cancellations or reschedulings of orders due to customer financial difficulties
or other events, inventory obsolescence, including the reduction in value of the
Company's inventories due to price declines, unexpected product returns, the
timing of expenditures in anticipation of increased sales, cyclicality in the
Company's targeted markets, and expenses associated with acquisitions. In
particular, declines in DRAM,

                                       17
<PAGE>   18

SRAM and Flash semiconductor prices could affect the valuation of the Company's
inventory which could result in adverse changes in the Company's business,
financial condition and results of operations. The concentration of the
Company's assets in its Fremont, California facility could make the Company's
exposure to business disruptions greater than if the Company's assets were more
geographically dispersed.

     The Company's net sales and gross margin have varied and will continue to
vary significantly based on a variety of factors, including the mix of products
sold, the manufacturing services provided, the average memory densities
incorporated into the Company's memory products, the channels through which the
Company's products are sold, changes in product selling prices and component
costs, the level of manufacturing efficiencies achieved and pricing by
competitors. The selling prices of the Company's products have declined in the
past and the Company expects that prices could continue to decline in the
future. In particular, during fiscal 1998, the selling prices of the Company's
products declined due to significant declines in DRAM semiconductor prices and
declines in SRAM and Flash semiconductor prices. Moreover, since the beginning
of calendar 1999, declines in the selling prices of certain of the Company's
existing products have continued due to significant declines in DRAM
semiconductor prices. Because a substantial portion of the Company's net sales
are attributable to the resale of semiconductor memory devices, declines in the
prices of these components would have a material adverse effect on the Company's
net sales and could have a material adverse effect on the Company's business,
financial condition and results of operations. Accordingly, the Company's
ability to maintain or increase net sales will be highly dependent upon its
ability to increase unit sales volumes of existing products and to introduce and
sell new products in quantities sufficient to compensate for the anticipated
declines in selling prices. Declining product selling prices may also materially
and adversely affect the Company's gross margin unless the Company is able to
reduce its cost per unit to offset declines in product selling prices. There can
be no assurance that the Company will be able to increase unit sales volumes,
introduce and sell new products or reduce its cost per unit. In addition, the
Company's business has in the past been subject to seasonality, although the
Company believes such seasonality has been masked by its growth. The Company
expects that its business will experience more significant seasonality to the
extent it continues to sell a material portion of its products in Europe and to
the extent its exposure to the personal computer market remains significant.

     Sales of the Company's individual products and product lines toward the end
of a product's life cycle are typically characterized by steep declines in
sales, pricing and gross margin, the precise timing of which may be difficult to
predict. The Company has experienced and could continue to experience unexpected
reductions in sales of products as customers anticipate new product purchases.
In addition, to the extent that the Company manufactures products in
anticipation of future demand that does not materialize, or in the event a
customer cancels outstanding orders during a period of either declining product
selling prices or decreasing demand, the Company could experience an
unanticipated decrease in sales of products. These factors could give rise to
charges for obsolete or excess inventory, returns of products by distributors,
or substantial price protection charges or discounts. In the past, the Company
has had to write-down and write-off excess or obsolete inventory. To the extent
that the Company is unsuccessful in managing product transitions, its business,
financial condition and results of operations could be materially and adversely
affected.

     The need for continued significant expenditures for capital equipment
purchases, research and development and ongoing customer service and support,
among other factors, will make it difficult for the Company to reduce its
operating expenses in any particular period if the Company's expectations for
net sales for that period are not met. The Company has significantly increased
its expense levels to support its recent growth, and there can be no assurance
that the Company will maintain its current level of net sales or rate of growth
for any period in the future. Accordingly, there can be no assurance that the
Company will be able to continue to be profitable. The Company believes that
period-to-period comparisons of the Company's financial results are not
necessarily meaningful and should not be relied upon as indications of future
performance. Due to the foregoing factors, it is likely that in some future
period the Company's operating results will be below the expectations of public
market analysts or investors. In such event, the market price of the Company's
securities would be materially and adversely affected.

