CERPROBE CORP, 424B1, 1997-09-24

CERPROBE CORP
424B1, 1997-09-24
ELECTRONIC COMPONENTS, NEC

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<PAGE> 1
Filed pursuant to Rule 424(b)(1)
File No. 333-34493

2,000,000 SHARES

[CERPROBE LOGO]

COMMON STOCK

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

Of the 2,000,000 shares of Common Stock offered hereby, 1,500,000 shares
are being sold by the Company and 500,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "CRPB." On September 23, 1997, the last reported sale price of the Common
Stock was $22 3/8 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share.................... $22.00 $1.26 $20.74 $20.74
- -------------------------------------------------------------------------------------------------
Total (3).................... $44,000,000 $2,520,000 $31,110,000 $10,370,000
=================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $50,600,000, $2,898,000 and $37,332,000, respectively. See
"Underwriting."
------------------------

The shares of Common Stock are offered by the several Underwriters, subject
to receipt and acceptance by them and to their right to reject any order in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made at the offices of Adams, Harkness & Hill, Inc., Boston,
Massachusetts, on or about September 29, 1997.

ADAMS, HARKNESS & HILL, INC. DAIN BOSWORTH
Incorporated

The date of this Prospectus is September 24, 1997.
<PAGE> 2
Inside Front Cover:

Picture of Wafer Prober test equipment and ATE test board, ATE interface
assembly, probe card, and wafer prober.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF
PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M.
SEE "UNDERWRITING."

Cerprobe, the logo of the Company, and CerCard are trademarks of the
Company. All trademarks and trade names referred to in this Prospectus are the
property of their respective owners.
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Investors should carefully consider the
risk factors related to the purchase of Common Stock of the Company. See "Risk
Factors."

THE COMPANY

The Company has grown its business and expanded its product lines primarily
through internal product development. The development of the Company's CerCard
technology in 1990 served as the foundation for the growth of the Company's core
probe card business. The Company has also grown through strategic acquisitions
and joint ventures. The acquisition of Fresh Test Technology Corporation in
April 1995 enabled the Company to expand its product line to include ATE
interface assemblies. The acquisition of CompuRoute, Inc. in December 1996
enabled the Company to offer ATE test boards, the Company's first packaged IC
testing product. In January 1997, the Company acquired SVTR, Inc., which
refurbishes, reconfigures, and services wafer prober equipment. Recently, the
Company entered into a strategic international joint venture with Upsys for the
assembly of a memory IC testing product, which the Company will distribute in
the United States and Asia. Upsys is a joint venture between IBM and a French
test and engineering company. In addition, the Company established an
international joint venture with Mitsubishi Materials to develop next generation
probe card technology.

According to independent semiconductor market research, worldwide
production of ICs increased from approximately 34 billion units in 1992 to in
excess of 49 billion units in 1996. Additionally, advances in semiconductor
technology have resulted in larger semiconductor wafers, higher IC processing
speeds, more varied configurations, and increasingly complex semiconductor
devices. In the semiconductor manufacturing process, probe cards, and to a
lesser extent ATE test boards, are consumable products rather than capital
equipment. Accordingly, the rapid unit growth of ICs and new IC designs coupled
with the trend toward shorter product life cycles and increased complexity of
ICs have accelerated demand for the Company's probe cards and ATE test boards.

Historically, each component of the testing system has been supplied by
different vendors. As a result, IC manufacturers frequently have been left with
the task of combining separate components from many small vendors into a single
integrated testing system. More recently, the Company's customers have
increasingly outsourced their test integration products and services to focus on
their core strengths, and have increasingly relied on the Company to overcome
complex design, manufacturing, and integration challenges. The Company believes
semiconductor manufacturers are seeking a single source provider capable of
supplying comprehensive solutions for the components necessary to assure a clean
test signal. The Company believes it is the only company that designs,
manufactures, and assembles each of the components in the critical path for the
test signal.

The Company maintains regional full service facilities in Arizona,
California, and Texas as well as sales offices in Colorado, Florida,
Massachusetts, and Oregon to serve the U.S. market for its products and
services. The Company also maintains a full service facility in Scotland to
serve the European market and full service facilities in Singapore and Taiwan to
serve the Southeast Asian market. Each of the Company's facilities is located in
proximity to major semiconductor manufacturing centers. The Company's focus on
high quality products and innovative technologies has enabled it to establish
strong relationships with leading worldwide semiconductor manufacturers. In
1996, the Company's top five customers were Intel, Motorola, LSI Logic, IBM, and
Hewlett-Packard.

The Company believes it is a leader in providing high quality semiconductor
testing products and services. The Company's goal is to enhance its leadership
position and increase its domestic and international market share. The Company's
strategy to achieve its goal includes the following key elements: (i) provide
comprehensive solutions for semiconductor test integration, (ii) continue to
maintain strong customer relationships, (iii) expand its global presence, (iv)
focus on technological innovation, and (v) provide quality products and
services.

3
<PAGE> 4

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by:
The Company.................................... 1,500,000 shares
The Selling Stockholders....................... 500,000 shares
Common Stock to be outstanding after the offering... 7,871,580 shares (1)
Use of proceeds..................................... For general corporate purposes,
including additional working capital.
The Company may use a portion of the
net proceeds to repay certain
indebtedness and for possible
acquisitions. See "Use of Proceeds."
Nasdaq National Market symbol....................... CRPB
</TABLE>

- ------------
(1) Excludes (i) 740,540 shares of Common Stock reserved for issuance upon
exercise of stock options and warrants outstanding as of August 1, 1997, and
(ii) 366,334 shares reserved for issuance upon the exercise of stock options
that may be granted in the future under the Company's 1995 Stock Option
Plan.

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
-------------------------
SIX MONTHS ENDED SIX MONTHS
YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED ENDED JUNE
------------------------------------------------- -------------------- DECEMBER 31, 30,
1992 1993 1994 1995 1996 (1) 1996 1997 (2) 1996 (3) 1997 (3)
------ ------- ------- ------- ---------- ------- ---------- ------------ ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............. $8,060 $11,212 $14,251 $26,099 $ 37,308 $19,360 $ 34,583 $ 62,268 $ 34,636
Costs of goods sold.... 4,914 6,768 8,214 13,706 20,343 10,348 20,404 39,353 20,487
------ ------- ------- ------- ------- ------- ------- ------- -------
Gross profit........... 3,146 4,444 6,037 12,393 16,965 9,012 14,179 22,915 14,149

Expenses:
Selling, general and
administrative..... 1,827 2,398 3,693 7,503 10,725 5,275 9,127 16,063 9,241
Engineering and
product
development........ 246 336 417 707 903 378 618 1,452 655
Acquisition
related............ -- -- -- -- 4,584 -- 6,164 -- --
------ ------- ------- ------- ------- ------- ------- ------- -------
Total expenses..... 2,073 2,734 4,110 8,210 16,212 5,653 15,909 17,515 9,896
------ ------- ------- ------- ------- ------- ------- ------- -------
Operating income
(loss)............... 1,073 1,710 1,927 4,183 753 3,359 (1,730) 5,400 4,253
Net income (loss)...... $ 771 $ 1,502 $ 1,213 $ 2,402 $ (1,361) $ 1,867 $ (3,305) $ 2,916 $ 2,519
====== ======= ======= ======= ======= ======= ======= ======= =======

Net income (loss) per
common and common
equivalent share:
Primary.............. $ 0.31 $ 0.41 $ 0.36 $ 0.59 $ (0.30) $ 0.35 $ (0.52) $ 0.48 $ 0.38
====== ======= ======= ======= ======= ======= ======= ======= =======
Fully diluted........ $ 0.21 $ 0.35 $ 0.30 $ 0.49 $ (0.30) $ 0.32 $ (0.52) $ 0.45 $ 0.38
====== ======= ======= ======= ======= ======= ======= ======= =======

Weighted average number
of common and common
equivalent shares:
Primary.............. 2,502 3,688 3,387 4,071 4,580 5,262 6,321 6,028 6,545
Fully diluted........ 3,680 4,349 4,007 4,862 4,580 5,798 6,321 6,518 6,608
</TABLE>

4
<PAGE> 5

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
ACTUAL AS ADJUSTED (4)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 1,482 $23,942
Working capital...................................................... 7,005 32,465
Total assets......................................................... 36,433 58,893
Long-term debt....................................................... 1,592 1,592
Stockholders' equity................................................. 22,789 48,249
</TABLE>

(2) Includes the results of operations of SVTR, Inc. ("SVTR") since the date of
acquisition of January 15, 1997. Includes a one-time write-off of purchased
research and development costs of $5.7 million for the six months ended June
30, 1997, or $0.90 per share, related to the acquisition of SVTR. In
addition, an accrual was recorded in the same period for the estimated costs
to move SVTR's manufacturing operations from California to Arizona during
1997 for $500,000, or $0.05 per share, net of taxes, for a total of $0.95
per share. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview."

(3) The pro forma statement of operations data for the year ended December 31,
1996 and the six months ended June 30, 1997 present results for the Company
as if the acquisitions of CompuRoute and SVTR had occurred as of January 1,
1996. The pro forma statement of operations data does not reflect any cost
savings associated with the reduction of overhead or the elimination of
duplicate functions or consolidation of facilities. See "Unaudited Pro Forma
Combined Condensed Financial Information" for a discussion of pro forma
statement of operations adjustments.

(4) Adjusted to give effect to the sale by the Company of 1,500,000 shares of
Common Stock at the public offering price of $22.00 per share and the
application of the estimated net proceeds therefrom. A portion of the
proceeds will be used for the repayment of advances outstanding on the
Company's line of credit of $7.3 million, including $5.3 million borrowed
after June 30, 1997 to redeem the remaining outstanding shares of Series A
Convertible Preferred Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Subsequent Events" and "Use
of Proceeds."

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

The Company was incorporated in California in 1976 and reincorporated in
Delaware in 1987. The Company maintains its principal executive offices at 1150
North Fiesta Boulevard, Gilbert, Arizona 85233, and its telephone number is
(602) 333-1500.

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

Unless the context indicates otherwise, all references to "Cerprobe" or the
"Company" refer to Cerprobe Corporation and its subsidiaries. Except as
otherwise noted, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. See "Capitalization," "Description of
Securities," and "Underwriting."

5
<PAGE> 6

RISK FACTORS

The following risk factors should be considered carefully in addition to
the other information in this Prospectus before purchasing the Common Stock
offered by this Prospectus. Except for the historical information contained
herein, the discussion in this Prospectus contains certain forward-looking
statements that involve risks and uncertainties. When used in this Prospectus,
the words "believes," "expects," "anticipates," "intends," "estimates,"
"should," "will likely," and similar expressions are intended to identify such
forward-looking statements. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Important factors that could cause
or contribute to such differences include those discussed below, as well as
those discussed elsewhere herein.

Fluctuations in Operating Results. The Company's quarterly and annual
operating results will be affected by a wide variety of factors that could have
a material adverse effect on its net sales and profitability, many of which are
beyond its control, including factors pertaining to (i) customer demand for the
Company's products, such as the cyclical nature of the semiconductor industry,
market acceptance of the Company's products, changes in product mix, the level
of orders that are received and can be delivered in a quarter, and customer
order patterns; (ii) competition, such as competitive pressures on delivery
time, product performance and reliability, prices, the introduction or
announcement of new products by competitors, and intellectual property rights of
third parties; (iii) product development, such as the Company's ability to
introduce new product designs and innovations on a timely basis in response to
advances in IC technology; (iv) manufacturing and operations, such as the
availability and cost of raw materials, equipment and other supplies,
fluctuations in manufacturing yields, availability and cost of production
capacity, and concentration of suppliers; and (v) generally prevailing economic
conditions in the U.S. and worldwide markets served by the Company. Fluctuations
in operating results could materially and adversely affect the market price of
the Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."

Cyclicality of the Semiconductor Industry. The Company's business depends
substantially on both the volume of IC production by semiconductor manufacturers
as well as new IC designs, which in turn depend on the demand for ICs and
products utilizing ICs. The semiconductor industry is highly cyclical and
historically has experienced periods of oversupply, resulting in reduced demand
for IC testing products, including the products manufactured by the Company.
There can be no assurance that demand for ICs or products utilizing ICs will not
decline. Furthermore, there can be no assurance that demand for the Company's
products will continue at the current level. The Company anticipates that a
significant portion of new orders for its products will depend upon demand from
IC manufacturers building or expanding IC fabrication facilities or otherwise
increasing production capacity or shifting production to new IC designs, and
there can be no assurance that such demand will exist. Future downturns or
slowdowns in the IC market will have a material adverse effect on the Company's
business, financial condition, and operating results. Moreover, the Company's
need to invest in engineering and product development, marketing, and customer
service and support capabilities will limit its ability to reduce expenses in
response to such downturns or slowdowns. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."

Risks Associated with Expansion Strategy. The Company intends to expand,
in part, through strategic acquisitions and joint ventures and by entering into
new geographic and product markets. The Company's ability to expand through
acquisitions will depend primarily on its ability to identify, acquire, and
operate other businesses that complement the Company's existing business. There
can be no assurance that any suitable acquisitions can be identified or
consummated or that the operations and product offerings of any businesses that
are acquired will be successfully integrated into the Company's operations and
product offerings. The Company anticipates that it will use cash, possibly
including the net proceeds from this offering, and/or its securities, including
Common Stock, as the primary consideration for any future acquisitions. The
size, timing, and integration of any future acquisitions could cause

6
<PAGE> 7

substantial fluctuations in operating results. The Company faces similar risks
and uncertainties with respect to joint ventures. The Company is not engaged in
any negotiations with any third parties and has no specific agreements or plans
with respect to any acquisitions or joint ventures, and there can be no
assurance the Company will consummate any acquisitions or joint ventures.

The Company believes that its future success will depend, in part, on its
ability to expand into new international markets, particularly Asia, and new
product markets. The Company believes that its Asian competitors have a
competitive advantage because of their dominance of the Asian market. There can
be no assurance that the Company will be able to establish a significant
presence in these international markets. There also can be no assurance that or
to what extent the Company will be able to gain market acceptance for any new
product. See "Business."

Management of Growth. The Company has undergone a period of rapid growth
and expansion of its worldwide organization. Continued expansion by the Company
may strain its management, manufacturing, and human resources and the ability of
materials suppliers and other third parties on which the Company is dependent.
The Company's operating results could be materially and adversely affected if it
is unable to maintain high levels of productivity and/or to maintain
satisfactory delivery schedules. Moreover, to manage its growth effectively, the
Company will be required to expand its existing operating and financial systems
and controls and to manage a substantial increase in its employee base. To the
extent that the Company's management is unable to assume or perform these
duties, the business of the Company could be materially and adversely affected.
There can be no assurance that the management systems and controls currently in
place or any steps taken to expand such management systems and controls will be
adequate in the future.

The CompuRoute, Inc. ("CompuRoute") and SVTR, Inc. ("SVTR") acquisitions
represent significant growth in the Company's operations. Significant
uncertainties accompany any business combination and its implementation with
respect to the ability of the Company to integrate administrative functions,
management resources, and sales and marketing distribution systems. There can be
no assurance that the Company will be able successfully to integrate the
operations of CompuRoute and SVTR. The Company recently moved SVTR's operations
from California to facilities in Arizona. The move could be disruptive to the
operations of SVTR and could have a material adverse effect on the Company's
business, financial condition, and operating results. See
"Business -- Manufacturing" and "Business -- Facilities."

Dependence on New Products and Technologies. The Company operates in an
industry subject to rapid change. The Company custom-designs or customizes its
products to a customer's particular IC design specifications. The Company's
inability to introduce new product designs and enhancements and to adapt its
manufacturing techniques in response to technological advances in IC and capital
equipment designs would have a material adverse effect on the Company's
business, financial condition, and operating results. There can be no assurance
that any new product designs or enhancements will receive or maintain
substantial market acceptance. Probe card technologies, other than those being
utilized by the Company, are being developed. To the extent that such other
probe card technologies gain market acceptance, the Company's probe card
products could lose market share and the Company's business, financial
condition, and operating results would be materially and adversely affected. If
the Company is unable to design, develop, and introduce competitive products on
a timely basis, its future operating results may be materially and adversely
affected. See "Business -- Products and Services."

Competition. The semiconductor testing products industry is highly
competitive. The Company faces substantial competition in each of the probe
card, ATE interface assembly, and ATE test board markets. In addition, the
Company anticipates that it may face substantial competition in the future from
new entrants in the Company's markets. The principal competitive factors in the
industry are product performance, service, delivery time, and price. Competition
in international markets is also significant, particularly in Asia where the
Company is expanding into new geographic markets while simultaneously addressing
the testing requirements of the memory IC market, a new product market for the
Company. Some of the Company's competitors, particularly in Asia, have
substantially greater financial, engineering,

7
<PAGE> 8

or manufacturing resources than the Company and larger sales and service
organizations. To compete successfully, the Company must make substantial
investments in its engineering and product development, marketing, and customer
service and support activities. There can be no assurance that competition in
the Company's markets will not intensify or that the Company's technological
advantages will not be reduced or lost as a result of technological advances by
competitors or customers.

Wafer prober manufacturers, such as Electroglas, Inc., Tokyo Electron Labs,
and Tokyo Semitsu, provide limited refurbishment services and offer new wafer
probers as an alternative. These wafer prober manufacturers have greater
financial, engineering, and manufacturing resources and larger service
organizations than the Company, as well as long standing customer relationships.
There can be no assurance that levels of competition in the market for wafer
prober refurbishing and reconfiguration services will not intensify in the
future or that customers will not elect to purchase new wafer probers.

Reliance on Third Party Distribution Channels. The Company markets and
sells its products internationally primarily through a network of third party
foreign distributors that are not under the direct control of the Company. The
Company's international business represented approximately 16% of net sales for
the six months ended June 30, 1997. A reduction in the sales efforts by the
Company's foreign distributors or termination of their relationships with the
Company could materially and adversely affect the Company's international sales
and, as a result, its business, financial condition, and operating results. See
"Business -- Marketing, Sales, and Services."

Risks of International Operations. Given the Company's efforts in
establishing production and sales facilities in Scotland, Singapore, and Taiwan,
the Company anticipates that sales to international customers will increase in
the future. The foreign manufacture and sale of products and the purchase of raw
materials and equipment from foreign suppliers may be materially and adversely
affected by political and economic conditions abroad. Protectionist trade
legislation in either the United States or foreign countries, such as a change
in the current tariff structures, export compliance laws, or other trade
policies, as well as the Company's ability to form effective joint venture
alliances in order to compete in restrictive markets, could materially and
adversely affect the Company's ability to manufacture or sell products in
foreign markets and purchase materials or equipment from foreign suppliers. In
addition, the laws of certain foreign countries may not protect the Company's
intellectual property rights to the same extent as the laws of the United
States. See "Business."

Currency Exchange Fluctuations. A portion of the Company's foreign
transactions are denominated in currencies other than the U.S. dollar. Such
transactions expose the Company to exchange rate fluctuations for the period of
time from inception of the transaction until it is settled. The Company has not
engaged in transactions to hedge its currency risks, but may do so in the
future. The Company may purchase a portion of its raw materials and equipment
from foreign suppliers and will incur labor costs in a foreign currency. There
can be no assurance that fluctuations in the currency exchange rates in the
future will not have a material adverse effect on the Company's operating
results.