                                       18
<PAGE>   19

  Dependence on Sole or Limited Sources of Supply

     The Company is dependent on certain suppliers, including limited and sole
source suppliers, to provide key components used in the Company's products. In
particular, the Company is dependent in significant part upon certain limited or
sole source suppliers for critical components in the Company's memory module,
communication card and embedded computer products. The Company also depends on
sole source third party manufacturers to produce certain of the Company's
embedded computer products. The electronics industry has experienced in the
past, and may experience in the future, shortages in semiconductor devices,
including DRAM, SRAM and Flash memory. The Company has experienced and may
continue to experience delays in component deliveries and quality problems with
respect to certain component deliveries which have caused and could in the
future cause delays in product shipments and have required and could in the
future require the redesign of certain products. The Company generally has no
written agreements with its suppliers. There can be no assurance that the
Company will receive adequate component supplies on a timely basis in the
future. The inability to continue to obtain sufficient supplies of components as
required, or to develop alternative sources if required, could cause delays,
disruptions or reductions in product shipments or require product redesigns
which could damage relationships with current or prospective customers, could
increase costs and/or prices and could have a material adverse effect on the
Company's business, financial condition and results of operations.

  Management of Growth; Expansion of Operations

     The Company has significantly expanded its operations over the last several
years. This growth has resulted in a significant increase in responsibility for
existing management which has placed, and may continue to place, a significant
strain on the Company's limited personnel and management, manufacturing and
other resources. The Company's ability to manage the recent and any possible
future growth will require an expansion of its manufacturing capacity,
accounting and other internal management systems and the implementation of a
variety of procedures and controls. There can be no assurance that significant
problems in these areas will not occur. Any failure to expand these systems and
implement such procedures and controls in an efficient manner and at a pace
consistent with the Company's business could have a material adverse effect on
the Company's business, financial condition and results of operations.

     The Company has licensed a new management information system that is Year
2000 compliant. In February 1999, the Company replaced its existing management
information system at its headquarters in Fremont, California with the new
management information system. By mid 1999, the Company intends to replace its
existing management information systems at its other worldwide facilities with
the new information system. The implementation of the new system will impact
almost all phases of the Company's operations (e.g., planning, manufacturing,
finance and accounting). Implementation of the new system and transition from
the existing system to the new system will require substantial financial
resources, time and personnel. There can be no assurance that the new system
will be completely implemented in time to avoid any Year 2000 compliance
problems, or that the Company will not experience problems, delays or
unanticipated additional costs in implementing the new management information
system that could have a material adverse effect on the Company's business,
financial condition and results of operations, particularly during the periods
in which the new system is brought online. The new system will be centrally
operated from one location for all of the Company's facilities worldwide. Each
of the Company's facilities will remotely access the new system via a wide area
network. There can be no assurance that the Company will not experience
interruption of use of the new system due to telecommunications problems or
otherwise that could have a material adverse effect on the Company's business,
financial condition and results of operations.

     In connection with the Company's growth over the last several years, the
Company's operating expenses have increased significantly, and the Company
anticipates that operating expenses will continue to increase in absolute
dollars in the future. In particular, in order to continue to provide quality
products and customer service and to meet any anticipated demand of its
customers, the Company will be required to continue to increase staffing and
other expenses, including expenditures on capital equipment, sales and
marketing. Should the Company increase its expenditures in anticipation of a
future level of sales that does not materialize, the Company's business,
financial condition and results of operations would be materially and adversely
affected.
                                       19
<PAGE>   20

Certain customers have required and may continue to require rapid increases in
production and accelerated delivery schedules which have placed and may continue
to place a significant burden on the Company's resources. In order to achieve
anticipated sales levels and profitability, the Company will continue to be
required to manage its assets and operations efficiently. In addition, should
the Company continue to expand geographically, it may experience certain
inefficiencies from the management of geographically dispersed facilities.

     In fiscal 1998, the Company opened a new manufacturing facility in Penang,
Malaysia, which has resulted and will continue to result in higher operating
expenses. There can be no assurance that enough future sales will exist to
support the operating expenses of the new facility or that the production lines
of the new facility will be efficient or that they will result in an increase in
output. Any delay or difficulties arising from the start-up of the new facility
could materially and adversely affect the Company's business, financial
condition and results of operations.