Dependence on Key Customers. Sales of the Company's products are
concentrated with a small number of customers. During 1996, sales to the
Company's two largest customers, Intel and Motorola, accounted for approximately
15% and 12% of net sales, respectively. The Company's top 15 customers in 1996
together accounted for approximately 65% of net sales. The Company expects that
sales of its products to relatively few customers will continue to account for a
high percentage of its net sales. None of the Company's customers has entered
into a long-term agreement requiring it to purchase the Company's products. The
loss of a significant customer or any reduction in orders from any significant
customer, including reductions due to changes in customer buying patterns,
market, economic, or competitive conditions in the IC industry or in the
industries that manufacture products utilizing ICs, would have a material
adverse effect on the Company's business, financial condition, and operating
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Customers."

Dependence on Key Suppliers. The Company relies on third party suppliers
in the production and shipment of its products. Although the Company believes
that all raw materials, component parts, and

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<PAGE> 9

services are currently available in adequate amounts, there can be no assurance
that shortages will not develop in the future. Certain of the raw materials and
component parts for the Company's products are purchased from single or a
limited group of suppliers. The Company does not have long-term written
agreements with such suppliers. Termination or a significant disruption of any
of its key supplier arrangements could have a material adverse effect on the
Company's business, financial condition, and operating results. See
"Business -- Manufacturing."

Intellectual Property. While the Company currently holds certain patents,
the Company does not consider any single patent to be material to the conduct of
its business. The Company believes that its competitors have been and will be
able to continue to circumvent many of the Company's patents. To the extent the
Company wishes to assert its patent rights, there can be no assurance that any
patents issued to the Company will not be challenged, invalidated, or
circumvented, that any rights granted thereunder will provide adequate
protection to the Company, or that the Company will have sufficient resources to
prosecute its rights. The Company believes that its success will depend
primarily on the technological competence and creative skills of its personnel
rather than the protection of its existing patents or future patents. The
Company relies primarily on trade secret protection for its proprietary
information. There can be no assurance that the Company will be able to protect
its technology.

Although there are no pending lawsuits against the Company regarding
infringement of any existing patents or other intellectual property rights,
there can be no assurance that third parties will not assert intellectual
property infringement claims against the Company. See "Business -- Intellectual
Property."

Significant Capital Requirements. The probe card, ATE interface, ATE test
board, and wafer prober services industries are capital intensive. In order to
remain competitive, the Company must make significant investments in capital
equipment for engineering and product development. As a result of the increase
in fixed costs and operating expenses related to these capital expenditures, the
Company's operating results may be materially and adversely affected if net
sales do not increase sufficiently to offset the increased costs. The Company
may from time to time seek additional equity or debt financing to provide for
the capital expenditures required to maintain or expand its production
facilities and capital equipment. The timing and amount of any such capital
requirements cannot be predicted at this time and will depend on a number of
factors, including demand for the Company's products, product mix, changes in
industry conditions, and competitive factors. There can be no assurance that any
such financing will be available on acceptable terms, and that any additional
equity financing, if available, would not result in additional dilution to
existing investors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Potential Liability for Failure to Comply with Environmental
Regulations. The Company is subject to a variety of federal, state, and local
governmental regulations related to the use, storage, discharge, and disposal of
toxic, volatile, or otherwise hazardous chemicals used in its manufacturing
process. Although the Company believes that its activities are in substantial
compliance with presently applicable environmental regulations, the failure to
comply with present or future regulations could result in fines being imposed on
the Company, suspension of its production, or a cessation of its operations.
Such regulations could require the Company to acquire costly equipment or to
incur other significant expenses to comply with environmental regulations. Any
failure by the Company to control the use or adequately restrict the discharge
of hazardous substances could subject it to future liabilities. See
"Business -- Environmental Regulations."

Dependence on Management and Other Key Personnel. The Company's success
depends, in part, upon the retention of certain key personnel and the
recruitment and retention of additional key personnel, including technical and
engineering staff. The loss of existing key personnel or the failure to recruit
and retain necessary additional personnel by the Company could materially and
adversely affect its business, financial condition, and operating results. There
can be no assurance that the Company will be able to retain its current
personnel or attract and retain necessary additional personnel. Future growth
will further increase the demand on the Company's resources and require the
addition of new personnel and the development of additional expertise by
existing personnel. The failure of the Company to attract and retain

9
<PAGE> 10

personnel with the requisite expertise or to develop such expertise internally
could materially and adversely affect the prospects for its success.

Control by Current Stockholders. Stockholders of the Company have the
right to cumulate their votes for the election of directors. The directors and
executive officers of the Company and their affiliates currently own
beneficially approximately 22.7% of the Common Stock and after the offering will
own beneficially approximately 16% of the Common Stock. Accordingly, these
persons, if they act as a group, will be able to elect one or more members to
the Company's Board of Directors and may be able to exert significant influence
regarding the outcome of other matters requiring approval by the stockholders of
the Company.

Price Volatility of Common Stock. The market price of the Company's Common
Stock has experienced significant volatility during the past three years. See
"Price Range of Common Stock." The trading price of the Company's Common Stock
in the future could be subject to wide fluctuations in response to quarterly
variations in operating results of the Company and others in its industry,
actual or anticipated announcements concerning the Company or its competitors,
changes in analysts' estimates of the Company's financial performance, general
conditions in the semiconductor industry, general economic and financial
conditions, and other events or factors. In addition, the stock market has
experienced extreme price and volume fluctuations, which have adversely affected
the market prices for many companies involved in high technology manufacturing
and related industries and which often have been unrelated to the operating
performance of such companies. These broad market fluctuations and other factors
could have a material adverse effect on the market price of the Common Stock.

Rights to Acquire Shares; Potential Issuance of Additional Shares. As of
August 1, 1997, options to acquire a total of 691,265 shares were outstanding
under the Company's stock option plans. An additional 366,334 shares of Common
Stock are reserved for issuance pursuant to the exercise of options that may be
granted in the future under the Company's stock option plans. The Company also
has granted non-employee options to purchase up to 10,000 shares of Common
Stock. The Company also has issued warrants to purchase up to 39,275 shares of
Common Stock in connection with the sale of the Series A Convertible Preferred
Stock. During the terms of such options and warrants, the holders thereof will
have the opportunity to profit from an increase in the market price of the
Common Stock with resulting dilution in the interests of holders of Common
Stock. The existence of such stock options and warrants could adversely affect
the terms on which the Company can obtain additional financing, and the holders
of such options and warrants can be expected to exercise such options and
warrants at a time when the Company, in all likelihood, would be able to obtain
additional capital by offering shares of its Common Stock on terms more
favorable to the Company than those provided by the exercise of such options and
warrants. The Company also has the authority to issue additional shares of
Common Stock and shares of one or more series of convertible preferred stock.
The issuance of such shares could result in the dilution of the voting power of
outstanding shares of Common Stock and could have a dilutive effect on earnings
per share. See "Description of Securities -- Shares Eligible for Future Sale."

Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market could adversely affect prevailing market prices. The
executive officers, directors, the Selling Stockholders, and certain other
stockholders have agreed with the Underwriters not to sell or otherwise dispose
of any shares of Common Stock for a period of 90 days after the date of this
Prospectus without the prior written consent of Adams, Harkness & Hill, Inc. Of
the 7,871,580 shares of Common Stock to be outstanding upon completion of this
offering, approximately 7,366,548 shares will be eligible for resale in the
public market without restriction or further registration, unless held by an
"affiliate" of the Company, as that term is defined under the Securities Act of
1933, as amended (the "Securities Act"), or subject to the above lock-up
agreement. In addition, 330,032 shares held by the former principal stockholder
of CompuRoute are subject to Rule 145 of the Securities Act, which requires
affiliates to sell any stock acquired in the acquisition in accordance with the
volume and manner of sale restrictions under Rule 144 under the Securities Act.
The former principal stockholder of CompuRoute has agreed with the Company not
to sell, publicly or privately, any of the 330,032 shares acquired by her in
connection with the CompuRoute acquisition until December 27, 1997, and no more
than the greater of 1% of the outstanding shares of

10
<PAGE> 11

Common Stock, or 50,000 shares, in any 90-day period during the succeeding
12-month period. Subject to the terms of this agreement, this same stockholder
will have certain registration rights covering the resale of shares of Common
Stock acquired by her in the CompuRoute acquisition for as long as she is
subject to the volume limitations on resale under Rule 145. Such stockholder has
entered into the above lock-up agreement with the Underwriters and is not
selling any shares in this offering. The former principal stockholder of SVTR
has agreed with the Company generally not to sell, publicly or privately, any of
the 175,000 shares acquired by him in connection with the SVTR acquisition until
January 15, 1998, on which date such shares will become eligible for resale
subject to the volume limitations and other requirements of Rule 144. Such
stockholder has entered into the above lock-up agreement with the Underwriters.
The Company has registered 1,057,599 shares of Common Stock reserved for
issuance pursuant to the exercise of options outstanding or to be granted under
the Company's stock option plans. Shares issued pursuant to such registration
statements upon the exercise of stock options generally will be eligible for
sale in the public market, subject to the lock-up agreements discussed above.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Subsequent Events" and "Description of Securities -- Shares
Eligible for Future Sale."

Change in Control Provisions. The Company's First Restated Certificate of
Incorporation (the "Restated Certificate") and the Delaware General Corporation
Law (the "Delaware GCL") contain provisions that may have the effect of making
more difficult or delaying attempts by others to obtain control of the Company,
even when these attempts may be in the best interest of stockholders. The
Restated Certificate also authorizes the Board of Directors, without stockholder
approval, to issue one or more series of preferred stock, which could have
voting and conversion rights that adversely affect the voting power of the
holders of the Company's Common Stock. The Delaware GCL also imposes conditions
on certain business combination transactions with "interested stockholders" (as
defined therein). See "Description of Securities -- Certain Charter Provisions
and Delaware General Corporation Law."

11
<PAGE> 12

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company hereby, after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company, are estimated to be $30.7 million ($36.9 million if the Underwriters'
over-allotment option is exercised in full), at the public offering price of
$22.00 per share. The Company will not receive any of the proceeds from the sale
of shares of Common Stock by the Selling Stockholders. See "Principal and
Selling Stockholders."

The Company intends to use the net proceeds of this offering for general
corporate purposes, including additional working capital, and may use a portion
to repay advances of $7.3 million on the Company's line of credit, which include
amounts borrowed to redeem outstanding shares of the Company's Series A
Convertible Preferred Stock. As of August 28, 1997, the weighted average
interest rate on amounts outstanding under the line of credit was 7.47%. The
Company also may use a portion of the net proceeds to pay the outstanding demand
note of $1.0 million assumed in connection with the acquisition of CompuRoute.
As of August 28, 1997, the interest rate on this note was 9.50%.

The Company also may use a portion of the net proceeds to acquire products
or businesses that it believes will broaden or enhance its current product
offerings or increase market share. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." The amounts actually expended by the Company for general corporate
purposes may vary significantly depending upon a number of factors, including
future revenue and the amount of cash generated by the Company's operations. As
a result, the Company will retain broad discretion in the allocation of a
significant portion of the net proceeds from this offering. The Company is not
engaged in any negotiations with any third parties and has no specific
agreements or plans with respect to any acquisitions, and there can be no
assurance the Company will consummate any acquisitions. Pending the uses
described above, the net proceeds will be invested in interest-bearing,
investment-grade securities.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock began trading in the over-the-counter market on
the Nasdaq system on September 29, 1983 and commenced trading on the Nasdaq
National Market on August 10, 1995 under the symbol "CRPB." The table below sets
forth the high and low last closing prices of Common Stock for the periods
indicated as reported on the Nasdaq National Market, except that prior to August
10, 1995 prices represent high ask and low bid quotations on Nasdaq. Bid and ask
quotations represent interdealer quotations, which exclude retail markups or
mark-downs and commissions and may not necessarily represent actual
transactions.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter.................................................................. $ 6 1/2 $ 4 3/4
Second Quarter................................................................. 8 3/4 4 3/4
Third Quarter.................................................................. 10 3/4 8
Fourth Quarter................................................................. 17 3/8 9 1/4
1996
First Quarter.................................................................. 17 1/2 13
Second Quarter................................................................. 16 11 7/8
Third Quarter.................................................................. 12 1/8 7 7/8
Fourth Quarter................................................................. 14 3/8 9
1997
First Quarter.................................................................. 15 7/8 11 1/8
Second Quarter................................................................. 13 3/4 9 3/8
Third Quarter (through September 23, 1997)..................................... 24 1/8 12 3/4
</TABLE>

On September 23, 1997, the last reported closing price for the Common Stock
on the Nasdaq National Market was $22.375. As of August 1, 1997, there were
approximately 3,500 holders of record of Common Stock.

12
<PAGE> 13

DIVIDEND POLICY

The Company does not intend to pay any cash dividends in the future and
intends to retain any future earnings for reinvestment in its business. The
Company's revolving credit facility contains restrictions on the Company's
ability to pay cash dividends, and future borrowings may contain similar
restrictions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

CAPITALIZATION

The following table sets forth the actual capitalization of the Company as
of June 30, 1997, and as adjusted to reflect the sale of the 1,500,000 shares of
Common Stock offered hereby (at the offering price of $22.00 per share) and the
application of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------
ACTUAL (1) AS ADJUSTED (1)(2)
---------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt................................................. $ 3,717 $ 717
======= =======
Long-term debt.................................................. $ 1,592 $ 1,592
Stockholders' equity:
Preferred stock, $.05 par value; 10,000,000 shares authorized;
330 shares of Series A Convertible Preferred Stock issued and
outstanding, liquidation preference of $10,875 per share...... 0 0
Common stock, $.05 par value; 10,000,000 shares authorized;
6,353,047 shares issued and outstanding, actual; 7,853,047
shares issued and outstanding, as adjusted.................... 318 393
Additional paid-in capital...................................... 23,655 49,040
Retained earnings (deficit)..................................... (1,200) (1,200)
Foreign currency translation adjustment......................... 16 16
------- -------
Total stockholders' equity............................ 22,789 48,249
------- -------
Total capitalization.................................. $ 24,381 $ 49,841
======= =======
</TABLE>

- ------------
(1) Excludes (i) 770,573 shares of Common Stock reserved for issuance upon
exercise of stock options and warrants outstanding as of June 30, 1997, and
(ii) 366,334 shares reserved for issuance upon the exercise of stock options
that may be granted in the future under the Company's 1995 Stock Option
Plan.

(2) Reflects the repayment of advances outstanding on the Company's line of
credit of $5.3 million borrowed after June 30, 1997 to redeem the remaining
outstanding shares of Series A Convertible Preferred Stock.

13
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which are included elsewhere in this Prospectus. The
consolidated statement of operations data for the years ended December 31, 1994,
1995, and 1996 and the consolidated balance sheet data as of December 31, 1995
and 1996 are derived from, and are qualified by reference to, the consolidated
financial statements included elsewhere in this Prospectus, which have been
audited by KPMG Peat Marwick LLP. The consolidated statement of operations data
for the years ended December 31, 1992 and 1993 and the consolidated balance
sheet data as of December 31, 1992, 1993, and 1994 are derived from audited
consolidated financial statements not included in this Prospectus. The
consolidated statement of operations data for the six months ended June 30, 1996
and 1997 and the consolidated balance sheet data as of June 30, 1997 are derived
from the unaudited consolidated financial statements included elsewhere in this
Prospectus that have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the consolidated financial position and results of operations
for such periods. These historical results are not necessarily indicative of the
results to be expected in the future, and results for interim periods are not
necessarily indicative of results for the entire year.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------------------------- JUNE 30,
1996 ------------------
1992 1993 1994 1995 (1) 1996 1997 (2)
------ ------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $8,060 $11,212 $14,251 $26,099 $37,308 $19,360 $34,583
Cost of goods sold................................. 4,914 6,768 8,214 13,706 20,343 10,348 20,404
------ ------- ------- ------- ------- ------- -------
Gross profit....................................... 3,146 4,444 6,037 12,393 16,965 9,012 14,179
Expenses:
Selling, general and administrative.............. 1,827 2,398 3,693 7,503 10,725 5,275 9,127
Engineering and product development.............. 246 336 417 707 903 378 618
Acquisition related expenses..................... -- -- -- -- 4,584 -- 6,164
------ ------- ------- ------- ------- ------- -------
Total expenses................................. 2,073 2,734 4,110 8,210 16,212 5,653 15,909
------ ------- ------- ------- ------- ------- -------
Operating income (loss)............................ 1,073 1,710 1,927 4,183 753 3,359 (1,730)
Other income (expense):
Interest income.................................. -- 1 19 45 467 168 68
Interest expense................................. (304) (132) (115) (154) (222) (116) (297)
Other income, net................................ 22 13 92 140 247 87 115
------ ------- ------- ------- ------- ------- -------
Total other income (expense)................... (282) (118) (4) 31 492 139 (114)
------ ------- ------- ------- ------- ------- -------
Income (loss) before income taxes, minority
interest, and extraordinary item................. 791 1,592 1,923 4,214 1,245 3,498 (1,844)
Provision for income taxes......................... (321) (90) (710) (1,812) (2,701) (1,693) (1,490)
Minority interest share of loss.................... -- -- -- -- 95 62 29
------ ------- ------- ------- ------- ------- -------
Net income (loss) before extraordinary item........ 470 1,502 1,213 2,402 (1,361) 1,867 (3,305)
Extraordinary item -- prior years' NOLs............ 301 -- -- -- -- -- --
------ ------- ------- ------- ------- ------- -------

Net income (loss).................................. $ 771 $ 1,502 $ 1,213 $ 2,402 $(1,361) $ 1,867 $(3,305)
====== ======= ======= ======= ======= ======= =======
Net income (loss) per common and common equivalent
share:
Primary.......................................... $ 0.31 $ 0.41 $ 0.36 $ 0.59 $ (0.30) $ 0.35 $ (0.52)
====== ======= ======= ======= ======= ======= =======
Fully diluted.................................... $ 0.21 $ 0.35 $ 0.30 $ 0.49 $ (0.30) $ 0.32 $ (0.52)
====== ======= ======= ======= ======= ======= =======
Weighted average number of common and common
equivalent shares:
Primary.......................................... 2,502 3,688 3,387 4,071 4,580 5,262 6,321
Fully diluted.................................... 3,680 4,349 4,007 4,862 4,580 5,798 6,321
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1996 JUNE 30,
1992 1993 1994 1995 (1) 1997 (2)
------ ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................... $1,551 $ 2,777 $ 3,572 $ 4,772 $10,004 $ 7,005
Total assets....................................... 3,083 4,674 7,015 14,967 31,512 36,433
Long-term debt..................................... 859 748 791 981 1,742 1,592
Stockholders' equity............................... 1,304 3,063 4,923 10,656 23,130 22,789
</TABLE>

- ------------
(1) Includes a one-time write-off of purchased research and development costs of
$4.6 million in 1996, or $1.00 per share, related to the acquisition of
CompuRoute.
(2) Includes a one-time write-off of purchased research and development costs of
$5.7 million for the six months ended June 30, 1997, or $0.90 per share,
related to the acquisition of SVTR. In addition, an accrual was recorded in
the six months ended June 30, 1997 for the estimated costs to move SVTR's
manufacturing operations from California to Arizona during 1997 for
$500,000, or $0.05 per share, net of taxes, for a total of $0.95 per share.