  Year 2000 Readiness Disclosure; Information Technology Transition

     Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning with 21st
century dates, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with such Year 2000 requirements. Significant uncertainty exists concerning the
potential effects associated with such compliance. The Company has licensed a
new management information system that is Year 2000 compliant. In February 1999,
the Company replaced its existing management information system at its
headquarters in Fremont, California with the new management information system.
By mid 1999, the Company intends to replace its existing management information
systems at its other worldwide facilities with the new information system. The
implementation of the new system will impact almost all phases of the Company's
operations (e.g., planning, manufacturing, finance and accounting).
Implementation of the new system and transition from the existing system to the
new system will require substantial financial resources, time and personnel.
There can be no assurance that the new system will be completely implemented in
time to avoid any Year 2000 compliance problems, or that the Company will not
experience problems, delays or unanticipated additional costs in implementing
the new management information system that could have a material adverse effect
on the Company's business, financial condition and results of operations,
particularly during the periods in which the new system is brought online. The
new system will be centrally operated from one location for all of the Company's
facilities worldwide. Each of the Company's facilities will remotely access the
new system via a wide area network. There can be no assurance that the Company
will not experience interruption of use of the new system due to
telecommunications problems or otherwise that could have a material adverse
effect on the Company's business, financial condition and results of operations.

     During the second quarter of fiscal 1998, the Company began a Year 2000
assessment of its management information system, other information technology
systems, non-information technology systems, products and key suppliers. Items
identified and under review include manufacturing and test equipment,
telecommunications systems and equipment and computer systems and equipment. In
addition, the Company is assessing the Year 2000 compliance of its products. The
Company intends to have its Year 2000 assessment, testing, remediation efforts
and development of necessary contingency plans complete by the year 2000, the
total cost of which has not yet been determined. To date, however, costs
incurred to address Year 2000 compliance issues have not been material. Costs
related to Year 2000 compliance issues continue to be funded through operating
cash flows. There can be no assurance that the Company will be able to complete
its Year 2000 assessment, testing, remediation efforts and development of
necessary contingency plans by the year 2000. Any failure to complete the Year
2000 assessment, testing, remediation efforts and development of necessary
contingency plans prior to the year 2000 could have a material adverse effect on
the Company's business, financial condition and results of operations.

     During the third quarter of fiscal 1998, the Company initiated formal
communications with its key suppliers of raw materials and services. Although a
number of respondents indicated that their products are or will be Year 2000
compliant prior to the year 2000 and that they expect their operations and
services will
                                       20
<PAGE>   21

continue uninterrupted, there can be no assurance that the Company's key
suppliers have, or will have information technology systems, non-information
technology systems and products that are Year 2000 compliant. Similarly, there
can be no assurance that the Company's customers have or will have information
technology systems, non-information technology systems and products that are
Year 2000 compliant. Any Year 2000 compliance problem facing the Company, its
customers or suppliers could have a material adverse effect on the Company's
business, financial condition and results of operations.

  Rapid Technological Change

     The semiconductor, computer, telecommunications and networking industries
are subject to rapid technological change, short product life cycles, frequent
new product introductions and enhancements, changes in end user requirements and
evolving industry standards. The Company's ability to be competitive in these
markets will depend in significant part upon its ability to invest significant
amounts of resources for research and development efforts, to successfully
develop, introduce and sell new products and enhancements on a timely and
cost-effective basis and to respond to changing customer requirements that meet
evolving industry standards. For example, the semiconductor memory market is
expected to transition from SDRAM to Direct RDRAM. The Company is currently
focusing its research and development resources on the development of Rambus
DRAM, DDR, SDRAM, Flash and SRAM products, 56 kbps asynchronous modem products
and various embedded computer products. The success of the Company in developing
new and enhanced products will depend upon a variety of factors, including
integration of various elements of complex technology, timely and efficient
completion of product design, timely and efficient implementation of
manufacturing and assembly processes, availability of production capacity,
achievement of acceptable manufacturing yields and product performance, quality
and reliability. The Company has experienced, and may in the future experience,
delays from time to time in the development and introduction of new products.
Moreover, there can be no assurance that the Company will be successful in
selecting, developing, manufacturing and marketing new products or enhancements.
There can be no assurance that defects or errors will not be found in the
Company's products after commencement of commercial shipments, which could
result in the delay in market acceptance of such products. The inability of the
Company to introduce new products or enhancements that contribute to net sales
could have a material adverse effect on the Company's business, financial
condition and results of operations.

  Dependence on Key Personnel

     The Company's future operating results depend in significant part upon the
continued contributions of its key technical and senior management personnel,
many of whom would be difficult to replace. None of such persons, including the
executive officers, has an employment agreement with the Company. The Company's
future operating results also depend in significant part upon its ability to
attract, train and retain qualified management, manufacturing and quality
assurance, engineering, marketing, sales and support personnel. The Company is
actively recruiting such personnel. However, competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting, training or retaining such personnel now or in the future. There may
be only a limited number of persons with the requisite skills to serve in these
positions and it may be increasingly difficult for the Company to hire such
persons over time. The loss of any key employee, the failure of any key employee
to perform in his or her current position, the Company's inability to attract,
train and retain skilled employees as needed or the inability of the officers
and key employees of the Company to expand, train and manage the Company's
employee base could materially and adversely affect the Company's business,
financial condition and results of operations.

  International Sales

     International sales accounted for 30%, 18% and 8% of net sales in fiscal
1998, fiscal 1997 and fiscal 1996, respectively. The Company anticipates that
international sales will continue to be material in future periods. As a result,
a material portion of the Company's sales may be subject to certain risks,
including changes in regulatory requirements, tariffs and other barriers, timing
and availability of export licenses, political and economic instability,
difficulties in accounts receivable collections, natural disasters, difficulties
in staffing and

                                       21
<PAGE>   22

managing foreign subsidiary and branch operations, difficulties in managing
distributors, difficulties in obtaining governmental approvals for
telecommunications and other products, foreign currency exchange fluctuations,
the burden of complying with a wide variety of complex foreign laws and
treaties, potentially adverse tax consequences and uncertainties relative to
regional, political and economic circumstances. In particular, recent
instability in certain Asian economies and financial markets could have an
adverse effect on the Company's business, financial condition and results of
operations in future quarters. In fiscal 1998, the Company's net sales to
customers in Asia accounted for less than one percent of all net sales. In
addition to net sales to customers in Asia, the Company maintains strategic
supply relationships with companies located in Asia. Moreover and as a result of
currency changes and other factors, certain of the Company's competitors may
have the ability to manufacture competitive products in Asia at lower costs than
the Company. There can be no assurance that current economic instability in Asia
will not have a material adverse effect on the Company's net sales, its ability
to compete or its ability to receive raw materials for its products.

     The Company is also subject to the risks associated with the imposition of
legislation and regulations relating to the import or export of high technology
products. The Company cannot predict whether quotas, duties, taxes or other
charges or restrictions upon the importation or exportation of the Company's
products will be implemented by the United States or other countries. Because
sales of the Company's products have been denominated to date primarily in
United States dollars, increases in the value of the United States dollar could
increase the price of the Company's products so that they become relatively more
expensive to customers in the local currency of a particular country, leading to
a reduction in sales and profitability in that country. Future international
activity may result in increased foreign currency denominated sales. Gains and
losses on the conversion to United States dollars of accounts receivable,
accounts payable and other monetary assets and liabilities arising from
international operations may contribute to fluctuations in the Company's results
of operations. Some of the Company's customer's purchase orders and agreements
are governed by foreign laws, which may differ significantly from United States
laws. Therefore, the Company may be limited in its ability to enforce its rights
under such agreements and to collect damages, if awarded. There can be no
assurance that any of these factors will not have a material adverse effect on
the Company's business, financial condition and results of operations.

  Uncertainty Regarding Protection of Proprietary Rights

     In the semiconductor, computer, telecommunications and networking
industries, it is typical for companies to receive notices from time to time
alleging infringement of patents, copyrights or other intellectual property
rights of others. The Company is currently being sued by a party who alleges
that certain of the Company's communication card products have infringed and
continue to infringe upon the party's intellectual property rights. The Company
is also currently being sued by a party who alleges that the Company's
manufacturing operations and processes have infringed and continue to infringe
upon the party's intellectual property rights. Moreover, the Company has been
and may from time to time continue to be notified of claims that it may be
infringing patents, copyrights or other intellectual property rights owned by
other third parties. There can be no assurance that these or other companies
will not in the future pursue claims against the Company with respect to the
alleged infringement of patents, copyrights or other intellectual property
rights. In addition, litigation may be necessary to protect the Company's
intellectual property rights and trade secrets, to determine the validity of and
scope of the proprietary rights of others or to defend against third party
claims of invalidity. The current litigation or any other litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, financial condition and results of
operations.