14
<PAGE> 15

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

The unaudited pro forma combined condensed statements of operations combine
Cerprobe's historical condensed consolidated statements of operations for the
year ended December 31, 1996 and the unaudited six months ended June 30, 1997,
with the corresponding CompuRoute and SVTR historical condensed consolidated
statements of operations for the year ended December 31, 1996 and the unaudited
six months ended June 30, 1997, respectively, giving effect to the acquisitions
as if they had occurred on January 1, 1996.

The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results that would have occurred
if the acquisitions had been consummated on January 1, 1996, nor is it
necessarily indicative of future operating results. The unaudited pro forma
combined condensed statements of operations do not incorporate any benefits from
cost savings or synergies of operations of the combined companies that may
occur. No pro forma combined balance sheet as of June 30, 1997 is presented as
the acquisitions have already been reflected in Cerprobe's historical June 30,
1997 balance sheet.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ADJUSTED
ACTUAL PRO FORMA PRO FORMA PRO FORMA
CERPROBE COMPUROUTE (1) SVTR (1) COMBINED ADJUSTMENTS COMBINED
-------- -------------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales................................ $37,308 $ 10,424 $14,617 $62,349 $ (81) (2) $62,268
Costs of goods sold...................... 20,343 7,550 11,541 39,434 (81) (2) 39,353
------- ------- ------- ------- ------- -------
Gross profit............................. 16,965 2,874 3,076 22,915 -- 22,915
Expenses:
Selling, general and administrative.... 10,725 2,278 2,939 15,942 121(3) 16,063
Engineering and product development.... 903 -- 549 1,452 -- 1,452
Acquisition related expenses........... 4,584 -- -- 4,584 (4,584) (3) --
------- ------- ------- ------- ------- -------
Total expenses.................. 16,212 2,278 3,488 21,978 (4,463) 17,515
------- ------- ------- ------- ------- -------
Operating income (loss).................. 753 596 (412) 937 4,463 5,400
Other income (expense):
Interest income........................ 467 30 -- 497 (408) (4) 89
Interest expense....................... (222) (143) (320) (685) -- (685)
Other income, net...................... 247 -- 13 260 -- 260
------- ------- ------- ------- ------- -------
Total other income (expense).... 492 (113) (307) 72 (408) (336)
------- ------- ------- ------- ------- -------
Income (loss) before income taxes and
minority interest...................... 1,245 483 (719) 1,009 4,055 5,064
Minority interest share of loss.......... 95 -- -- 95 -- 95
------- ------- ------- ------- ------- -------
Income (loss) before income taxes........ 1,340 483 (719) 1,104 4,055 5,159
Provision for income taxes............... (2,701) -- 295 (2,406) 163(5) (2,243)
------- ------- ------- ------- ------- -------
Net income (loss)........................ $(1,361) $ 483 $ (424) $(1,302) $ 4,218 $ 2,916
======= ======= ======= ======= ======= =======
Net income (loss) per common and common
equivalent share:
Primary.................................. $ (0.30) $ 0.48
======= =======
Fully diluted............................ $ (0.30) $ 0.45
======= =======
Weighted average number of common and
common equivalent shares outstanding:
Primary.................................. 4,580 6,028(6)
Fully diluted............................ 4,580 6,518(6)
</TABLE>

- ------------
(1) Reflects the historical operations of CompuRoute and SVTR for the year ended
December 31, 1996.
(2) Reflects the elimination of intercompany sales.
(3) Reflects the amortization of goodwill associated with the acquisition of
CompuRoute and the elimination of acquisition related expenses associated
with the acquisition of CompuRoute.
(4) Reflects the reduction of interest income associated with the Series A
Convertible Preferred Stock proceeds that were used in the acquisitions of
CompuRoute and SVTR.
(5) Reflects the statutory income tax rate applied to the taxable pro forma
adjustments.
(6) Reflects the issuance of 700,000 shares of Common Stock as a portion of the
consideration paid to the sellers of CompuRoute and SVTR and the dilutive
effect of outstanding stock options and warrants.

15
<PAGE> 16

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ADJUSTED
ACTUAL PRO FORMA PRO FORMA PRO FORMA
CERPROBE SVTR (1) COMBINED ADJUSTMENTS COMBINED
-------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............................................... $34,583 $ 53 $34,636 $ -- $34,636
Costs of goods sold..................................... 20,404 83 20,487 -- 20,487
------- ----- ------- ------- -------
Gross profit............................................ 14,179 (30) 14,149 -- 14,149
Expenses:
Selling, general and administrative................... 9,127 114 9,241 -- 9,241
Engineering and product development................... 618 37 655 -- 655
Acquisition related expenses.......................... 6,164 -- 6,164 (6,164) (2) --
------- ----- ------- ------- -------
Total expenses................................. 15,909 151 16,060 (6,164) 9,896
------- ----- ------- ------- -------
Operating income (loss)................................. (1,730) (181) (1,911) 6,164 4,253
Other income (expense):
Interest income....................................... 68 -- 68 -- 68
Interest expense...................................... (297) -- (297) -- (297)
Other income, net..................................... 115 (14) 101 -- 101
------- ----- ------- ------- -------
Total other income (expense)................... (114) (14) (128) -- (128)
------- ----- ------- ------- -------
Income (loss) before income taxes and minority
interest.............................................. (1,844) (195) (2,039) 6,164 4,125
Minority interest share of loss......................... 29 -- 29 -- 29
------- ----- ------- ------- -------
Income (loss) before income taxes....................... (1,815) (195) (2,010) 6,164 4,154
Provision for income taxes.............................. (1,490) 55 (1,435) (200) (3) (1,635)
------- ----- ------- ------- -------

Net income (loss)....................................... $(3,305) $ (140) $(3,445) $ 5,964 $ 2,519
======= ===== ======= ======= =======
Net income (loss) per common and common equivalent
share:
Primary............................................... $ (0.52) $ 0.38
======= =======
Fully diluted......................................... $ (0.52) $ 0.38
======= =======
Weighted average number of common and common equivalent
shares outstanding:
Primary............................................... 6,321 6,545(4)
Fully diluted......................................... 6,321 6,608(4)
</TABLE>

- ------------
(1) Reflects the historical operations of SVTR from January 1, 1997 through the
acquisition date of January 15, 1997.
(2) Reflects the elimination of acquisition related expenses associated with the
acquisition of SVTR.
(3) Reflects the statutory income tax rate applied to the taxable pro forma
adjustments.
(4) Reflects the dilutive effect of outstanding stock options and warrants.

16
<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Selected Consolidated Financial Data and the Consolidated Financial
Statements and related Notes thereto of the Company appearing elsewhere in this
Prospectus.

OVERVIEW

The Company has grown substantially over the last five years as the Company
has increased its market share and has benefited from the substantial growth in
the worldwide demand for ICs. Net sales have increased from $8.1 million for
1992 to $37.3 million for 1996, representing an average annualized growth rate
of 46.5%. Similarly, the Company's net income has increased from $771,000 for
1992 to $3.2 million for 1996 (before a one-time charge for purchased research
and development of $4.6 million, resulting in a net loss of $1.4 million). Until
1995, substantially all of the Company's growth was from the existing probe card
product line.

Beginning with the April 1995 acquisition of Fresh Test Technology
Corporation ("Fresh Test"), acquisitions have contributed to the Company's
growth. Fresh Test, which expanded the Company's product line to include ATE
interface assemblies, contributed approximately $4 million to 1995 net sales and
approximately $7 million to 1996 net sales. The Company acquired CompuRoute in
December 1996, which enabled the Company to offer ATE test boards. CompuRoute's
net sales and net income for its fiscal year ended December 31, 1996 were $10.4
million and $500,000, respectively. The Company acquired SVTR in January 1997,
which added wafer prober refurbishing and upgrading services. SVTR's net sales
and net loss for its fiscal year ended December 31, 1996 were $14.6 million and
$400,000, respectively. Together, these acquisitions contributed approximately
$12.2 million to net sales for the first six months of 1997. In May 1997 the
Company entered into a joint venture with Upsys Reseau Erisys ("Upsys"), a
French company owned by IBM and GAME, a French test and engineering company. The
joint venture, called Upsys-Cerprobe, L.L.C., will assemble and repair the Cobra
probe card for distribution by the Company in the United States and Asia. The
Company believes the Cobra probe is well-suited for multiple-IC and memory IC
testing.

The Company believes that it is positioned to continue its growth as a
result of its strength in designing, producing, and delivering, on a timely and
cost-efficient basis, a broad range of custom or customized, high quality test
products and services for semiconductor manufacturers in the United States,
Europe, and Asia. There can be no assurance that the Company can continue its
growth. The Company maintains regional full service facilities in Arizona,
California, and Texas as well as sales offices in Colorado, Florida,
Massachusetts, and Oregon to service the U.S. market for its products and
services. The Company continues to expand into international markets, including
Europe and Asia. The Company maintains a full service facility in Scotland to
serve the European market and full service facilities in Singapore and Taiwan to
serve the Southeast Asia market. Each of the Company's facilities is located in
proximity to semiconductor manufacturing centers.

17
<PAGE> 18

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
of net sales of certain items in the Consolidated Statement of Operations of the
Company. The table and the discussion below should be read in conjunction with
the Consolidated Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- ------------------
1994 1995 1996 (1) 1996 1997 (2)
----- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................. 57.6 52.5 54.5 53.5 59.0
----- ----- ----- ----- -----
Gross profit................................... 42.4 47.5 45.5 46.5 41.0
Expenses:
Selling, general and administrative.......... 25.9 28.8 28.7 27.2 26.4
Engineering and product development.......... 2.9 2.7 2.4 2.0 1.8
Acquisition related expenses................. -- -- 12.3 -- 17.8
----- ----- ----- ----- -----
Total expenses....................... 28.8 31.5 43.4 29.2 46.0
----- ----- ----- ----- -----
Operating income (loss)........................ 13.6 16.0 2.1 17.3 (5.0)
Other income (expense):
Interest income.............................. 0.1 0.2 1.3 0.9 0.2
Interest expense............................. (0.8) (0.6) (0.6) (0.6) (0.8)
Other income, net............................ 0.6 0.5 0.6 0.4 0.3
----- ----- ----- ----- -----
Total other income (expense)......... (0.1) 0.1 1.3 0.7 (0.3)
----- ----- ----- ----- -----
Income (loss) before income taxes and minority
interest..................................... 13.5 16.1 3.4 18.0 (5.3)
Provision for income taxes..................... (5.0) (6.9) (7.2) (8.7) (4.3)
Minority interest share of loss................ -- -- 0.2 0.3 0.0
----- ----- ----- ----- -----
Net income (loss).............................. 8.5% 9.2% (3.6)% 9.6% (9.6)%
===== ===== ===== ===== =====
</TABLE>

- ------------
(1) Includes a one-time write-off of purchased research and development costs of
$4.6 million in 1996 related to the acquisition of CompuRoute.

(2) Includes a one-time write-off of purchased research and development costs of
$5.7 million for the six months ended June 30, 1997 related to the
acquisition of SVTR and the estimated costs to move SVTR's manufacturing
operations from California to Arizona during 1997 for $500,000, net of
taxes.

SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996

Net Sales. Net sales for the six months ended June 30, 1997 were $34.6
million, an increase of 78.4% over net sales of $19.4 million for the six months
ended June 30, 1996. This increase of $15.2 million in net sales was a result of
the Company's acquisition of its ATE test board and wafer prober products and
services business ($8.6 million), higher domestic order rates for the Company's
probe card and interface products ($5.4 million), and increased international
sales ($1.2 million).

Gross Profit. Gross profit for the six months ended June 30, 1997 was
$14.2 million, an increase of 57.8% over gross profit of $9.0 million for the
same period in 1996. Gross margin decreased from 46.5% for the six months ended
June 30, 1996 to 41.0% for the same period in 1997. The decrease in gross margin
was primarily a result of a change in product mix due to the two recent
acquisitions. Approximately 25% of net sales in the period were attributed to
ATE test boards and wafer prober products and services. Both product lines have
lower gross margins than the Company's core products of probe cards and ATE
interfaces.

18
<PAGE> 19

Selling, General and Administrative. Selling, general and administrative
expenses were $9.1 million, or 26.4% of net sales, for the six months ended June
30, 1997, compared to $5.3 million, or 27.2% of net sales, for the same period
in 1996, an increase of 71.6%. The increase in selling, general and
administrative expenses resulted primarily from the two recent acquisitions, the
start up of the joint venture with Upsys, and the continued domestic and
international expansion. Of the increase, $2.3 million, or 60.5%, was
attributable to the two recent acquisitions and the joint venture with Upsys.

Engineering and Product Development. Engineering and product development
expenses were $618,000, or 1.8% of net sales, for the six months ended June 30,
1997, compared to $378,000, or 2.0% of net sales, for the same period in 1996.
These increased expenses resulted from the Company's two recent acquisitions and
from the Company's continued emphasis on engineering and product development in
an effort to anticipate and address technological advances in semiconductor
testing. Total expenses were partially offset by increased project funding
receipts from collaboration on engineering and product development with certain
customers and the re-assignment of personnel and other resources to the joint
venture with Upsys.

Acquisition Related Expenses. Acquisition related expenses totaled $6.2
million and were related to the acquisition of SVTR. The acquisition was
accounted for using the purchase method. Accordingly, the purchase price was
allocated to the assets acquired and the liabilities assumed based upon their
estimated fair values. The value of the purchased research and development in
connection with the acquisition was $5.7 million. The state of the research and
development products/processes was not at a technologically feasible or
commercially viable stage. Therefore, consistent with generally accepted
accounting principles, the Company took a one-time charge for the full value of
the purchased research and development. The remaining $500,000 of acquisition
related costs was the estimated cost to move SVTR's manufacturing operations
from California to Arizona during 1997.

Interest Income. Interest income was $68,000 for the six months ended June
30, 1997, compared to $168,000 for the same period in 1996. The decrease was a
result of utilizing cash in the fourth quarter of 1996 and in the first quarter
of 1997 in the two recent acquisitions.

Interest Expense. Interest expense was $297,000 for the six months ended
June 30, 1997, compared to $116,000 for the same period in 1996. The majority of
the 1997 increase in interest expense was due to the debt acquired in the two
recent acquisitions.

Provision for Income Taxes. The provision for income taxes for the six
months ended June 30, 1997 was $1.5 million, which represented an effective tax
rate of 39.0% (excluding the nondeductible acquisition related expenses of $5.7
million), compared to $1.7 million, which represented an effective rate of 48.4%
for the same period of 1996. The decreased effective tax rate, as adjusted for
1997, was due to the benefit of CompuRoute's net operating loss carryforward and
partial use of net operating loss carryforwards from foreign subsidiaries.

Minority Interest Share of Loss. The minority interest share of loss of
$29,000 for the six months ended June 30, 1997 represented the combined total of
the Company's joint venture partners' $21,000 share of the income from the
Company's Asian operations and the Company's joint venture partner's $50,000
share of the loss from the joint venture with Upsys. For the six months ended
June 30, 1996, the minority interest share of loss of $62,000 represented the
Company's joint venture partners' share of the loss from the Company's Asian
operations.

Net Income (Loss). Net loss for the six months ended June 30, 1997 was
$3.3 million compared to net income of $1.9 million for the same period in 1996.
Excluding the acquisition related expenses, net income for the six months ended
June 30, 1997 would have been $2.7 million, or 7.8% of net sales, compared to
9.6% of net sales for the six months ended June 30, 1996.

YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995

Net Sales. Net sales for 1996 were $37.3 million, an increase of 43.5%
over net sales of $26.0 million for 1995. The increase in net sales reflected a
continuation of higher order rates for the Company's probe

19
<PAGE> 20

card products and increased international sales. International net sales in 1996
were $7.3 million compared to $3.0 million in 1995, an increase of 147.0%,
primarily attributable to the international expansion in Scotland in 1995 and
Singapore in 1996.

Gross Profit. The gross profit for 1996 was $17.0 million, an increase of
37.1% from the gross profit of $12.4 million for 1995. Gross margin decreased
from 47.5% in 1995 to 45.5% in 1996. The decrease in gross margin was primarily
a result of a change in product mix, which included a higher ratio of lower
margin ATE interface product sales as well as higher fixed costs related to
increased manufacturing capacity to meet anticipated customer demand and
maintain satisfactory delivery schedules.

Selling, General and Administrative. Selling, general, and administrative
expenses were $10.7 million, or 28.7% of net sales, for 1996, compared to $7.5
million, or 28.8% of net sales, for 1995, an increase of 42.7%. The increase in
selling, general, and administrative expenses resulted primarily from the
increase in fixed general and administrative costs due to the Company's
continued domestic expansion and the start-up of Asian operations.

Engineering and Product Development. Engineering and product development
expenses were $903,000, or 2.4% of net sales, for 1996, an increase of 27.7%
over $707,000, or 2.7% of net sales, for 1995. These increased expenses resulted
from the Company's continued emphasis on engineering and product development in
an effort to anticipate and address technological advances in semiconductor
testing. During 1995, the Company was awarded two engineering and product
development contracts by SEMATECH, the U.S. semiconductor industry consortium.
The Company also performs ongoing contract engineering and product development
in collaboration with customers. Revenues from these collaborations are
accounted for as an offset to the total expenses incurred for the respective
projects.

Acquisition Related Expenses. Purchased research and development costs
from the December 1996 acquisition of CompuRoute totaled $4.6 million. The
acquisition was accounted for using the purchase method. Accordingly, the
purchase price was allocated to the assets acquired and the liabilities assumed
based upon their estimated fair values. The value of purchased research and
development in connection with the acquisition was $4.6 million. The state of
the research and development products/processes was not at a technologically
feasible or commercially viable stage. Therefore, consistent with generally
accepted accounting principles, the Company took a one-time charge for the full
value of the purchased research and development.

Interest Income. Interest income was $467,000 in 1996, compared to $45,000
for 1995. This increase is attributable to the interest earned on the net
proceeds from the issuance of Series A Convertible Preferred Stock in January
1996.

Provision for Income Taxes. The provision for income taxes increased to
$2.7 million, which represented an effective tax rate of 46.3% for 1996
(excluding the nondeductible acquisition related expenses of $4.6 million),
compared to $1.8 million, which represented an effective rate of 43.0% for 1995.
The increased effective tax rate, as adjusted for 1996, was due primarily to the
benefit in 1995 of the Company's net operating loss carryforwards and the tax
benefit of research tax credits.

Minority Interest Share of Loss. The minority interest share of loss of
$95,000 for 1996 represented the Company's joint venture partners' share of the
loss from the Company's Asian operations.

Net Income (Loss). Net loss for 1996 was $1.4 million, compared to the
income of $2.4 million for 1995. Excluding acquisition related expenses, net
income for 1996 would have been $3.2 million, or 8.6% of net sales for 1996,
compared to 9.2% of net sales for 1995.

YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

Net Sales. Net sales for 1995 were $26.1 million, an increase of 82.5%
over $14.3 million for 1994, primarily as a result of increased sales of its
probe card products. The increase in net sales was primarily due to an increase
in market share and continued strength in the semiconductor industry.

20
<PAGE> 21

Gross Profit. The gross profit for 1995 was $12.4 million, an increase of
106.7% from the gross profit of $6.0 million for 1994. Gross margin increased
from 42.4% in 1994 to 47.5% in 1995. The increase in gross margin resulted
primarily from fixed costs allocated over a larger net sales base.

Selling, General and Administrative. Selling, general, and administrative
expenses increased to $7.5 million, or 28.8% of net sales, for 1995, compared to
$3.7 million, or 25.9% of net sales, for 1994. The increased selling, general,
and administrative expenses resulted primarily from the increase in fixed
general and administrative costs due to the Company's continued expansion and
the acquisition of Fresh Test.

Engineering and Product Development. Engineering and product development
expenses were $707,000, or 2.7% of net sales, for 1995, compared to $407,000, or
2.9% of net sales, for 1994, reflecting an expansion of engineering and product
development efforts.

QUARTERLY RESULTS OF OPERATIONS

The following table presents unaudited consolidated financial results for
each of the 10 quarters in the period ended June 30, 1997. The Company believes
that all necessary adjustments have been included to present fairly the
quarterly information when read in conjunction with the Consolidated Financial
Statements and Notes thereto. The operating results for any quarter are not
necessarily indicative of the results for any subsequent quarter.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------------- ----------------------------------------- ---------------------
MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 (1) MAR. 31 (2) JUN. 30
------- ------- ------- ------- ------- ------- ------- ----------- ----------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............. $4,963 $6,172 $6,834 $8,131 $9,700 $9,660 $8,799 $ 9,149 $15,899 $18,684
Gross profit.......... 2,272 3,024 3,283 3,816 4,528 4,485 3,861 4,091 6,505 7,675
Operating income...... 1,002 1,052 885 1,245 1,817 1,542 920 1,058 1,879 2,556
Net income............ 565 615 512 711 1,007 861 663 692 1,069 1,589
Fully diluted net
income per share.... $ 0.14 $ 0.13 $ 0.10 $ 0.14 $ 0.18 $ 0.15 $ 0.11 $ 0.13 $ 0.17 $ 0.24
AS A PERCENTAGE OF NET SALES:
Net sales............. 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0% 100.0% 100.0%
Gross profit.......... 45.8 49.0 48.0 46.9 46.7 46.4 43.9 44.7 40.9 41.1
Operating income...... 20.2 17.0 12.9 15.3 18.7 16.0 10.5 11.6 11.8 13.7
Net income............ 11.4 % 10.0 % 7.5 % 8.7 % 10.4 % 8.9 % 7.5 % 7.6% 6.7% 8.5%
</TABLE>

- ------------
(1) Does not include a one-time write-off of purchased research and development
costs of $4.6 million for the three months ended December 31, 1996, or $0.86
per share, related to the acquisition of CompuRoute.

(2) Does not include a one-time write-off of purchased research and development
costs of $5.7 million for the three months ended March 31, 1997, or $0.90
per share, related to the acquisition of SVTR nor an accrual during the same
period for the estimated costs to move SVTR's manufacturing operations from
California to Arizona for $500,000, or $0.05 per share, net of taxes, for a
total of $0.95 per share.

Quarterly results can be affected by a number of factors, including the
cyclical nature of the semiconductor industry, market acceptance of the
Company's products, product mix, customer order patterns, competition, the
availability and cost of raw materials and production capacity, and the
Company's ability to respond to technological advances.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations and capital requirements primarily
through cash flow from operations, equipment lease financing arrangements, and
sales of equity securities. In January 1996, the Company completed a private
placement of Series A Convertible Preferred Stock, which raised net proceeds of
$9.4 million. The net proceeds have been used in domestic and international
expansion and

21
<PAGE> 22

acquisition of companies and technologies. As of June 30, 1997, cash and cash
equivalents were $1.5 million, compared to $5.6 million at December 31, 1996,
and $264,000 as of December 31, 1995.

The Company generated $2.9 million of cash from operating activities for
the six months ended June 30, 1997, compared to $1.2 million for the six months
ended June 30, 1996. The Company generated $5.7 million, $1.6 million, and $1.5
million of cash from operating activities for the years ended December 31, 1996,
1995, and 1994, respectively.

Accounts receivable increased $4.1 million, or 73.2%, to $9.7 million at
June 30, 1997 from $5.6 million at December 31, 1996. Of this increase, $884,000
resulted from the acquisition of SVTR with the balance a result of increased
sales. Inventories increased $2.7 million, or 68.9%, over December 31, 1996 to
$6.5 million at June 30, 1997. The increase resulted primarily from the
acquisition of SVTR.

Accounts payable and accrued expenses increased $3.3 million, or 76.4%, to
$7.7 million at June 30, 1997. The increase resulted from the acquisition of
SVTR and the Company's continued expansion activities.

The current portions of notes payable and capital leases increased to $2.7
million at June 30, 1997 from $763,000 at December 31, 1996, primarily as a
result of the Company's recent acquisition of SVTR. The Company borrowed
approximately $2.0 million from its revolving line of credit during the second
quarter to pay off notes payable and capital lease obligations of CompuRoute and
SVTR, whose obligation interest rates were higher than the Company's borrowing
rate.

Working capital decreased $3.0 million, or 30.0%, to $7.0 million at June
30, 1997 from December 31, 1996. The current ratio decreased from 2.6 at
December 31, 1996 to 1.6 at June 30, 1997. These decreases were due primarily to
the use of $2.8 million in the SVTR acquisition.

The Company used $5.5 million of cash for investing activities for the six
months ended June 30, 1997, compared to $4.4 million for the six months ended
June 30, 1996. The Company used $10.2 million, $2.0 million, and $1.4 million of
cash for investing activities for the years ended December 31, 1996, 1995, and
1994, respectively. Cash for investing activities was primarily used for capital
expenditures and, in 1996, for the acquisition of CompuRoute.

The Company increased its investment in property, plant, and equipment
during the six months ended June 30, 1997 by $2.3 million, or 20.3%, to $13.8
million. This increase was attributable to the acquisition of SVTR and the
Company's efforts to expand capacity to meet customer demand for its products.
These capital expenditures were funded from cash flow from operations and
proceeds from the private placement of the Series A Convertible Preferred Stock.

The Company used $1.4 million of cash in financing activities for the six
months ended June 30, 1997, compared to $9.8 million of cash generated from
financing activities for the six months ended June 30, 1996. Cash generated from
financing activities in 1996 relates primarily to the net proceeds from the
issuance of the Series A Convertible Preferred Stock. The Company generated $9.7
million and $33,000 of cash from financing activities for the years ended
December 31, 1996 and 1994, respectively, and used $95,000 of cash in financing
activities for the year ended December 31, 1995.

On December 27, 1996, the Company assumed a demand note for approximately
$1 million on the purchase of land and building occupied by CompuRoute. As of
June 30, 1997, the interest rate was 9.50%, with an outstanding balance of $1.0
million.

In February 1997, the Company entered into a $10.0 million unsecured
revolving line of credit, which matures August 15, 1998, with its primary
lender, Wells Fargo Bank. Advances under the revolving line may be made as prime
rate advances, at the Bank's prime lending rate, or as LIBOR rate advances,
which bear interest at 175 basis points in excess of the LIBOR base rate. At
June 30, 1997, the Company had approximately $2 million outstanding from LIBOR
rate advances with an interest rate of 7.625%.

22
<PAGE> 23

In May 1997, the Company entered into a $3.0 million lease line of credit,
which matures February 28, 1998, with Banc One Leasing Corporation. The maximum
term for each lease schedule will not exceed 60 months. Pricing will be indexed
to like term treasuries plus 170 basis points. The advances will be
collateralized by the underlying leased manufacturing equipment, furniture,
fixtures, software and/or hardware. At June 30, 1997 no advances had been made
under the agreement.

The Company's total borrowings at June 30, 1996 were $5.3 million,
including notes payable of $2.6 million and capital leases of $1.7 million.

The Company believes that its working capital, together with the loan
commitments described above, anticipated cash flow from operations, and net
proceeds from this offering will provide adequate sources to fund operations for
at least the next 12 months. The Company anticipates that any additional cash
requirements for operations or capital expenditures will be financed through
cash flow from operations, by borrowing from the Company's primary lender, by
lease financing arrangements, or by sales of equity securities. There can be no
assurance that any such financing will be available on acceptable terms and that
any additional equity financing, if available, would not result in additional
dilution to existing investors.

SUBSEQUENT EVENTS

On August 18, 1997, a letter of understanding detailing the settlement of
certain open terms related to the purchase of SVTR by the Company on January 15,
1997 was signed by the former owners of SVTR. In general, the letter of
understanding requires these former owners to return 125,000 shares of Common
Stock currently held in escrow to the Company. In addition, the former owners
are required to release any claims or interests they may have to receive any
payments or shares of Common Stock with respect to an earnout provision detailed
in the January 15, 1997 agreement of merger between the two entities. Upon
completion and execution of documentation evidencing the terms of the letter of
understanding, both parties will release the other from any future liability
related to the purchase of SVTR by the Company. If the letter of understanding
is ultimately consummated through a formal agreement between the two parties,
the Company anticipates recording an estimated one-time $1.2 million reduction
in acquisition related expenses at the time the formal agreement is signed.

On August 28, 1997, the Company redeemed the remaining 330 shares of Series
A Convertible Preferred Stock for approximately $5.3 million in cash. The
redemption was funded through advances on the Company's line of credit.

23
<PAGE> 24

BUSINESS

Cerprobe offers comprehensive solutions for semiconductor test integration
and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE
test boards. The Company believes it is the only company that designs,
manufactures, and assembles each of the electromechanical components that assure
the integrity of the electrical test signal that passes from the automatic test
equipment ("ATE") to the IC device under test ("DUT"). The Company also
refurbishes, reconfigures, and services wafer probers. The Company's products
and services enable semiconductor manufacturers to test integrated circuits
("ICs") in wafer form and as packaged ICs. Testing ICs assures IC quality,
reduces manufacturing costs, improves the accuracy of manufacturing yield data,
and identifies repairable memory ICs.

The Company has grown its business and expanded its product lines primarily
through internal product development. The development of the Company's CerCard
technology in 1990 served as the foundation for the growth of the Company's core
probe card business. The Company has also grown through strategic acquisitions
and joint ventures. The acquisition of Fresh Test Technology Corporation ("Fresh
Test") in April 1995 enabled the Company to expand its product line to include
ATE interface assemblies. The acquisition of CompuRoute, Inc. ("CompuRoute") in
December 1996 enabled the Company to offer ATE test boards, the Company's first
packaged IC testing product. In January 1997, the Company acquired SVTR, Inc.
("SVTR"), which refurbishes, reconfigures, and services wafer prober equipment.
Recently, the Company entered into a strategic international joint venture with
Upsys for the assembly of a memory IC testing product, which the Company will
distribute in the United States and Asia. Upsys is a joint venture between IBM
and a French test and engineering company. In addition, the Company established
an international joint venture with Mitsubishi Materials to develop next
generation probe card technology.

The Company maintains regional full service facilities in Arizona,
California, and Texas, as well as sales offices in Colorado, Florida,
Massachusetts, and Oregon to serve the U.S. market for its products and
services. The Company also maintains a full service facility in Scotland to
serve the European market and full service facilities in Singapore and Taiwan to
serve the Southeast Asian market. Each of the Company's facilities is located in
proximity to major semiconductor manufacturing centers. The Company's focus on
high quality products and innovative technologies has enabled it to establish
strong relationships with leading worldwide semiconductor manufacturers. In
1996, the Company's top five customers were Intel, Motorola, LSI Logic, IBM, and
Hewlett-Packard.

INDUSTRY OVERVIEW

The IC market is a high volume, high growth commodity market characterized
by rapid technological change. According to independent semiconductor market
research, worldwide production of ICs increased from approximately 34 billion
units in 1992 to in excess of 49 billion units in 1996.

Growing demand for ICs has driven the increased demand for semiconductor
testing products, such as probe cards, ATE interface assemblies, ATE test boards
and wafer probing equipment. Because probe cards, and to a lesser extent ATE
test boards, are consumable products rather than capital equipment, the rapid
unit growth of ICs and new IC designs are in particular fueling the demand for
probe cards and ATE test boards. VLSI Research Inc. ("VLSI"), an independent
semiconductor market research company, estimated the worldwide market for probe
cards in 1997 to be approximately $400 million. The Company estimates that the
market for ATE test boards is approximately $300 million. Based upon VLSI and
other industry data on projected sales of new material handling equipment (wafer
probers/handlers), the Company estimates the market for ATE interface assemblies
to be $150 million.

The long-term growth in demand for ICs and the required production capacity
to meet this demand drives the market for wafer prober equipment and services as
well. The market for wafer probers and associated equipment in new and existing
IC fabrication facilities ("fabs") in 1997 is estimated by VLSI to be
approximately $500 million. Because of the escalating costs of new fabs,
reconditioned and reconfigured wafer probers increasingly are being utilized by
manufacturers in order to extend the life of existing fabs and minimize capital
expenditures. As a result of the increasing size and the age of the installed
base of

24
<PAGE> 25

wafer probers, the Company expects the demand for wafer prober reconditioning
and refurbishing services to increase; however, there can be no assurance that
such an increase will occur.

In addition to the rapid unit growth in ICs, technological advances in ICs
have also fueled the increased demand for semiconductor testing products. IC
technology is changing rapidly due to constantly increasing demand for greater
functionality and higher processing speeds. Advances in IC design and process
technologies have enabled manufacturers to meet these demands by producing
smaller ICs with ever greater circuit densities, higher pin counts, more varied
configurations, and increased complexity. The intense competition among
semiconductor manufacturers to be first to market with a new IC and gain a
competitive edge has caused design and production cycles to continue to shrink.
As a result of the increased complexity of ICs and shorter product life cycles,
demand for sophisticated test products that can be produced in short lead times
has increased.

These trends in the IC market have caused corresponding trends in the probe
card, ATE interface assembly, and ATE test board markets, as well as in the
market for wafer prober equipment and services. IC manufacturers are placing
added emphasis on greater test accuracy, testing at higher speeds, multiple DUT
testing, and quicker turnaround times for probing devices and packaged testing
products. As IC technology has become increasingly sophisticated and complex, it
has become more difficult for IC manufacturers to maintain the necessary
technology, expertise, personnel, and equipment to design and produce internally
all of the various components required to carry the electrical signal between
the ATE tester and the DUT. The Company believes competitive market conditions
have led manufacturers to rely increasingly on outsourcing to reduce their own
investment in the personnel, equipment, and facilities necessary for the
specialized design and manufacturing of testing products in order to concentrate
on the design, production, and distribution of their core IC products.

INTEGRATED CIRCUIT TESTING

Semiconductor manufacturers test ICs during the design and manufacturing
processes to assure IC quality, reduce manufacturing costs, improve the accuracy
of manufacturing yield data, and identify repairable memory ICs. Semiconductor
manufacturers generally test each IC two or three times before completion of the
fabrication process in order to maintain high manufacturing yields and
acceptable profit margins. The increased cost associated with manufacturing ICs
has increased the importance of IC testing in the manufacturing process.

Wafer Probing

Most semiconductor manufacturers test ICs in wafer form by probing each
individual IC to determine whether it meets design specifications. Probing
involves establishing temporary electrical contact between the ATE and the DUT.
The ATE transmits electrical signals to the ICs and analyzes the signals upon
their return. The testing of ICs in wafer form is important to avoid incurring
the significant expense of assembling and packaging ICs that do not meet
specifications. The principal components of a wafer probing system include: (i)
the ATE, which is capital equipment that transmits the electrical signals to the
IC and evaluates the signals upon their return; (ii) the ATE test board, a
complex, multilayer printed circuit board ("PCB") that is mounted directly to
the ATE and transfers the test signals between the ATE and the pogo tower of the
ATE interface assembly; (iii) an ATE interface assembly, typically consisting of
a pogo tower, lock ring, and insert ring, that mechanically connects the ATE
with the wafer prober and carries the electrical signals between the ATE and the
probe card attached to the wafer prober; (iv) a probe card, which consists of a
complex, multilayer PCB and numerous probes positioned to "touch down" on or
make electrical contact with metallized test pads on the IC; and (v) a wafer
prober, which is the capital equipment that moves the wafers into position
enabling the probe card probes to touch down on the test pads.

During the probing process, the wafer prober successively positions each IC
on a wafer so that the pads on the IC align and make contact with the probes on
a probe card. The ATE transmits electrical signals through the ATE interface
assembly to the probe card. The ATE evaluates the return signals from the probe

25
<PAGE> 26

card to determine whether each IC meets design specifications. Depending on the
complexity of the DUT, the probe testing of a single IC can last from a few
milliseconds to over a minute.

Package (Final) Testing

ICs that pass the initial testing at the wafer level are separated from the
wafer and bonded onto plastic, ceramic, or other packages with extended leads.
The packaged IC must then be tested to validate design and performance
specifications. Packaged devices are loaded into a machine called a handler. The
ATE test board is placed on the ATE, and the ATE is coupled to the handler using
an ATE interface assembly. The handler, which performs a function similar to the
wafer prober in the wafer test process, successively positions each IC into a
test socket device that is connected to the ATE test board. The ATE tests the IC
and evaluates the return signals to determine whether a particular IC meets
performance specifications. After package testing, the handler sorts the IC
devices according to test performance.

The schematic below illustrates the wafer test and package test steps in
the manufacturing cycle of an IC:

[CERPROBE GRAPHIC]

26
<PAGE> 27

THE COMPANY'S STRATEGY

- Provide Comprehensive Solutions for Semiconductor Test Integration. The
Company is focused on providing its worldwide customers with
comprehensive solutions for semiconductor test integration, consisting of
each of the electromechanical components necessary to assure the
integrity of the electrical test signal. Historically, each component of
the testing system has been supplied by different vendors. The Company
believes IC manufacturers increasingly are seeking a single source
provider capable of supplying comprehensive solutions for the components
necessary to assure a clean test signal. The Company believes it is the
only company that designs, manufactures, and assembles each of the
components in the critical test signal path. The Company intends to
capitalize on its market position and technical expertise by broadening
existing product lines through internally developed products and as
appropriate through acquisitions or joint ventures.

- Maintain Strong Customer Relationships. The Company intends to continue
to maintain its long standing relationships with its broad customer base,
which includes leading semiconductor manufacturers such as Intel,
Motorola, and IBM, as well as with emerging companies. Engineering,
sales, and management personnel collaborate closely with customer
counterparts to determine customer needs and specifications, and custom
design specific testing solutions. The Company has accumulated
substantial design expertise through these collaborations and believes
this expertise, along with its in-house staff of over 100 engineers and
designers, provides it with a competitive advantage in meeting customer
requirements for increasingly sophisticated testing products. To help
meet the demanding service needs of the semiconductor manufacturing
industry, all of the Company's facilities are located in proximity to
semiconductor manufacturing centers in the United States, Europe, and
Asia.

- Expand Global Presence. The Company believes that the international
market for its products is at least as large as the domestic market. The
Company intends to continue its expansion into international markets,
including Europe and Asia, and has begun to pursue these markets by
aggressively mounting a focused sales and marketing effort directed at
key semiconductor manufacturers. To date, the Company's international
expansion includes the establishment of full service facilities in
Scotland, Singapore, and Taiwan. The Company also intends to enter the
Japanese market within the next 18 months through a joint venture
arrangement with local Japanese partners. In the Company's overseas
operations, the Company employs managers native to such markets to
minimize language and cultural barriers and provide market-specific
technical and operational insight.