     There can be no assurance that additional infringement, invalidity, right
to use or ownership claims by third parties or claims for indemnification
resulting from infringement claims will not be asserted in the future. The
Company has entered into license agreements in the past regarding certain
alleged infringement claims asserted by third parties. In response to the
current litigation or if any other claims or actions are asserted against the
Company, the Company may again seek to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that a license
will be available under reasonable terms or at all. The failure to obtain a
license under a patent or intellectual property right from a third party for

                                       22
<PAGE>   23

technology used by the Company could cause the Company to incur substantial
liabilities and to suspend the manufacture of products. In addition, should the
Company decide to litigate the current claims or such other claims, such
litigation could be extremely expensive and time consuming and could materially
and adversely affect the Company's business, financial condition and results of
operations, regardless of the outcome of the litigation.

     The Company attempts to protect its intellectual property rights through a
variety of measures including non-disclosure agreements, trademarks, trade
secrets and to a lesser extent, patents. There can be no assurance, however,
that such measures will provide adequate protection for the Company's trade
secrets or other proprietary information, that disputes with respect to the
ownership of its intellectual property rights will not arise, that the Company's
trade secrets or proprietary technology will not otherwise become known or be
independently developed by competitors or that the Company can otherwise
meaningfully protect its intellectual property rights.

  Risks Associated with Acquisitions

     As part of its business strategy, the Company expects to acquire or make
significant investments in businesses that offer complementary products and
technologies. Any such future acquisitions or investments would expose the
Company to the risks commonly encountered in acquisitions of businesses. Such
risks include, among others, difficulty of assimilating the operations,
information systems and personnel of the acquired businesses, the potential
disruption of the Company's ongoing business, the inability of management to
maximize the financial and strategic position of the Company through the
successful incorporation of acquired employees and customers, the maintenance of
uniform standards, controls, procedures and policies and the impairment of
relationships with employees and customers as a result of any integration of new
management personnel. There can be no assurance that any potential acquisition
will be consummated or, if consummated, that it will not have a material adverse
effect on the Company's business, financial condition and results of operations.

  Volatility of Stock Prices

     There has been a history of significant volatility in the market prices of
the common stock of technology companies, including the Common Stock of the
Company, and it is likely that the market price of the Company's Common Stock
will continue to be subject to significant fluctuations. Factors such as the
timing and market acceptance of new product introductions by the Company, demand
for products of the Company's customers, the introduction of new products by the
Company's competitors, variations in quarterly operating results, changes in
securities analysts' recommendations regarding the Company's Common Stock,
developments in the technology industry and general economic conditions may have
a significant impact on the market price of the Company's Common Stock. In
addition, the equity markets in recent years have experienced significant price
and volume fluctuations that have affected the market prices of technology
companies and that have often been unrelated to the operating performance of
such companies.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  Interest Rate Risk

     The Company's exposure to market risk for changes in interest rates relate
primarily to the Company's investment portfolio. Currently, the Company does not
use derivative financial instruments in its investment portfolio. The Company
invests in high-credit quality issuers and, by policy, limits the amount of
principal exposure to any one issuer. As stated in the Company's policy, the
Company seeks to ensure the safety and preservation of its invested principal
funds by limiting default and market risk.

     The Company seeks to mitigate default risk by investing in high-credit
quality securities and by positioning its investment portfolio to respond to a
significant reduction in a credit rating of any investment issuer, guarantor or
depository. The Company seeks to mitigate market risk by limiting the principal
and investment term of funds held with any one issuer and by investing funds in
marketable securities with active secondary or resale markets.

                                       23
<PAGE>   24

     The table below presents principal amounts and related weighted average
interest rates by year of maturity for the Company's investment portfolio as of
October 31, 1998 (in thousands):

<TABLE>
<CAPTION>
                                           1999      2000     2001   2002   2003   THEREAFTER    TOTAL
                                         --------   -------   ----   ----   ----   ----------   --------
<S>                                      <C>        <C>       <C>    <C>    <C>    <C>          <C>
CASH EQUIVALENTS AND SHORT-TERM
  INVESTMENTS:
  Fixed-rate investments...............  $113,061   $20,885   $--    $--    $--       $--       $133,946
  Average interest rate................      3.93%     4.19%   --     --     --        --           3.97%
</TABLE>

     As of April 30, 1999, there were no changes in the Company's investment
portfolio that would materially impact the Company's exposure to interest rate
risk.

  Foreign Currency Exchange Risk

     The Company transacts business in various foreign countries. The Company's
primary foreign currency cash flows are in certain European countries. As of
April 30, 1999 and October 31, 1998, the Company did not employ a foreign
currency hedge program with respect to transactions and expenditures originating
in these or any other foreign countries. The Company believes that its foreign
currency exchange risk is currently immaterial.

                                       24
<PAGE>   25

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     The Company and certain of its officers and directors have been named as
defendants in six securities class action lawsuits filed in the United States
District Court for the Northern District of California, Boren v. SMART Modular
Technologies, Inc., et al., No. C 98 20692 JW (PVT) (filed July 1, 1998),
Woszczak v. SMART Modular Technologies, Inc., et al., No. C 98 2617 JL (filed
July 2, 1998), Bisson v. SMART Modular Technologies, Inc., et al., No. C 98
20714 JF (filed July 8, 1998), D'Amato v. SMART Modular Technologies, Inc., et
al., No. C 98 2804 PJH (filed July 16, 1998), Cha v. SMART Modular Technologies,
Inc., et al., No. C 98 2833 BZ (filed July 17, 1998) and Chang v. SMART Modular
Technologies, Inc., et al., No. C 98 3151 SI (filed August 13, 1998)
(collectively, the "Federal Actions"). The plaintiffs in the Federal Actions
allege that defendants made material misrepresentations and omissions during the
period from July 1, 1997 through May 21, 1998 in violation of Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The
Federal Actions were consolidated on October 9, 1998, and a consolidated
complaint was filed on November 30, 1998 (the "Federal Complaint").

     On October 22, 1998, a putative securities class action lawsuit, captioned
Reagan v. SMART Modular Technologies, Inc., et al., Case No. H204162-5 (the
"State Complaint"), was filed against the Company and certain of its officers
and directors in the Superior Court of the State of California, County of
Alameda (the "Superior Court"). The State Complaint alleges violations of
Sections 25400 and 25500 of the California Corporations Code and seeks
unspecified damages on behalf of a purported class of purchasers of SMART common
stock during the period from July 1, 1997 through May 21, 1998. The factual
allegations of the State Complaint are nearly identical to the factual
allegations contained within the Federal Complaint. On February 22, 1999, the
Superior Court granted the Company's motion to stay the State Complaint pending
the resolution of the Federal Complaint.

     The Company believes that all claims related to the state and federal
securities actions are without merit and intends to defend itself vigorously
against these actions. Currently, the Company is unable to estimate the
financial impact of the state and federal securities actions.

ITEM 2. CHANGES IN SECURITIES

     Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable

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

     (a) The Company held an annual meeting of shareholders (the "Annual
         Meeting") on March 16, 1999.

     (b) The following individuals were nominated and elected to the Board of
         Directors to serve for the ensuing year and until their successors are
         duly elected and qualified or until their earlier death, resignation or
         removal. Each individual so nominated also served as a Director on the
         Company's Board of Director during the preceding year.

<TABLE>
<CAPTION>
                                                         NUMBER OF VOTES
                                          ----------------------------------------------
                                                                                BROKER
                NOMINEE                      FOR        AGAINST    WITHHELD    NON-VOTES
                -------                   ----------    -------    --------    ---------
<S>                                       <C>           <C>        <C>         <C>
Ajay Shah...............................  39,749,868    133,330       0            0
Mukesh Patel............................  39,750,848    132,350       0            0
Erik Anderson...........................  39,748,976    134,222       0            0
Tor R. Braham...........................  39,749,348    133,850       0            0
</TABLE>

                                       25
<PAGE>   26

     (c) The following matter was voted upon at the Annual Meeting and the
         results of voting were as follows:

        (1) The shareholders voted 39,804,908 shares in the affirmative, 30,899
            shares in the negative and withheld 47,391 shares to approve the
            ratification of the appointment of Arthur Andersen LLP as
            independent auditors of the Company for the fiscal year ending
            October 31, 1999.

ITEM 5. OTHER INFORMATION

     Not applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

     For a list of exhibits to this Form 10-Q see the exhibit index located on
pages 28 - 30.

(b) Reports on Form 8-K:

     There were no reports on Form 8-K filed during the three months ended April
30, 1999.

                                       26
<PAGE>   27

                                   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 hereunto duly authorized.

                                          SMART MODULAR TECHNOLOGIES, INC.