- Focus on Technological Innovation. The Company custom designs or
customizes its products to manufacturers' particular IC design
specifications. Changes in the IC design require changes in the probe
card and, depending on the design change, in the ATE test board.
Consequently, the Company continually develops new designs and product
enhancements. The Company collaborates with IC manufacturers and
semiconductor equipment manufacturers to anticipate and address
technological advances in semiconductor testing and to improve
performance of its products. SEMATECH, the U.S. semiconductor industry
consortium that defines the standards for future semiconductor products,
awarded the Company research and development contracts in 1995. The
Company is focusing its engineering and new product development efforts
toward producing a variety of high performance custom designed products
to test more complex ICs and to test at higher speeds. In addition, the
Company is developing a next generation probe card through a joint
development relationship with Mitsubishi Materials Corporation.

27
<PAGE> 28

- Provide Quality Products and Services. The Company believes it has
developed a reputation as a leader in providing high quality products and
services. This high quality level is achieved through a robust,
documented, and controlled manufacturing process, and the application of
sound quality management policies and practices. The Company's use of
advanced metrology tools, which ensure precise measurement of all key
product parameters, is a cornerstone of its quality management system.
The Company believes that its design capabilities, customer focus, and
production methods enhance its ability to provide its customers with high
quality products and services with quick turnaround times.

PRODUCTS AND SERVICES

Historically, each component of the IC testing system has been supplied by
different vendors. As a result, IC manufacturers frequently have been left with
the task of combining separate components from many small vendors into a single
integrated testing system. The Company believes IC manufacturers increasingly
are seeking a single source provider capable of supplying comprehensive
solutions for the components necessary to assure a clean test signal between the
testing equipment and the DUT. Through its manufacture of probe cards, ATE
interface assemblies, and ATE test boards and through its wafer prober services,
the Company is able to be a single source provider for its customers.

Probe Card Products

The Company believes it is the leading U.S. producer of probe cards, which
constitute the majority of the Company's business. Probe cards accounted for
approximately 81% of net sales in 1996. Probe card sales continue to grow;
however, as a result of the CompuRoute and SVTR acquisitions and the related new
product and service offerings in 1997, the Company expects that probe cards will
account for a smaller percentage of 1997 net sales. Probe card sales accounted
for approximately 67% of net sales for the first six months of 1997.

The probe card consists of a complex, multilayer (some in excess of 25
layers) PCB and utilizes a number of probes designed to contact (or "probe")
separately a series of electrical contact points (or "pads") on the IC in wafer
form. At the point of contact with the wafer, each probe is significantly
smaller than a human hair. The majority of the Company's probe cards have fewer
than 200 probes; the Company's complex probe cards can have more than 1,500
probes. Because the type and complexity of ICs vary, the number and positioning
of the probes and the size of each probe card must be custom designed for the
specific IC being tested to ensure proper alignment.

The probe testing of a single IC can last from a few milliseconds to over a
minute, depending on the complexity of the semiconductor device. Unlike the
capital equipment used in the semiconductor manufacturing process, probe cards
are considered consumable products. The Company believes the average life of a
probe card is approximately three months, which provides for 200,000 to 500,000
touchdowns with each touchdown generally representing the testing of a single
IC. However, probe cards for application specific integrated circuits ("ASICs")
might be used to test a single batch order of 50,000 ICs and then discarded. The
Company estimates that about one-third of its probe cards become obsolete within
six months of being placed into service, primarily as a result of customer
initiated design changes. However, damage due to faulty test handling equipment
or operator error can render a probe card useless prior to the expiration of its
normal life.

The Company has invested over 20 years in the design of different types of
probe card components and the manufacturing processes required to assemble a
finished probe card. Because the signals carried by the probe card are complex
and vary by customer, the Company manufactures many types of probe cards.

The Company's probe card products utilize three technologies:

Epoxy ring technology uses probes that connect directly to a printed
circuit board. Probe cards using this type of technology are capable of
high speed, high density probing. The Company introduced its first ceramic
based epoxy ring probe card, the CerCard, in October 1990. Sales of

28
<PAGE> 29

ceramic based epoxy ring probe cards generated approximately 56% of the
Company's net sales for the first six months of 1997. The Company
anticipates that such cards will continue to account for a substantial
portion of its net sales.

Ceramic blade technology uses a ceramic blade attached to a needle
designed to make contact with the IC pads. Probe cards using ceramic blade
technology, which was developed and patented by the Company, are capable of
low speed, low density probing. With optional features, the ceramic blade
can be used for high speed probing.

Cobra probe (buckle beam) technology uses vertical probes that match
the pattern of the pads on the IC being tested. This technology allows for
the probing of pads in the center of an IC and is used generally for high
density applications. Vertical contact probing is particularly well-suited
for multiple-IC and memory IC testing. In May 1997, the Company entered
into a joint venture with a French semiconductor testing and engineering
company to assemble and repair the Cobra probe card, which is based on
technology originally developed by IBM. The Company will be the exclusive
distributor for the product in the United States and Asia.

The Company's probe cards generally range in price from $500 to $65,000,
depending upon the complexity and performance specifications of the probe cards.

ATE Interface Assemblies

The Company entered the ATE interface business through the acquisition in
April 1995 of Fresh Test, a company engaged primarily in the design,
manufacture, and sale of ATE interface products. An ATE interface assembly
securely connects the ATE to the wafer prober or handler and is used to carry
signals from the ATE to the DUT. An interface assembly typically consists of
custom mechanical docking hardware such as a lock ring and insert ring, as well
as two intricate multilayer PCBs connected by either a system of cables or,
increasingly, spring-loaded "pogo" contact pins. Interface assemblies range from
small, single board, cable-type interfaces for less complex systems to high
speed, high frequency, digital or mixed signal interfaces used in testing more
complex ICs. One end of the interface connects to the ATE and the other to
either a probe card fixture mounted on a prober or a test socket mounted to a
handler for packaged IC testing. In each case, the reliability of the test is
highly dependent on maintaining the integrity of the signal between the ATE and
the IC being tested.

Each ATE interface assembly is custom designed or customized for each
application. The Company's ATE interface product line transmits a clean signal
from the ATE to the probe card or test socket and carries a return signal back
to the ATE after the circuit processes the signal. The Company's ATE interface
products are designed to optimize the integrity of return signal data through
the reduction of channel crosstalk and the matching of delay times and
impedance, thereby increasing the accuracy of the test data. Because the
Company's ATE interface assemblies enable the ATE to provide reliable yield data
by allowing for clear signal transmission, its interfaces can also be cost
saving devices. The Company's interface assemblies feature ease of mechanical
installation and facilitate access to the probe card or test socket during
testing.

The ATE and related wafer prober and handler typically have useful lives of
five to seven years. While the Company's ATE interface assemblies have a similar
useful life, any upgrade of the ATE or reconfiguration of the prober or handler
used with a specific ATE requires a new ATE interface assembly. As a result, the
Company believes its ATE interface products have an average life of two to three
years.

The Company's ATE interface assemblies range in price from $1,000 to
$65,000.

ATE Test Boards

Through the acquisition of CompuRoute in December 1996, the Company
expanded its product offerings to include custom-designed ATE test boards. The
CompuRoute acquisition also enabled the Company to internalize the fabrication
of PCBs, which are a critical component in its probe card and ATE interface
assembly products, rather than rely exclusively on third party PCB
manufacturers.

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<PAGE> 30

ATE test board products are also referred to as prober interface boards,
DUT boards, load boards, or performance boards, depending on whether the ATE
test board is used for wafer probing or package testing. The Company has
developed a database for different ATE designs, which are used as starting
designs and customized for the particular IC to be tested. The ATE test board is
a complex, multilayer PCB that is mounted to the ATE and transfers the test
signals between the ATE and the ATE interface assembly of a wafer prober or
handler. ATE test boards were the Company's first packaged IC testing product.

The Company believes its ATE test boards have an average life of one year
although their useful life could be much longer. The Company's ATE test board
products range in price from $2,000 to $30,000.

Wafer Prober Products and Services

Through the acquisition of SVTR in January 1997, the Company expanded its
services to include refurbishing, reconfiguring, and servicing wafer probers.
The wafer prober positions each IC on a wafer so that the pads on the IC align
and make contact with the probes on the probe card, which is mounted on the
wafer prober. The Company currently is focusing its services on wafer probers
originally manufactured by Electroglas, Inc. ("Electroglas"), because the
Company believes that Electroglas has the largest installed base of wafer
probers in the world, outside of Japan.

Prober refurbishment requires the Company to overhaul, reprofile, and
recertify its customers' wafer probers. Refurbishing extends the life of the
equipment, deferring the need to buy new capital intensive probing equipment.
The Company develops independent sources for most of the components necessary
for refurbishment or internally produces the part, particularly when the
required part has been discontinued by the original equipment manufacturer.

Prober reconfiguration requires the Company to retrofit its customers'
wafer probers to handle larger diameter wafers and improve the accuracy of wafer
positioning. The Company has developed the components and processes necessary to
reconfigure probers originally designed to handle four and six-inch wafers to
the current advanced fab requirement of eight-inch wafers. Many fab production
managers consider conversion of their existing four and six-inch equipment as an
effective way to optimize their capital equipment budgets and an expedient way
to upgrade to eight-inch wafer capability. Additionally, each conversion
provides the Company with salvageable components, which can be reconditioned and
used for the Company's service and repair business. The Company also converts
older generation four-inch probers into a single unit that is able to handle
five and six-inch wafers. The demand for six-inch wafer probers remains strong,
especially in developing nations. The Company recently introduced a
reaccurization service in which the customer's existing six-inch wafer probers
are reprofiled and upgraded beyond their originally manufactured specifications
to achieve the greater accuracy and performance that is required by many current
standards. Additionally, the Company has developed add-on and enhancement
products, including an automatic wafer transfer/handling system, and
probe-to-pad alignment positioning products.

The Company also provides other prober services, including providing
on-site maintenance and repair services and replacement parts for wafer probers
through a network of direct and contract field service personnel in the United
States, Europe, and parts of Asia.

The Company's wafer prober products and services range in price from
$25,000 to $150,000 per unit, depending on options.

ENGINEERING AND PRODUCT DEVELOPMENT

The customized nature of the Company's products results in ongoing
engineering and product development being included in the cost of goods sold for
the Company's products. In addition, the Company has devoted and will continue
to devote substantial resources to materials and process engineering and product
development. Engineering and new product development expenses were $417,000,
$707,000, and $903,000 for the years ended December 31, 1994, 1995, and 1996,
respectively,

30
<PAGE> 31

which represented 2.9%, 2.7%, and 2.4% of net sales, respectively. The Company
employs over 100 engineers and designers.

During 1995, the Company was awarded two engineering and product
development contracts with SEMATECH, a consortium of leading U.S. semiconductor
manufacturers and the U.S. government formed to promote technological innovation
in the U.S. semiconductor industry. In the first agreement with SEMATECH, the
Company concentrated on the extension of present technology to include tighter
pitches (i.e. placing probes closer together) as well as developing higher
frequency testing characteristics. The second agreement with SEMATECH called for
the Company to determine the best solution for probing the interior contact
points of semiconductors. The Company retains the rights to any technology
developed by it through these engineering and product development efforts. The
Company also believes it gains an added benefit from the SEMATECH relationship
by being able to work with its semiconductor manufacturer customers to
anticipate and address technological advances in semiconductor processing and
testing.

The Company has from time to time collaborated with certain customers that
pay the Company to develop new products. Funds received from such engineering
and product development are accounted for as offsets to the total expenses for
the related project.

The Company recently entered into a joint development agreement with
Mitsubishi Materials Corporation to accelerate the research and development of
the Company's next generation probe card, which will utilize the Company's
proprietary technology to address increasing demand for tighter pitches and the
higher performance requirements for wafer probing. Under such agreement each
party will own any patents and know-how resulting from its own efforts, subject
to a royalty free license back to the other party. Patents and know-how
resulting from the efforts of both parties will be owned jointly.

MANUFACTURING

The Company's manufacturing objective is to produce quality products that
meet its customers' testing needs and design specifications on a timely and cost
efficient basis.

The Company's manufacturing operations consist of procurement and/or
fabrication of components and subassemblies, assembly, and extensive testing of
finished products. All components and subassemblies are inspected for mechanical
and electrical compliance to Company specifications and all finished products
are tested against Company and customer specifications.

The Company believes that it is able to respond more quickly and accurately
to its customers' needs by maintaining manufacturing facilities and technical
support in geographic markets where its semiconductor manufacturing customers
are located. The Company designs and manufactures its probe cards in Arizona,
California, and Texas as well as in Scotland, Singapore, and Taiwan. The Company
typically designs and manufactures its probe cards within two weeks of receiving
a customer order. The Company manufactures its interface assemblies in its
Gilbert, Arizona facility. The Company typically designs and manufactures its
ATE interface assemblies within 12 weeks of receiving an order. The Company
conducts its ATE test board and related PCB fabrication and assembly operations
at its Dallas, Texas facility. The Company typically designs and fabricates its
ATE test boards within four weeks of receiving an order.

The Company refurbishes, reconfigures, and services wafer probers in its
facility in Tempe, Arizona. The Company's wafer prober services business
provides a variety of services to a large installed base of wafer probers in
North America, Europe, and Asia. These services include factory-based
refurbishing, upgrading to allow for the processing of larger wafers and/or to
improve prober accuracy, and providing field service at the user's site.

The Company emphasizes quality and reliability in both the design and
manufacture of its products. While the Company's facilities are not ISO 9000
certified, ISO 9000, the internationally recognized standard for quality
management, sets the criteria for the Company's quality management system
throughout its manufacturing processes. The Company's use of advanced metrology
tools, which ensure precise measurement of all key product parameters, is a
cornerstone of its quality management system. As the size of the ICs is driven
smaller by advances in IC technology, the accuracy of measurements becomes

31
<PAGE> 32

increasingly important. The Company's Quality and Engineering Departments work
together to define measurement needs and develop tools that can achieve desired
results.

The Company relies on third party suppliers in the production and shipment
of its products. Although the Company believes that all raw materials, component
parts, and services are currently available in adequate amounts, there can be no
assurance that shortages will not develop in the future. Certain of the raw
materials and component parts for the Company's products are purchased from
single or a limited group of suppliers. The Company does not have long-term
written agreements with such suppliers. Although the Company believes there are
alternative suppliers for all such raw materials, component parts, and services,
termination or a significant disruption of any of its existing supplier
arrangements could have a material adverse effect on the Company's business,
financial condition, and operating results.

CUSTOMERS

An integral part of the Company's strategy is to continue to maintain its
long standing customer relationships. All of the Company's top 15 customers in
1996 were repeat customers. The top 15 customers fluctuate from year to year
depending on the growth cycles of the individual customers. These semiconductor
manufacturers provide the Company with a diversified customer base whose
products serve the communications, computer, automotive, military, and aerospace
industries. In addition to serving high volume established manufacturers, the
Company's products also are designed to meet the needs of emerging and leading
edge technology firms such as those offering ASICs and Gallium Arsenide ICs.
During 1996, the Company's two largest customers, Intel and Motorola, accounted
for approximately 15% and 12% of net sales, respectively. The Company's top 15
customers in 1996, which together accounted for approximately 65% of net sales,
were as follows:

<TABLE>
<S> <C> <C>
Intel Schlumberger
Advanced Micro Devices LSI Logic Technologies
Delco Electronics Lucent Technologies Symbios Logic
Hewlett-Packard Motorola Texas Instruments
IBM National VLSI Technology
Integrated Device Technology Semiconductor Xilinx
</TABLE>

MARKETING, SALES, AND SERVICES

The Company's customers place a high value on service. Technical features
and product quality also are attributes expected by the Company's customers. The
unique needs of purchasers of semiconductor testing products demand a high level
of customer responsiveness. The Company's products usually require a high degree
of customization in order to meet customer specifications. Response time,
product design specifications, and rapid delivery typically are critical factors
in customer satisfaction. In addition, the customer's evaluation of the design
and performance of completed products can be quite subjective. Engineering,
sales, and management personnel collaborate closely with customer counterparts
to determine their needs and product specifications. Additionally, in order to
meet the demanding service needs of its customers, all of the Company's
facilities are located in proximity to manufacturing centers worldwide.

The Company intends to leverage its worldwide sales facilities to market
and distribute all of the Company's products. The Company markets its products
in North America through direct technical sales personnel. To meet the demanding
service requirements of its customers, the Company has five regional
manufacturing, repair, and sales centers in Arizona, California, and Texas. In
addition to its regional full service facilities, the Company serves its
domestic customers through sales offices strategically located to facilitate
rapid response to major market centers and key customers. The Company maintains
sales offices in Oregon, Colorado, Florida, and Massachusetts.

The Company utilizes a network of independent foreign distributors in both
Europe and Asia. The Company's international business represented approximately
16% of net sales for the first six months of 1997. The Company believes the
potential exists to increase sales in international markets, and the Company is
positioning itself to initiate a more aggressive marketing and sales program in
these markets in

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<PAGE> 33

the future. In particular, the Company intends to expand its sales efforts
throughout Europe and has opened a manufacturing, repair, and sales facility in
Scotland for the purpose of serving customers in Europe. In June 1995, the
Company formed Cerprobe Asia PTE LTD, a joint venture with Asian investors.
Through the joint venture, the Company established full service manufacturing
and repair facilities in Singapore and Taiwan in April 1996 and January 1997,
respectively, to penetrate the growing markets for the Company's products in
Southeast Asia. Within the next 18 months, the Company intends to enter into the
highly competitive Japanese market through a joint venture arrangement with
local Japanese partners.

COMPETITION

The semiconductor testing products industry is highly competitive. The
Company faces substantial competition in each of the probe card, interface
assembly, and ATE test board markets. In addition, the Company anticipates that
it may face substantial competition in the future from new entrants in the
Company's markets. The principal competitive factors in the industry are product
performance, service, delivery time, and price. Competition in international
markets is also significant, particularly in Asia where the Company is expanding
into new geographic markets while simultaneously addressing the testing
requirements of the memory IC market, a new product market for the Company. Some
of the Company's competitors, particularly in Asia, have substantially greater
financial, engineering, or manufacturing resources than the Company and larger
sales and service organizations. To compete successfully, the Company must make
substantial investments in its engineering and product development, marketing,
and customer service and support activities. There can be no assurance that
competition in the Company's markets will not intensify or that the Company's
technological advantages may not be reduced or lost as a result of technological
advances by competitors or customers.

Wafer prober manufacturers, such as Electroglas, Tokyo Electron Labs, and
Tokyo Semitsu, provide limited refurbishment services and offer new wafer
probers as an alternative. These wafer prober manufacturers have greater
financial, engineering, and manufacturing resources and larger service
organizations than the Company as well as long-standing customer relationships.
There can be no assurance that levels of competition in the market for wafer
prober refurbishing and reconfiguration services will not intensify in the
future or that customers will not elect to purchase new wafer probers.

FACILITIES

The Company's principal executive offices and primary manufacturing
facility are located in Gilbert, Arizona. The facility is owned by CRPB
Investors, L.L.C. ("CRPB Investors"). The Company owns a 36% interest in CRPB
Investors. The Company has entered into a long-term lease with CRPB Investors on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties. The initial term of the lease expires in May 2012 with seven
options to extend the lease for successive five-year terms.