                                          By:      /s/ DAVID B. MULLIN

                                            ------------------------------------
                                                      David B. Mullin
                                                     Vice President and
                                                  Chief Financial Officer
                                                  (Principal Financial and
                                                    Accounting Officer)

Date: June 11, 1999

                                       27
<PAGE>   28

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                EXHIBITS
 -------                                --------
<C>           <S>
    2.1(1)    Agreements and Plan of Reorganization among the Registrant,
              Apex Data, Inc. and SMART Acquisition Inc. dated April 24,
              1995
    3.1(7)    Registrant's Amended and Restated Articles of Incorporation
    3.2(1)    Registrant's Amended Bylaws
    4.1(1)    Registration Rights Agreement dated July 26, 1995
    4.2(1)    Registrant's specimen stock certificate
    4.3(3)    Termination to the Registration Rights Agreement dated July
              26, 1995
   10.1(1)    1989 Incentive Stock Plan, as amended, and forms of
              agreements attached thereto
   10.2(1)    1995 Employee Stock Purchase Plan, and forms of agreements
              attached thereto
   10.3(1)    1995 Director Option Plan, and forms of agreements attached
              thereto
   10.4(1)    1995 Stock Plan, and forms of agreements attached thereto
   10.5(1)    Form of Indemnification Agreement between the Registrant and
              its officers, directors and certain significant employees
   10.6(1)    Standard Triple Net Industrial Lease between the Registrant
              and Pactel Properties dated November 18, 1991
   10.7(1)    First Amendment to Lease between the Registrant and Pactel
              Properties dated July 19, 1993
   10.8(1)    Second Amendment to Lease between the Registrant and Riggs
              National Bank of Washington, D.C. as Trustee of the
              Multi-Employer Property Trust Northport Business Park, a
              National Banking Association dated May 31, 1994
   10.9(1)    Third Amendment to Lease between the Registrant and Riggs
              National Bank of Washington, D.C. as Trustee of the
              Multi-Employer Property Trust Northport Business Park, a
              National Banking Association dated November 1994
  10.10(1)    Standard Triple Net Industrial Lease between the Registrant
              and Riggs National Bank of Washington, D.C., as Trustee of
              the Multi-Employer Property Trust, dated June 18, 1995
  10.11(1)    Lease Contract between the Registrant and The Puerto Rico
              Industrial Development Company dated April 24, 1995
  10.12(1)    Note, Loan and Security Agreement between the Registrant and
              Merrill Lynch Business Financial Services Inc. dated May 19,
              1993
  10.13(1)    Letter Agreement between the Registrant and Merrill Lynch
              Business Financial Services Inc. dated December 28, 1994
  10.14(1)    Letter Agreement between the Registrant and Merrill Lynch
              Business Financial Services Inc. dated June 27, 1995
  10.15(1)    Intercreditor Agreement among the Registrant, Merrill Lynch
              Business Financial Services Inc. and Imperial Bank dated
              June 27, 1995
  10.16(1)    Security and Loan Agreement between the Registrant and
              Imperial Bank dated July 19, 1995
 *10.17(1)    License and Supply Agreement between the Registrant and
              Krypton Isolation, Inc. dated July 22, 1994
  10.18(1)    Warrant Purchase Agreement between the Registrant and
              Krypton Isolation, Inc. dated July 27, 1994
  10.19(1)    Holders' Agreement dated July 27, 1994 by and among Krypton
              Isolation, Inc. and certain individuals and entities
              identified on Exhibit A attached thereto
</TABLE>