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<PAGE> 34

The Company's major facilities are described in the table below:

<TABLE>
<CAPTION>
LEASE
EXPIRATION
FACILITY SQUARE FEET FUNCTION PRODUCTS DATE
- --------------------------- ----------- --------------------------- --------------------------- --------------
<S> <C> <C> <C> <C>
Gilbert, Arizona........... 84,000 Corporate headquarters, Probe cards and ATE May 2012
manufacturing, sales and interface assemblies
service
Dallas, Texas.............. 35,000 CompuRoute headquarters, ATE test boards Company owned
manufacturing, sales and
service
San Jose, California....... 34,000 Manufacturing, sales and Probe cards July 2002
service
Tempe, Arizona............. 30,000 SVTR headquarters, Refurbished/reconfigured September 2004
manufacturing, sales and wafer probers
service
Chandler, Arizona.......... 16,000 Upsys-Cerprobe, L.L.C. Cobra probe cards November 1998
headquarters, manufacturing
and service
Hsin Chu, Taiwan........... 9,000 Manufacturing and service Probe cards April 2003
Austin, Texas.............. 7,000 Manufacturing, sales and Probe cards March 2002
service
East Kilbride, Scotland.... 4,800 Manufacturing, sales and Probe cards August 1999
service
Singapore.................. 1,000 Manufacturing and service Probe cards September 1998
</TABLE>

In addition, the Company leases space for its sales offices in Colorado
Springs, Colorado; Boca Raton, Florida; Westboro, Massachusetts; Beaverton,
Oregon; and Richardson, Texas. The Company believes that its existing facilities
are adequate to meet its current requirements.

BACKLOG

As of June 30, 1997, the Company had a backlog of orders of approximately
$10.4 million. These orders are believed to be firm and all are expected to be
filled during fiscal 1997. The backlog of orders at June 30, 1996 for the
Company was approximately $3.2 million. The Company's business has not been
seasonal to date. Because of possible changes in delivery schedules and
cancellations of orders, the Company's backlog at any particular date is not
necessarily indicative of future sales.

ENVIRONMENTAL REGULATIONS

The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. The Company has made certain
leasehold improvements in order to comply with Environmental Protection Agency
and local regulations. Proper waste disposal is a major consideration for PCB
manufacturers because metals and chemicals are used in the manufacturing
process. Water used in the printed circuit board manufacturing process must be
treated to remove metal particles and other contaminants before it can be
discharged into the municipal sanitary sewer system. The Company operates and
maintains wastewater treatment systems and effluent testing facilities at its
PCB manufacturing plant in Dallas, Texas.

The Company's PCB manufacturing plant operates under effluent discharge
permits issued by the appropriate governmental authorities. These permits must
be renewed periodically and are subject to revocation in the event of violations
of environmental laws. The Company believes that the waste treatment equipment
in its PCB manufacturing facility is currently in compliance with environmental
protection requirements in all material respects. However, there can be no
assurance that violations will not occur in the future as a result of human
error, equipment failure or other causes. The Company is also subject to
environmental laws relating to the storage, use and disposal of chemicals, solid
waste and other hazardous materials as well as air quality regulations.
Furthermore, environmental laws could become more stringent over time, and the
costs of compliance with more stringent laws could be substantial.

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<PAGE> 35

Although the Company believes that it is in full compliance with all
regulations, the Company is unable to predict what effect, if any, the adoption
of more stringent regulations would have on its future operations. The Company
does not anticipate incurring any future material expenditures to remain in
substantial compliance with presently applicable environmental regulations.

INTELLECTUAL PROPERTY

While the Company considers intellectual property rights, patents, and
licenses to be important, the Company does not consider any single patent to be
material to the conduct of its business. The Company relies primarily on trade
secret protection for its proprietary information rather than patents to avoid
publicly disclosing its technology in a patent application. The Company believes
that its success will depend primarily on the technological competence and
creative skills of its personnel rather than the protection of its existing
patents or future patents.

EMPLOYEES

As of August 1, 1997, the Company had 523 employees, consisting of 104 in
engineering and product development, 293 in manufacturing, 67 in sales and
marketing, and 59 in administration. There are no collective bargaining
agreements, and the Company considers its relations with its employees to be
good.

LITIGATION

The Company is not a party to, nor is any of its property the subject of,
any material pending legal proceedings.

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<PAGE> 36

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the executive
officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- -------------------------------------------------
<S> <C> <C>
C. Zane Close...................... 48 President, Chief Executive Officer, and Director
Eswar Subramanian.................. 40 Senior Vice President and Chief Operating Officer
Michael K. Bonham.................. 58 Senior Vice President -- Sales and Marketing
Randal L. Buness................... 40 Vice President, Chief Financial Officer,
Secretary, and Treasurer
Roseann L. Tavarozzi............... 43 Vice President, Corporate Controller, and
Assistant Secretary
Ross J. Mangano.................... 52 Chairman of the Board of Directors
William A. Fresh................... 68 Director
Kenneth W. Miller.................. 65 Director
Donald F. Walter................... 65 Director
</TABLE>

C. Zane Close has served as President and Chief Executive Officer and as a
director of the Company since July 1990. From September 1989 to July 1990, Mr.
Close served as Vice President and General Manager of Probe Technology
Corporation ("Probe Technology"), a manufacturer of probing devices for testing
integrated circuits. Mr. Close served as Vice President of Operations of Probe
Technology from February 1985 to September 1989.

Eswar Subramanian has served as Senior Vice President and Chief Operating
Officer of the Company since June 1996. Mr. Subramanian served as Vice President
of Engineering of the Company from July 1990 to June 1996. From April 1990 to
July 1990, Mr. Subramanian was Director of Development at Probe Technology,
where he was responsible for the development and establishment of new probing
technology and its production operations. From November 1984 to April 1990, Mr.
Subramanian was Engineering Manager at Probe Technology and was responsible for
the design, development, manufacture, and engineering of probing products.

Michael K. Bonham has served as Senior Vice President -- Sales and
Marketing of the Company since June 1996. Mr. Bonham served as Vice President of
Sales and Marketing of the Company from July 1990 to June 1996. From October
1988 to June 1990, Mr. Bonham served as Marketing Manager of the IC Probe and
Curve Tracer Group of Tektronix, Incorporated, a manufacturer of electronic test
measurement equipment.

Randal L. Buness has served as Vice President, Chief Financial Officer,
Secretary, and Treasurer of the Company since June 1996. From September 1994 to
June 1996, Mr. Buness served as Vice President -- Finance and Administration,
Chief Financial Officer, Secretary, and Treasurer of Three-Five Systems, Inc., a
publicly held manufacturer of liquid crystal displays. Mr. Buness served as
Chief Financial Officer, Secretary, and Treasurer of United Medical Network, a
developer of video conferencing networks for healthcare providers, from January
1993 to September 1994. From January 1989 to January 1993, Mr. Buness worked as
a self-employed consultant. Mr. Buness served as principal and manager with
Arthur Young from January 1986 to January 1989 and served as a manager, senior,
and staff accountant with Price Waterhouse from July 1979 to January 1986. Mr.
Buness is a Certified Public Accountant.

Roseann L. Tavarozzi has served as Vice President, Corporate Controller,
and Assistant Secretary of the Company since June 1996. Ms. Tavarozzi served as
Vice President -- Finance of the Company from April 1995 to June 1996 and as
Vice President and Chief Financial Officer from March 1994 to March 1995. Prior
to joining the Company, Ms. Tavarozzi was the Corporate Controller for Quorum
International, Ltd., an international distributor of security products. From May
1989 to April 1992, Ms. Tavarozzi was the

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<PAGE> 37

Controller-Mid Continent for Core-Mark International, Inc., an international
distributor of consumable products. Ms. Tavarozzi is a Certified Public
Accountant.

Ross J. Mangano has served as the Chairman of the Board of Directors of the
Company since February 1993 and as a director of the Company since February
1988. Mr. Mangano has served as the President of Oliver Estate, Inc., an
Indiana-based management company, since 1996. Prior to that time, Mr. Mangano
served in various management positions with Oliver Estate, Inc., since 1971. Mr.
Mangano also is an investment analyst for Oliver Estate, Inc. From December 1993
to 1996, Mr. Mangano served on the Board of Directors of Cole Taylor Financial
Group, a publicly held bank holding company based in Wheeling, Illinois. Since
its spin-off from Cole Taylor Financial Group in 1996, Mr. Mangano has served on
the Board of Directors of Reliance Acceptance Group Inc., a publicly held
commercial banking and financial services company based in San Antonio, Texas.

William A. Fresh has served as a director of the Company since April 1995.
Mr. Fresh co-founded Fresh Test, a designer and manufacturer of probe and
interface test technology for the semiconductor industry, which was acquired by
the Company in April 1995. He served as Chairman of the Board and Chief
Executive Officer of Fresh Test from January 1986 through March 1995. Mr. Fresh
also has served as the Chairman of the Board and Chief Executive Officer of
Magellan Technology, a public holding company; and Orem Tek Development Corp., a
real estate development company, since May 1990 and May 1991, respectively. Mr.
Fresh served as Chairman of the Board and Chief Executive Officer of Satellite
Images System Corporation, a medical information processing company, from
February 1992 to August 1996, and since August 1996 has served on the Board of
Directors of the successor company known as Satellite Images System, L.L.C. Mr.
Fresh served as Chairman of the Board of EFI Electronics, a publicly held power
conditioning company; and Fresh Technology Company, a PC-based software company,
from January 1991 to March 1994. Since April 1996, Mr. Fresh has served as a
director of Sento Technical Innovation Corporation, a publicly held software
company.

Kenneth W. Miller has served as a director of the Company since 1979. Mr.
Miller served as Treasurer of the Company from June 1994 to June 1996 and as
Secretary of the Company from October 1991 to June 1996. Since January 1992, Mr.
Miller has served as a business consultant to various companies involved in the
microelectronic industry. From April 1991 until October 1991, Mr. Miller served
as Marketing Director of Scrantom Engineering, Inc., a manufacturer of hybrid
circuits and ceramic circuit boards located in Costa Mesa, California. From
September 1988 until April 1991, Mr. Miller served as Marketing Director of
Advanced Packaging Systems, a manufacturer of high-density ceramic and polymer
thin film interconnect products. From September 1981 to September 1988, Mr.
Miller served as President of Interamics, a manufacturer of ceramic packages for
ICs and hybrid substrates.

Donald F. Walter has served as a director of the Company since May 1991.
Since April 1982, Mr. Walter has been a financial consultant and is the
principal of Walter & Keenan Financial Consulting Co., a financial consulting
firm located in Niles, Michigan. Since January 1982, Mr. Walter has served as a
director of National Standard Co., a publicly held manufacturer of specialty
wire products. Since October 1988, Mr. Walter has served as a director of Metro
BanCorp, a publicly held bank.

37
<PAGE> 38

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the shares of
the Company's outstanding Common Stock beneficially owned as of August 1, 1997
(i) by each of the Company's directors and executive officers; (ii) by all
directors and executive officers of the Company as a group; (iii) by each person
who is known by the Company to own beneficially or exercise voting or
dispositive control over more than 5% of the Company's Common Stock; and (iv) by
each of the Selling Stockholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER OFFERING
OFFERING (1)(2) SHARES BEING (1)(2)
-------------------- REGISTERED --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT FOR SALE NUMBER PERCENT
- --------------------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Ross J. Mangano (3)...................................... 613,501 9.6% -- 453,501 5.8%
C. Zane Close (4)........................................ 86,600 1.3 -- 86,600 1.1
William A. Fresh (5)..................................... 344,298 5.4 55,000 289,298 3.7
Kenneth W. Miller (6).................................... 162,237 2.5 -- 162,237 2.1
Donald F. Walter (7)..................................... 23,001 * -- 23,001 *
Michael K. Bonham (8).................................... 110,450 1.7 25,000 85,450 1.1
Eswar Subramanian (9).................................... 123,400 1.9 -- 123,400 1.6
Randal L. Buness (10).................................... 22,000 * -- 22,000 *
Roseann L. Tavarozzi (11)................................ 30,000 * -- 30,000 *
All directors and executive officers as a group (nine
persons) (12).......................................... 1,515,487 22.7 80,000 1,275,487 15.6
5% STOCKHOLDERS:
Judd C. and Mary Morris Leighton (13).................... 460,000 7.2 260,000 200,000 2.5
Souad Shrime (14)........................................ 331,259 5.2 -- 331,259 4.2
Troon & Co., Ross J. Mangano, et al., Trustees (15)...... 380,200 5.9 100,000 280,200 3.6
OTHER SELLING STOCKHOLDERS:
Millie M. Cunningham..................................... 120,000 1.9 30,000 90,000 1.1
Oliver & Company......................................... 51,300 * 30,000 21,300 *
</TABLE>

- ------------
* Less than one percent.

(1) Unless otherwise indicated, and subject to community property laws where
applicable, all shares are owned of record by the persons named and the
beneficial ownership consists of sole voting power and sole investment
power.

(2) The percentages shown include the shares of Common Stock actually owned as
of August 1, 1997 and the shares of Common Stock that the identified person
or group had the right to acquire within 60 days of August 1, 1997 pursuant
to the exercise of stock options. In calculating the percentage of
ownership, all shares of Common Stock that the identified person or group
had the right to acquire within 60 days of August 1, 1997 upon the exercise
of stock options are deemed to be outstanding for the purpose of computing
the percentage of the shares of Common Stock owned by such person or group,
but are not deemed to be outstanding for the purpose of computing the
percentage of the shares of Common Stock owned by any other person.

(3) Includes 20,000 shares in the name of Nat & Co. voted pursuant to a power
of attorney, 51,300 shares in the name of Oliver & Company voted pursuant
to a power of attorney, of which 30,000 shares are being sold in this
offering; 120,000 shares in the name of Millie M. Cunningham voted pursuant
to a power of attorney, of which 30,000 shares are being sold in this
offering; 380,200 shares held in the name of Troon & Co., Ross J. Mangano,
et al., Trustees for which Mr. Mangano serves as a trustee, of which
100,000 shares are being sold in this offering; 20,000 shares that Mr.
Mangano has the right to acquire at an exercise price of $5.75 per share
pursuant to the exercise of options granted in September 1994; 1,334 shares
that Mr. Mangano has the right to acquire at an exercise price of $8.25 per
share pursuant to the exercise of options granted in June 1995; and 667
shares that Mr. Mangano has the right to acquire at an exercise price of
$10.375 per share pursuant to the exercise of options granted in July 1996.

38
<PAGE> 39

(4) Includes 60,000 shares that Mr. Close has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994 and 15,000 shares that Mr. Close has the right to
acquire at an exercise price of $10.25 per share pursuant to the exercise
of options granted in May 1997.

(5) Includes 162,700 shares held by WAF Investment Company, a company 100%
owned by Mr. Fresh and his wife, of which 27,500 shares are being sold in
this offering; and 78,477 shares held by The William A. and Reva Luana
Fresh Charitable Remainder Unitrust, of which 27,500 shares are being sold
in this offering; and reflects 1,334 shares that Mr. Fresh has the right to
acquire at an exercise price of $8.25 per share pursuant to the exercise of
options granted in June 1995 and 667 shares that Mr. Fresh has the right to
acquire at an exercise price of $10.375 per share pursuant to the exercise
of options granted in July 1996.

(6) Includes 90,236 shares held by U.S. Trust Company of California, N.A., as
trustee for the Kenneth W. Miller Charitable Remainder Unitrust. Mr. Miller
disclaims beneficial ownership with respect to these shares. Also includes
20,000 shares that Mr. Miller has the right to acquire at an exercise price
of $5.75 per share pursuant to the exercise of options granted in September
1994, and 1,334 shares that Mr. Miller has the right to acquire at an
exercise price of $8.25 per share pursuant to the exercise of options
granted in June 1995 and 667 shares that Mr. Miller has the right to
acquire at an exercise price of $10.375 per share pursuant to the exercise
of options granted in July 1996.

(7) Includes 20,000 shares that Mr. Walter has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994, and 1,334 shares that Mr. Walter has the right
to acquire at an exercise price of $8.25 per share pursuant to the exercise
of options granted in June 1995 and 667 shares that Mr. Walter has the
right to acquire at an exercise price of $10.375 per share pursuant to the
exercise of options granted in July 1996.

(8) Includes 50,000 shares that Mr. Bonham has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994 and 3,750 shares that Mr. Bonham has the right to
acquire at an exercise price of $10.25 per share pursuant to the exercise
of options granted in May 1997.

(9) Includes 35,000 shares that Mr. Subramanian has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994 and 12,500 shares that Mr. Subramanian has the
right to acquire at an exercise price of $10.25 per share pursuant to the
exercise of options granted in May 1997.

(10) Includes 20,000 shares that Mr. Buness has the right to acquire at an
exercise price of $11.875 per share pursuant to the exercise of options
granted in June 1996.

(11) Includes 20,000 shares that Ms. Tavarozzi has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in June 1994 and 9,000 shares that Ms. Tavarozzi has the right to
acquire at an exercise price of $10.50 per share pursuant to the exercise
of options granted in August 1995.

(12) Includes 293,254 shares that members of the group had the right to acquire
as of August 1, 1997 or within 60 days of August 1, 1997 pursuant to the
exercise of stock options.

(13) Includes 60,000 shares owned by the Leighton-Oare Foundation, Inc., a
corporation for which Mr. and Mrs. Leighton serve as directors, which
shares are being sold in this offering. Judd C. and Mary Morris Leighton's
address is 211 W. Washington Ave, Suite 2400, South Bend, Indiana 46601.

(14) Includes 1,227 shares held by Mrs. Shrime's children. Mrs. Shrime's address
is 9611 Milltrail, Dallas, Texas 75238.

(15) The address of Troon & Co is P. O. Box 1655, South Bend, Indiana 46634.

39
<PAGE> 40

DESCRIPTION OF SECURITIES

The Company's authorized capital consists of 10,000,000 shares of Common
Stock, $0.05 par value and 10,000,000 shares of serial preferred stock, $0.05
par value, (the "Serial Preferred Stock"). As of August 1, 1997, 6,371,580
shares of Common Stock and 330 shares of Convertible Preferred Stock were issued
and outstanding. An additional 1,057,599 shares of Common Stock may be issued
upon exercise of options outstanding or available for issuance under the
Company's stock option plans, and 49,275 shares of Common Stock may be issued
upon exercise of outstanding options and warrants issued outside of such plans.
All of the currently issued and outstanding shares of Common Stock are, and all
of the shares of Common Stock to be issued in this offering will be, fully paid
and non-assessable.

COMMON STOCK

Except regarding the election of directors, the holders of Common Stock are
entitled to one vote for each share on all matters submitted to a vote of
stockholders. Every stockholder entitled to vote at any election for directors
has the right to cumulate his votes. Subject to preferences that may be
applicable to any then outstanding preferred stock, the holders of Common Stock
will be entitled to receive such dividends, if any, as may be declared by the
Board of Directors from time to time out of legally available funds. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock will be entitled to share ratably in all assets of the Company that are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of holders of any preferred stock
then outstanding. The holders of Common Stock have no preemptive, subscription,
redemption, or conversion rights. The rights, preferences, and privileges of
holders of Common Stock are subject to the rights of the holders of shares of
any series of preferred stock that the Company may issue in the future.