                                       28
<PAGE>   29

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                EXHIBITS
 -------                                --------
<C>           <S>
  10.20(1)    Common Stock Purchase Agreement dated July 27, 1994 by and
              among Krypton Isolation, Inc. and the individuals identified
              on Exhibit A attached thereto
  10.21(1)    First Amendment to the Krypton Isolation, Inc. Warrant to
              Purchase 2,000,000 Shares of Series A Preferred Stock
              between the Registrant and Krypton Isolation, Inc. dated
              October 24, 1995
  10.22(1)    Letter of Intent dated as of October 24, 1995 by and among
              Krypton Isolation, Inc., the Registrant and certain
              individuals identified on the signature pages thereto
**10.23(2)    License and Supply Agreement between the Registrant and
              Krypton Isolation, Inc. dated January 29, 1996
  10.24(2)    Warrant Purchase Agreement between the Registrant and
              Krypton Isolation, Inc. dated January 29, 1996
  10.25(2)    First Amended and Restated Holders' Agreement dated January
              29, 1996 by and among Krypton Isolation, Inc. and certain
              individuals and entities identified on Exhibit A attached
              thereto
  10.26(2)    Common Stock Agreement dated January 29, 1996 by and among
              Krypton Isolation, Inc. and the entities identified on
              Exhibit A attached thereto
  10.27(2)    First Amendment to the License and Supply Agreement between
              the Registrant and Krypton Isolation, Inc. dated January 29,
              1996
  10.28(3)    1989 Incentive Stock Plan, as amended, dated March 25, 1996
  10.29(4)    Fourth Amendment to Lease between the Registrant and Riggs
              Bank N.A. dated September 27, 1996
  10.30(5)    Revolving Line of Credit Note between the Registrant and
              Wells Fargo Bank, National Association dated May 29, 1997
  10.31(5)    Credit Agreement between the Registrant and Wells Fargo
              Bank, National Association dated May 29, 1997
  10.32(5)    Subfeature Note between the Registrant and Wells Fargo Bank,
              National Association dated May 29, 1997
  10.33(6)    Lease Contract between the Registrant and The Puerto Rico
              Industrial Development Company dated October 9, 1997
  10.34(6)    Second Amendment to the Krypton Isolation, Inc. Warrant to
              Purchase 2,000,000 Shares of Series A Preferred Stock
              between the Registrant and Krypton Isolation, Inc. dated
              January 21, 1998
  10.35(7)    Revolving Line of Credit Note between the Registrant and
              Wells Fargo Bank, National Association dated May 1, 1998
  10.36(7)    Credit Agreement between the Registrant and Wells Fargo
              Bank, National Association dated May 1, 1998
  10.37(7)    Subfeature Note between the Registrant and Wells Fargo Bank,
              National Association dated May 1, 1998
  10.38(8)    Sublease Contract between the Registrant and Philips
              Consumer Communications, L.P. dated June 30, 1998
  10.39(9)    First Amendment to the License and Supply Agreement between
              the Registrant and Krypton Isolation, Inc. dated June 22,
              1998
  10.40(9)    Second Amendment to the License and Supply Agreement between
              the Registrant and Krypton Isolation, Inc. dated June 22,
              1998
</TABLE>

                                       29
<PAGE>   30

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                EXHIBITS
 -------                                --------
<C>           <S>
     10.41    First Amendment to the Credit Agreement between the
              Registrant and Wells Fargo Bank, National Association dated
              May 1, 1998
     10.42    Second Amendment to the Credit Agreement between the
              Registrant and Wells Fargo Bank, National Association dated
              May 1, 1998
     10.43    Revolving Line of Credit Note between the Registrant and
              Wells Fargo Bank, National Association dated April 28, 1999
     10.44    Subfeature Note between the Registrant and Wells Fargo Bank,
              National Association dated April 28, 1999
     10.45    Employment Letter between the Registrant and Keith McDonald
              dated February 17, 1999
   16.1(1)    Letter Regarding Change in Certifying Accountant
   16.2(1)    Letter Regarding Change in Certifying Accountant
   16.3(1)    Letter Regarding Change in Certifying Accountant
   16.4(1)    Letter Regarding Change in Certifying Accountant
      27.1    Financial Data Schedule for the Quarter Ended April 30, 1999
</TABLE>

---------------
(1) Incorporated by reference to exhibit filed with the Registrant's
    Registration Statement on Form S-1 (No. 33-97748) filed October 4, 1995,
    Amendment No. 1 thereto filed October 24, 1995, Amendment No. 2 thereto
    filed November 6, 1995, Amendment No. 3 thereto filed November 14, 1995 and
    Amendment No. 4 thereto filed November 16, 1995, which Registration
    Statement became effective November 16, 1995.

(2) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-Q filed March 16, 1996.

(3) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-Q filed June 14, 1996.

(4) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-Q filed June 16, 1997.

(5) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-Q filed August 28, 1997.

(6) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-K filed January 29, 1998.

(7) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-Q filed June 15, 1998.

(8) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-Q filed September 11, 1998.

(9) Incorporated by reference to exhibit filed with the Registrant's Report on
    Form 10-K filed January 29, 1999.

 *  Pursuant to Rule 406(b) under the Securities Act of 1933, confidential
    treatment has been granted to certain portions of this exhibit, which
    portions have been deleted and filed separately with the Securities and
    Exchange Commission.

**  Pursuant to Rule 24b-2 under the Securities Exchange Act of 1934,
    confidential treatment has been granted to certain portions of this exhibit,
    which portions have been deleted and filed separately with the Securities
    and Exchange Commission.

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