SERIAL PREFERRED STOCK

The Company may issue Serial Preferred Stock in such series and
denominations as the Company's Board of Directors deems advisable. Accordingly,
the Board of Directors is empowered, without shareholder approval, to issue
Serial Preferred Stock with dividend, liquidation, conversion, voting, or other
rights that could adversely affect the voting power or other rights of holders
of the Common Stock. In the event of issuance, the Serial Preferred Stock could
be utilized, under certain circumstances, as a method of discouraging, delaying,
or preventing a change in control of the Company. The Company does not currently
intend to issue any additional shares of Serial Preferred Stock.

CERTAIN CHARTER PROVISIONS AND DELAWARE GENERAL CORPORATION LAW

The Company's Restated Certificate and Bylaws (the "Bylaws") contain a
number of provisions relating to corporate governance and to the rights of
stockholders. These provisions include (i) the authority of the Board of
Directors to fill vacancies on the Board of Directors; (ii) the authority of the
Board of Directors to issue series of preferred stock with such voting rights
and other powers as the Board of Directors may determine; (iii) notice
requirements relating to nominations to the Board of Directors and to the
raising of business matters at stockholder meetings; (iv) a provision that
special meetings of the stockholders may be called only by the Chairman of the
Board, the President, or the Board of Directors or by written demand of the
holders of 33% of all issued and outstanding shares of the Company entitled to
vote at such meeting; (v) a provision allowing the Board of Directors to
consider certain factors when evaluating certain matters such as tender offers;
(vi) a prohibition on stockholder action by written consent; (vii) a provision
requiring the satisfaction of certain minimum price and procedural requirements
in connection with certain transactions such as business combinations; and
(viii) the requirement that certain "anti-takeover" provisions in the Restated
Certificate may be amended only by super majority vote.

The Company is subject to the provisions of Section 203 of the Delaware
GCL. In general, this statute prohibits a publicly held Delaware corporation
from engaging, under certain circumstances, in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless (i)
prior to the date at which the

40
<PAGE> 41

stockholder became an interested stockholder, the Board of Directors approved
either the business combination or the transaction in which the stockholder
becomes an interested stockholder, (ii) upon consummation of the transaction in
which the stockholder becomes an interested stockholder, the stockholder owned
at least 85% of the outstanding voting stock of the corporation (excluding
shares held by directors who are officers or held in certain employee stock
plans); or (iii) the business combination is approved by the Board of Directors
and by two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder) at a meeting of stockholders (and not
by written consent) held on or subsequent to the date of the business
combination. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or at any time within the prior three years did
own) 15% or more of the corporation's voting stock. Section 203 defines a
"business combination" to include mergers, consolidations, stock sales and asset
based transactions, and other transactions resulting in a financial benefit to
the interested stockholder.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 7,871,580 shares of
Common Stock outstanding, of which approximately 7,366,548 (including all of the
shares sold in this offering) will be freely tradeable in the public market
without restriction or further registration under the Securities Act unless held
by an "affiliate" of the Company, as that term is defined in Rule 144 under the
Securities Act, or subject to the lock-up agreement discussed below. Affiliates
will be subject to certain of the resale limitations of Rule 144 as promulgated
under the Securities Act. In addition, 330,032 shares held by the former
principal stockholder of CompuRoute are subject to Rule 145 of the Securities
Act, which requires affiliates to sell any stock acquired in the acquisition in
accordance with the volume and manner of sale restrictions under Rule 144 under
the Securities Act. In addition, the former principal stockholder of CompuRoute
has agreed with the Company not to sell, publicly or privately, any of the
330,032 shares acquired by her in connection with the CompuRoute acquisition
until December 27, 1997, and no more than the greater of 1% of the outstanding
shares of the Company's Common Stock, or 50,000 shares, in any 90-day period
during the succeeding 12-month period. Subject to the terms of this agreement,
this same stockholder will have certain registration rights covering the resale
of shares of the Company's Common Stock acquired by her in the CompuRoute
acquisition for as long as she is subject to the volume limitations on resale
under Rule 145. Such stockholder has entered into the lock-up agreement with the
Underwriters discussed below and is not selling any shares in this offering. The
former principal stockholder of SVTR has agreed with the Company generally not
to sell, publicly or privately, any of the 175,000 shares acquired by him in
connection with the SVTR acquisition until January 15, 1998, on which date such
shares will become eligible for resale subject to the volume limitations and
other requirements of Rule 144. Such stockholder has entered into the lock-up
agreement with the Underwriters discussed below.

The Company's directors and executive officers, the Selling Stockholders
and certain other stockholders have entered into lock-up agreements with the
Underwriters that restrict the sale of their shares of Common Stock during the
90-day period after the date of this Prospectus without the prior written
consent of Adams, Harkness & Hill, Inc. Notwithstanding the foregoing, Mr.
Fresh, a director of the Company, reserved the right to make a charitable
contribution of up to 5,000 shares of Common Stock, which would not be subject
to the lock-up agreement. In addition, the Company has agreed not to offer,
sell, contract to sell, or otherwise dispose of any shares of Common Stock for a
period of 90 days after the date of this Prospectus without the prior written
consent of Adams, Harkness & Hill, Inc., except for the shares of Common Stock
offered hereby and except that the Company may issue securities pursuant to the
Company's stock plans. See "Underwriting."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three-month period, a number of shares beneficially
owned by such person for at least one year in such amount that does not exceed
the greater of (i) one percent of the then-outstanding shares of Common Stock
(approximately 78,716 shares after the offering), or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale.

41
<PAGE> 42

Sales under Rule 144 also are subject to certain requirements as to the manner
of sale, notice, and the availability of current public information about the
Company. However, a person who is not an affiliate, has not been an affiliate
within three months prior to the date of sale, and who has beneficially owned
his or her shares for at least two years is entitled to sell them without regard
to the volume, manner of sale or notice requirements. Upon completion of this
offering, an aggregate of 982,233 shares currently held by certain officers and
directors of the Company will be available for sale under Rule 144, subject to
the lock-up agreements described above. Sales of substantial amounts of Common
Stock by stockholders of the Company under Rule 144 or otherwise, or even the
potential for such sales, may have a depressive effect on the market price of
the Common Stock.

The Company has registered 1,057,599 shares of Common Stock reserved for
issuance pursuant to the exercise of stock options outstanding or to be granted
under the Company's stock option plans. Shares issued pursuant to such
registration statements upon the exercise of stock options generally will be
eligible for sale in the public market, subject to the lock-up agreements
described above.

42
<PAGE> 43

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Adams,
Harkness & Hill, Inc. and Dain Bosworth Incorporated are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Stockholders, the respective numbers of shares of
Common Stock set forth opposite each Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- ----------------------------------------------------------------------------- ----------------
<S> <C>
Adams, Harkness & Hill, Inc.................................................. 1,000,000
Dain Bosworth Incorporated................................................... 1,000,000
----------------
Total................................................................... 2,000,000
==============
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all shares offered hereby, if any
are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price less
a concession not in excess of $0.75 per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $0.10 per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the Representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 300,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 2,000,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments in connection with the sale of the 2,000,000 shares of Common
Stock offered hereby.

The Company has agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of Common Stock for a period of 90 days after the date of
this Prospectus without the prior written consent of Adams, Harkness & Hill,
Inc., except for the shares of Common Stock offered hereby and except that the
Company may issue securities pursuant to the Company's stock plans. In addition,
the Company's officers and directors, the Selling Stockholders and certain other
stockholders have agreed with the Underwriters not to offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge, or grant any rights with
respect to any shares of Common Stock owned beneficially by them, other than as
a bona fide gift to a person or entity who agrees in writing to be bound by the
foregoing restrictions, without the prior written consent of Adams, Harkness &
Hill, Inc. Notwithstanding the foregoing, Mr. Fresh, a director of the Company,
reserved the right to make a charitable contribution of up to 5,000 shares of
Common Stock, which would not be subject to the foregoing restrictions.

The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

In general, the rules of the Securities and Exchange Commission (the
"Commission") will prohibit the Underwriters from making a market in the Common
Stock during the "cooling off" period immediately preceding the commencement of
sales in the offering. The Commission has, however, adopted exemptions from
these rules that permit passive market making under certain conditions. These
rules permit an Underwriter to continue to make a market subject to the
conditions, among others, that its bid not exceed the highest bid by a market
maker not connected with the offering and that its net purchases on any one

43
<PAGE> 44

trading day not exceed prescribed limits. Pursuant to these exemptions, certain
Underwriters, selling group members (if any), or their respective affiliates may
engage in passive market making in the Common Stock during the cooling off
period.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
a professional association, Phoenix, Arizona. Certain legal matters will be
passed upon for the Underwriters by Cooley Godward LLP, San Diego, California.

EXPERTS

The consolidated financial statements of Cerprobe Corporation and
subsidiaries as of December 31, 1995 and 1996, and for each of the years in the
three-year period ended December 31, 1996, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements, and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, New York, New York 10048, and Chicago Regional
Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 upon
payment of the prescribed fees. The Commission also maintains a Web site that
contains reports, proxy and information statements and other materials that are
filed through the Commission's Electronic Data Gathering, Analysis, and
Retrieval system. This Web site can be accessed at http://www.sec.gov.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, with respect to the shares offered hereby.
This Prospectus does not contain all the information contained in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information regarding
the Company and the shares of Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits which are a part thereof,
which may be obtained upon request to the Commission and the payment of the
prescribed fee. Material contained in the Registration Statement may be examined
at the Commission's Washington, D.C. office and copies may be obtained at the
Commission's Washington, D. C. office upon payment of prescribed fees.
Statements contained in this Prospectus are not necessarily complete, and in
each case reference is made to the copy of such contracts or documents filed as
an exhibit to the Registration Statement, each such statement being qualified by
this reference.

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<PAGE> 45

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents or information have been filed by the Registrant
with the Commission and are incorporated herein by reference, except as
superseded or modified herein:

1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996;

2. The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997 and June 30, 1997;

3. The Company's Current Report on Form 8-K filed January 30, 1997;

4. The Company's Current Report on Form 8-K/A filed March 31, 1997;
and

5. The Company's Registration Statement filed December 15, 1983, as
amended by Form 8-A/A filed March 27, 1996, registering the Company's
Common Stock under Section 12(g) of the Exchange Act as it applies to the
description of the Company's Common Stock.

All documents and information filed by the Company pursuant to Sections
13(a), 13(c), 14, and 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of the offering shall be deemed to be
incorporated by reference into this Prospectus as of the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference into this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document described
above (other than exhibits). Requests for such copies should be directed to
Cerprobe Corporation, 1150 North Fiesta Boulevard, Gilbert, Arizona 85233,
Attention: Investor Relations Department, telephone (602) 333-1500.

45
<PAGE> 46

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997
(unaudited)......................................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and for the Six Months Ended June 30, 1996 and 1997 (unaudited)................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994,
1995 and 1996 and for the Six Months Ended June 30, 1997 (unaudited)................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and for the Six Months Ended June 30, 1996 and 1997 (unaudited)................ F-6
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE> 47

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Cerprobe Corporation:

We have audited the accompanying consolidated balance sheets of Cerprobe
Corporation and subsidiaries as of December 31, 1995 and 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cerprobe
Corporation and subsidiaries as of December 31, 1995 and 1996 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Phoenix, Arizona
February 14, 1997, except as to Note 20,
which is as of August 25, 1997

F-2
<PAGE> 48

CERPROBE CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- ----------- JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 263,681 $ 5,564,557 $ 1,482,445
Accounts receivable, net of allowance of $173,000 in 1995,
$223,000 in 1996 and $218,278 in 1997.............................. 4,377,041 5,564,203 9,718,798
Inventories, net..................................................... 2,802,081 3,862,753 6,525,933
Note receivable...................................................... -- 250,000 --
Prepaid expenses..................................................... 111,673 377,003 230,344
Income taxes receivable.............................................. 163,464 214,097 --
Deferred tax asset................................................... 270,599 303,265 421,459
----------- ----------- -----------
Total current assets.......................................... 7,988,539 16,135,878 18,378,979
Property, plant and equipment, net..................................... 4,667,786 11,446,291 13,769,965
Intangibles, net....................................................... 1,997,409 2,602,812 2,481,121
Other assets........................................................... 313,716 1,326,592 1,802,681
----------- ----------- -----------
Total assets.................................................. $14,967,450 $31,511,573 $36,432,746
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 1,499,853 $ 2,739,064 $ 4,532,211
Accrued expenses..................................................... 788,599 1,600,120 3,124,388
Demand note payable.................................................. -- 1,030,000 1,000,000
Convertible subordinated debentures.................................. 595,000 -- --
Current portion of notes payable..................................... 123,743 128,180 2,135,585
Current portion of capital leases.................................... 209,885 634,755 581,760
----------- ----------- -----------
Total current liabilities..................................... 3,217,080 6,132,119 11,373,944
Notes payable, less current portion.................................... 408,376 278,645 452,312
Capital leases, less current portion................................... 572,830 1,462,799 1,139,279
Deferred tax liability................................................. 66,123 100,789 200,783
Other liabilities...................................................... 46,801 394,011 477,485
----------- ----------- -----------
Total liabilities............................................. 4,311,210 8,368,363 13,643,803
----------- ----------- -----------
Minority interest...................................................... -- 12,851 --
----------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.05 par value; authorized 10,000,000 shares; issued
and outstanding 330 shares of Series A Convertible Preferred Stock,
liquidation preference of $10,164 per share at December 31, 1996
and $10,875 per share at June 30, 1997............................. -- 16 16
Common stock, $.05 par value; authorized, 10,000,000 shares; issued
and outstanding 4,095,851 shares at December 31, 1995, 6,027,714 at
December 31, 1996 and 6,353,047 at June 30, 1997................... 204,792 301,386 317,652
Additional paid-in capital........................................... 7,239,410 20,652,290 23,654,605
Retained earnings (accumulated deficit).............................. 3,466,464 2,105,674 (1,199,633)
Unearned compensation................................................ (241,872) -- --
Foreign currency translation adjustment.............................. (12,554) 70,993 16,303
----------- ----------- -----------
Total stockholders' equity.................................... 10,656,240 23,130,359 22,788,943
----------- ----------- -----------
Total liabilities and stockholders' equity.................... $14,967,450 $31,511,573 $36,432,746
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 49

CERPROBE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $14,251,485 $26,098,637 $37,308,199 $19,359,822 $34,582,921
Costs of goods sold................ 8,213,966 13,706,435 20,343,516 10,347,795 20,403,329
----------- ----------- ----------- ----------- -----------
Gross profit.............. 6,037,519 12,392,202 16,964,683 9,012,027 14,179,592
----------- ----------- ----------- ----------- -----------
Expenses:
Selling, general and
administrative................. 3,693,401 7,502,598 10,725,075 5,274,831 9,127,311
Engineering and product
development.................... 417,198 706,680 902,909 378,267 617,774
Acquisition related expenses..... -- -- 4,584,000 -- 6,164,156
----------- ----------- ----------- ----------- -----------
Total expenses............ 4,110,599 8,209,278 16,211,984 5,653,098 15,909,241
----------- ----------- ----------- ----------- -----------
Operating income (loss)... 1,926,920 4,182,924 752,699 3,358,929 (1,729,649)
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income.................. 18,882 44,697 467,043 168,243 67,664
Interest expense................. (115,254) (153,758) (221,248) (116,457) (296,853)
Other income, net................ 92,796 140,111 246,862 87,482 114,846
----------- ----------- ----------- ----------- -----------
Total other income
(expense)............... (3,576) 31,050 492,657 139,268 (114,343)
----------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes and
minority interest....... 1,923,344 4,213,974 1,245,356 3,498,197 (1,843,992)
Minority interest share of loss.... -- -- 94,854 62,288 28,985
----------- ----------- ----------- ----------- -----------
Income (loss) before
income
taxes................... 1,923,344 4,213,974 1,340,210 3,560,485 (1,815,007)
Provision for income taxes......... (710,521) (1,811,727) (2,701,000) (1,693,000) (1,490,300)
----------- ----------- ----------- ----------- -----------
Net income (loss)......... $ 1,212,823 $ 2,402,247 $(1,360,790) $ 1,867,485 $(3,305,307)
=========== =========== =========== =========== ===========

Net income (loss) per common and
common equivalent share:
Primary.......................... $ 0.36 $ 0.59 $ (0.30) $ 0.35 $ (0.52)
=========== =========== =========== =========== ===========
Fully diluted.................... $ 0.30 $ 0.49 $ (0.30) $ 0.32 $ (0.52)
=========== =========== =========== =========== ===========
Weighted average number of common
and common equivalent shares
outstanding:
Primary.......................... 3,387,220 4,071,233 4,579,598 5,262,320 6,321,399
=========== =========== =========== =========== ===========
Fully diluted.................... 4,006,801 4,862,137 4,579,598 5,797,680 6,321,399
=========== =========== =========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 50

CERPROBE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
COMMON PREFERRED RETAINED
SHARES SHARES ADDITIONAL EARNINGS
ISSUED AND ISSUED AND COMMON PREFERRED PAID-IN (ACCUMULATED
OUTSTANDING OUTSTANDING STOCK STOCK CAPITAL DEFICIT)
----------- ----------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994............... 2,976,018 -- $148,800 $ -- $ 2,973,645 $ (59,129)
Conversion of subordinated
debentures......................... 40,000 -- 2,000 -- 38,000 --
Stock options exercised.............. 207,333 -- 10,367 -- 191,326 --
Tax benefit of exercise of
nonqualified stock options......... -- -- -- -- 482,461 --
Cash dividends paid ($0.03 a
share)............................. -- -- -- -- -- (89,477)
Translation adjustment............... -- -- -- -- -- --
Net income........................... -- -- -- -- -- 1,212,823
--------- ----- -------- ---- ----------- -----------
Balance, December 31, 1994............. 3,223,351 -- 161,167 -- 3,685,432 1,064,217
Issuance of stock options at less
than fair market value............. -- -- -- -- 387,000 --
Compensation expense related to stock
options............................ -- -- -- -- -- --
Stock options exercised.............. 160,000 -- 8,000 -- 199,464 --
Tax benefit of exercise of
nonqualified stock options......... -- -- -- -- 340,170 --
Issuance of common stock for
acquisition........................ 712,500 -- 35,625 -- 2,627,344 --
Translation adjustment............... -- -- -- -- -- --
Net income........................... -- -- -- -- -- 2,402,247
--------- ----- -------- ---- ----------- -----------
Balance, December 31, 1995............. 4,095,851 -- 204,792 -- 7,239,410 3,466,464
Issuance of convertible preferred
stock.............................. -- 1,000 -- 50 9,399,950 --
Conversion of subordinated
debentures......................... 595,000 -- 29,750 -- 565,250 --
Compensation expense related to stock
options............................ -- -- -- -- (192,489) --
Stock options exercised.............. 164,702 -- 8,235 -- 556,744 --
Tax benefit of exercise of
nonqualified stock options......... -- -- -- -- 542,000 --
Conversion of preferred stock for
common stock....................... 772,161 (670) 38,609 (34) (38,575) --
Issuance of common stock for
acquisition........................ 400,000 -- 20,000 -- 2,580,000 --
Translation adjustment............... -- -- -- -- -- --
Net loss............................. -- -- -- -- -- (1,360,790)
--------- ----- -------- ---- ----------- -----------
Balance, December 31, 1996............. 6,027,714 330 301,386 16 20,652,290 2,105,674
Stock options exercised
(unaudited)........................ 25,333 -- 1,266 -- 153,065 --
Issuance of common stock for
acquisition (unaudited)............ 300,000 -- 15,000 -- 2,849,250 --
Translation adjustment (unaudited)... -- -- -- -- -- --
Net loss (unaudited)................. -- -- -- -- -- (3,305,307)
--------- ----- -------- ---- ----------- -----------
Balance, June 30, 1997 (unaudited)..... 6,353,047 330 $317,652 $ 16 $23,654,605 $(1,199,633)
========= ===== ======== ==== =========== ===========

FOREIGN
CURRENCY TOTAL
UNEARNED TRANSLATION STOCKHOLDERS'
COMPENSATION ADJUSTMENT EQUITY
------------ ----------- -------------
<S> <C> <C> <C>
Balance, January 1, 1994............... $ -- $ -- $ 3,063,316
Conversion of subordinated
debentures......................... -- -- 40,000
Stock options exercised.............. -- -- 201,693
Tax benefit of exercise of
nonqualified stock options......... -- -- 482,461
Cash dividends paid ($0.03 a
share)............................. -- -- (89,477)
Translation adjustment............... -- 12,138 12,138
Net income........................... -- -- 1,212,823
--------- -------- -----------
Balance, December 31, 1994............. -- 12,138 4,922,954
Issuance of stock options at less
than fair market value............. (387,000) -- --
Compensation expense related to stock
options............................ 145,128 -- 145,128
Stock options exercised.............. -- -- 207,464
Tax benefit of exercise of
nonqualified stock options......... -- -- 340,170
Issuance of common stock for
acquisition........................ -- -- 2,662,969
Translation adjustment............... -- (24,692) (24,692)
Net income........................... -- -- 2,402,247
--------- -------- -----------
Balance, December 31, 1995............. (241,872) (12,554) 10,656,240
Issuance of convertible preferred
stock.............................. -- -- 9,400,000
Conversion of subordinated
debentures......................... -- -- 595,000
Compensation expense related to stock
options............................ 241,872 -- 49,383
Stock options exercised.............. -- -- 564,979
Tax benefit of exercise of
nonqualified stock options......... -- -- 542,000
Conversion of preferred stock for
common stock....................... -- -- --
Issuance of common stock for
acquisition........................ -- -- 2,600,000
Translation adjustment............... -- 83,547 83,547
Net loss............................. -- -- (1,360,790)
--------- -------- -----------
Balance, December 31, 1996............. -- 70,993 23,130,359
Stock options exercised
(unaudited)........................ -- -- 154,331
Issuance of common stock for
acquisition (unaudited)............ -- -- 2,864,250
Translation adjustment (unaudited)... -- (54,690) (54,690)
Net loss (unaudited)................. -- -- (3,305,307)
--------- -------- -----------
Balance, June 30, 1997 (unaudited)..... $ -- $ 16,303 $22,788,943
========= ======== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 51

CERPROBE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEARS ENDED DECEMBER 31,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ 1,212,823 $ 2,402,247 $(1,360,790) $ 1,867,485 $(3,305,307)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization........... 458,436 1,125,584 1,930,341 854,628 1,657,746
Purchased research and development...... -- -- 4,584,000 -- 5,664,156
Tax benefit from stock options
exercised............................. 482,461 340,170 542,000 182,000 --
(Gain) loss on sale of fixed assets..... (50) 4,787 -- -- 426
Deferred income taxes................... (93,974) (110,502) 2,000 (52,000) (18,000)
Provision for losses on accounts
receivable, net....................... 24,000 12,000 12,000 2,000 (14,605)
Provision for obsolete inventory, net... 67,200 80,000 75,000 31,000 167,132
Compensation expense.................... -- 145,128 49,383 51,398 --
Loss applicable to minority interest.... -- -- (94,854) (62,288) (28,985)
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Accounts receivable..................... (907,762) (1,444,689) (194,293) (1,472,922) (3,255,550)
Inventories............................. (51,285) (1,038,216) (812,904) (630,129) 528,436
Prepaid expenses and other assets....... (59,418) (389,988) (562,590) 187,607 (57,474)
Income taxes receivable................. -- (163,464) (50,633) 163,464 214,097
Accounts payable and accrued expenses... 315,979 724,796 1,229,408 68,360 1,297,644
Other liabilities....................... 90,356 (42,289) 311,947 6,996 48,240
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities....................... 1,538,766 1,645,564 5,660,015 1,197,599 2,897,956
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment............................... (1,354,694) (1,960,775) (4,922,960) (2,091,021) (3,195,310)
Purchase of marketable securities......... -- -- -- (2,279,188) --
Investment in CRPB Investors, L.L.C. ..... -- -- (659,233) -- (607)
Investment in Upsys-Cerprobe, L.L.C. ..... -- -- -- -- (21,892)
Purchase of Fresh Test Technology, net of
cash acquired........................... -- (81,698) -- -- --
Purchase of CompuRoute, net of cash acquired... -- -- (4,327,162) -- (80,102)
Purchase of SVTR, net of cash acquired.... -- -- -- -- (2,565,697)
Proceeds from sale of equipment........... 50 42,062 -- -- 71,183
(Increase) decrease in note receivable.... -- -- (250,000) -- 250,000
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities....................... (1,354,644) (2,000,411) (10,159,355) (4,370,209) (5,542,425)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Dividends paid............................ (89,477) -- -- -- --
Principal payments on notes payable and
capital leases.......................... (79,603) (302,563) (356,015) (178,322) (3,539,072)
Net proceeds from note payable............ -- -- -- -- 2,001,788
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 52

CERPROBE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEARS ENDED DECEMBER 31,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net proceeds from issuance of convertible
preferred stock......................... -- -- 9,400,000 9,400,000 --
Net proceeds from stock options
exercised............................... 201,693 207,464 564,979 528,574 154,331
Capital contribution by minority interest
partners................................ -- -- 107,705 -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............. 32,613 (95,099) 9,716,669 9,750,252 (1,382,953)
----------- ----------- ----------- ----------- -----------
Effect of exchange rates on cash and cash
equivalents............................... 12,138 (24,692) 83,547 26,913 (54,690)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................... 228,873 (474,638) 5,300,876 6,604,555 (4,082,112)
Cash and cash equivalents, beginning of
period.................................... 509,446 738,319 263,681 263,681 5,564,557
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of period.... $ 738,319 $ 263,681 $ 5,564,557 $ 6,868,236 $ 1,482,445
=========== =========== =========== =========== ===========
Supplemental schedule of noncash investing
and financing activities:
Conversion of subordinated debentures to
common stock............................ $ 40,000 $ -- $ 595,000 $ 110,000 $ --
=========== =========== =========== =========== ===========
Equipment acquired under capital leases
and issuances of notes payable.......... $ 195,293 $ 1,056,817 $ 1,553,968 $ -- $ 4,144
=========== =========== =========== =========== ===========
Supplemental disclosures of cash flow
information:
Interest paid............................. $ 115,873 $ 153,690 $ 218,383 $ 93,833 $ 296,853
=========== =========== =========== =========== ===========
Income taxes paid......................... $ (9,731) $ 1,679,876 $ 2,060,000 $ 1,128,016 $ 1,315,096
=========== =========== =========== =========== ===========
Supplemental disclosures of noncash investing activities:
The Company made acquisitions for $3.1 million, $7.4 million and $5.7 million in the years ended December 31,
1995 and 1996 and the six months ended June 30, 1997, respectively. The purchase prices were allocated to
the assets acquired and liabilities assumed based on their fair values as indicated in the notes to the
consolidated financial statements. A summary of the acquisitions is as follows:
Purchase price............................ $ 3,065,834 $ 7,432,543 $ 5,715,263
Less cash acquired........................ (321,167) (505,381) (285,316)
Common stock issued....................... (2,662,969) (2,600,000) (2,864,250)
----------- ----------- -----------
Cash invested........................... $ 81,698 $ 4,327,162 $ 2,565,697
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 53

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Cerprobe offers comprehensive solutions for semiconductor test integration
and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE
test boards. The Company believes it is the only company that designs,
manufactures, and assembles each of the electromechanical components that assure
the integrity of the electrical test signal that passes from the automatic test
equipment ("ATE") to the IC device under test. The Company also refurbishes,
reconfigures, and services wafer probers. The Company's products and services
enable semiconductor manufacturers to test integrated circuits ("ICs") in wafer
form and as packaged ICs. Testing ICs assures IC quality, reduces manufacturing
costs, improves the accuracy of manufacturing yield data, and identifies
repairable memory ICs. The Company markets its products and services worldwide
to semiconductor manufacturers, both those who manufacture ICs for resale and
those who manufacture ICs for inclusion in their own products.

Unless the context indicates otherwise, all references to "Cerprobe" or the
"Company" refer to Cerprobe Corporation and its subsidiaries.

Basis of Preparation

The accompanying consolidated financial statements as of June 30, 1997 and
for the six months ended June 30, 1996 and June 30, 1997 are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of
financial position and operating results for the interim periods.

Results of operations for interim periods are not necessarily indicative of
those to be achieved for full fiscal years.

Principles of Consolidation

The consolidated financial statements include the accounts of Cerprobe and
its wholly-owned subsidiaries: Cerprobe Europe Limited, Cerprobe Asia Holdings
PTE LTD, CompuRoute, Inc., SVTR, Inc. and Cobra Venture Management, Inc.

Cerprobe Asia Holdings PTE LTD together with Asian investors, formed
Cerprobe Asia PTE LTD in 1995. Cerprobe Asia Holdings PTE LTD is a 70% owner of
Cerprobe Asia PTE LTD. Cerprobe Asia PTE LTD created wholly-owned subsidiaries,
Cerprobe Singapore PTE LTD and Cerprobe Taiwan Co. LTD, to operate full service
sales and manufacturing plants. Cerprobe-Singapore became operational in April
1996 and Cerprobe-Taiwan in January 1997. All significant intercompany
transactions have been eliminated in consolidation.

The consolidated balance sheet at December 31, 1996 also includes the
assets and liabilities of CompuRoute, Inc. ("CompuRoute"), a wholly-owned
subsidiary, acquired on December 27, 1996; the consolidated financial statements
do not include the 1996 operations of CompuRoute due to the date of acquisition.

On January 15, 1997, the Company acquired all of the outstanding stock of
SVTR, Inc. ("SVTR"), a company that refurbishes, reconfigures and services wafer
probing equipment. Accordingly, the consolidated financial statements as of June
30, 1997 and for the six months ended June 30, 1997 include SVTR's activities
since the date of acquisition.

F-8
<PAGE> 54

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

On May 30, 1997, the Company entered into a joint venture with Upsys Reseau
Eurisys ("Upsys"), a French company owned by IBM and GAME, a French test and
engineering company. The joint venture, called Upsys-Cerprobe, L.L.C., will
assemble and repair the Cobra Probe in Arizona for distribution by Cerprobe
throughout the United States and Asia. Cerprobe owns 55% of the joint venture
and Upsys owns 45%.

The Company manages the joint venture and established a wholly owned
subsidiary called Cobra Venture Management, Inc. to function as manager of
Upsys-Cerprobe, L.L.C. Accordingly, the consolidated financial statements as of
June 30, 1997 and for the six months ended June 30, 1997 include the activities
of both organizations.

Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and in banks and cash
invested in short-term securities with original maturities of three months or
less.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or
market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated by the
straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Building..................................................... 39 years
Manufacturing tools and equipment............................ 3-7 years
Office furniture and equipment............................... 3-7 years
Computer hardware and software............................... 3 years
Leasehold improvements....................................... Life of lease
</TABLE>

Other Intangibles

Goodwill represents the amount by which the cost of businesses purchased
exceeds the fair value of the net assets acquired. Goodwill is amortized over a
period of eight years using the straight-line method. The Company continually
evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant revision or that the
remaining balance may not be recoverable. When factors indicate that the asset
should be evaluated for possible impairment, the Company uses an estimate of the
undiscounted net cash flows over the remaining life of the asset in measuring
whether the asset is recoverable.

Patents and technology are stated at fair market value at the date of
acquisition less accumulated amortization and are amortized over a period of
five years using the straight-line method. Research and

F-9
<PAGE> 55

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

development costs and any costs associated with internally developed patents,
formulas or other proprietary technology are expensed in the year incurred.

Income Taxes

The Company utilizes the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Foreign Currency Translation

The financial statements of the Company's Europe and Asia subsidiaries are
translated into U.S. dollars in accordance with SFAS No. 52, "Foreign Currency
Translation." Assets and liabilities of the subsidiaries are translated into
U.S. dollars at current exchange rates. Income and expense items are translated
at the average exchange rate for the year. The resulting translation adjustments
are recorded directly as a separate component of stockholders' equity. All
transaction gains or losses are recorded in the statement of operations.

Revenue Recognition

The Company records revenue when goods are shipped.

Net Income (Loss) Per Share

Primary net income (loss) per common and common equivalent share is
computed using the weighted average number of common shares outstanding during
each year and includes shares issuable upon exercise of stock options, warrants,
and conversion of convertible preferred stock when the effect of such issuance
is dilutive. The calculation of fully diluted net income (loss) per common and
common equivalent share also includes shares issuable upon conversion of
convertible subordinated debentures when the effect of such issuance is
dilutive.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of " ("SFAS No. 121"), which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company adopted SFAS No. 121 in the first quarter of 1996 and this
adoption did not have a material impact on the consolidated financial
statements.

Stock Based Compensation

Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of

F-10
<PAGE> 56

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock Based Compensation" ("SFAS No. 123"), which permits
entities to recognize as expense over the vesting period the fair value of all
stock based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for employee
stock option grants made in 1995 and future years as if the fair value based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.

Reclassifications

Certain reclassifications have been made to the prior year financial
statements to conform to the 1996 presentation.

Recent Accounting Pronouncements

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("SFAS No. 128). SFAS No. 128 establishes standards
for computing and presenting earnings per share ("EPS"), and supersedes APB
Opinion No. 15. SFAS No. 128 replaces primary EPS with basic EPS and requires
dual presentation of basic and diluted EPS. SFAS No. 128 is effective for both
interim and annual periods ending after December 15, 1997. Earlier application
is not permitted. After adoption, all prior-period EPS data shall be restated to
conform to SFAS No. 128. Pro forma basic and diluted EPS, as calculated under
SFAS No. 128 would have been $0.38, $0.59, $(0.23) and $(0.52) and $0.30, $0.51,
$(0.23) and $(0.52) for the years ended December 31, 1994, 1995, 1996 and for
the six months ended June 30, 1997, respectively.

(2) INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials................................ $1,655,974 $3,328,422 $5,747,767
Work-in-process.............................. 1,229,107 615,360 1,058,158
Finished goods............................... -- 47,971 98,010
Reserve for obsolete inventories............. (83,000) (129,000) (378,002)
---------- ---------- ----------
$2,802,081 $3,862,753 $6,525,933
========== ========== ==========
</TABLE>

(3) NOTE RECEIVABLE

The Company had a note receivable from SVTR dated December 12, 1996, for
$250,000. Interest on the outstanding balance was 1% in excess of the prime
rate. As of December 31, 1996, the interest rate was 9.25%. This note was repaid
upon the acquisition of SVTR by the Company on January 15, 1997.

F-11
<PAGE> 57

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

(4) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land...................................... $ -- $ 359,253 $ 364,017
Building.................................. -- 1,947,877 1,973,704
Manufacturing tools and equipment......... 4,825,724 8,789,140 10,551,767
Office furniture and equipment............ 694,643 1,063,547 1,697,900
Leasehold improvements.................... 759,843 1,112,576 1,770,813
Computer hardware and software............ 1,067,444 2,402,551 2,823,245
Construction in progress.................. 398,838 483,591 567,727
Accumulated depreciation and
amortization............................ (3,078,706) (4,712,244) (5,979,208)
---------- ---------- ----------
$ 4,667,786 $11,446,291 $13,769,965
========== ========== ==========
</TABLE>

(5) INTANGIBLES

Intangibles consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill..................................... $2,120,505 $3,009,638 $3,089,740
Patents and technology....................... 90,839 90,839 90,839
Accumulated amortization..................... (213,935) (497,665) (699,458)
---------- ---------- ----------
$1,997,409 $2,602,812 $2,481,121
========== ========== ==========
</TABLE>

(6) OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
-------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Investment in CRPB Investors, L.L.C. .......... $ -- $ 659,233 $ 659,840
Deferred compensation.......................... 306,348 343,755 412,175
Other assets and deposits...................... 7,368 323,604 730,666
-------- ---------- ----------
$313,716 $1,326,592 $1,802,681
======== ========== ==========
</TABLE>

In September 1996, the Company acquired a 36% interest in CRPB Investors,
L.L.C. for $659,233. CRPB Investors, L.L.C., an Arizona limited liability
company, was formed for the purpose of owning and operating the 83,000 square
foot facility being built to serve as Cerprobe's worldwide headquarters. The
investment will be accounted for by the equity method of accounting.

F-12
<PAGE> 58

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

(7) ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
-------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and related taxes.............. $482,866 $1,070,777 $1,218,162
Accrued acquisition related expenses........... -- -- 490,676
Other accrued expenses......................... 305,733 529,343 1,415,550
-------- ---------- ----------
$788,599 $1,600,120 $3,124,388
======== ========== ==========
</TABLE>

(8) DEMAND NOTE PAYABLE

On December 27, 1996, the Company assumed a demand note with Security Bank
of Garland, Texas for approximately $1,030,000 on the purchase of land and
building occupied by CompuRoute, Inc., located in Dallas, Texas. Interest on the
outstanding balance is 1.00% in excess of the prime rate. As of December 31,
1996 and June 30, 1997, the interest rate was 9.25% and 9.50%, respectively,
with balances outstanding of $1,030,000 and $1,000,000, respectively.

(9) CONVERTIBLE SUBORDINATED DEBENTURES AND NOTES PAYABLE

In March 1991, the Company issued $1,000,000 in aggregate principal amount
of Convertible Subordinated Debentures (the "Debentures"). The Debentures were
convertible into shares of the Company's common stock at a conversion price
equal to $1.00 per share. As of December 31, 1995 and 1996, respectively,
$595,000 and $0 in principal amount of debentures were outstanding.

On April 30, 1996, the Company entered into an unsecured $3,000,000
revolving line of credit with First Interstate Bank (now Wells Fargo Bank),
which expired on April 28, 1997. The non-use fee under the line of credit was
0.125% of the unused portion, calculated per annum. The interest rate on any
amounts borrowed under the revolving credit agreement was the lower of prime
rate, which was 8.25% at December 31, 1996, or LIBOR (London Interbank Rate)
plus 2.25%, which was 7.75% at December 31, 1996. There was no amount
outstanding under this agreement at December 31, 1996.

In February 1997, the Company entered into a revolving line of credit with
Wells Fargo Bank of $10,000,000 for general corporate purposes and possible
future acquisitions, which matures on August 15, 1998. The unsecured line of
credit replaced the $3,000,000 revolving line of credit. Interest on the
outstanding balance is at the prime rate or 30, 60, or 90 day LIBOR plus 1.75%.
The non-use fee under the line of credit is 0.125% for outstanding balances
exceeding $3,000,000 and 0.25% for outstanding balances less than $3,000,000.
The line of credit contains certain restrictive covenants which include, among
other things, restrictions on the declaration or payment of dividends, the
incurrence or assumption of other indebtedness, and the making of loans to or
investments in others. The line also requires the Company to maintain a
specified net worth, as defined, to maintain a required debt to equity ratio,
and to maintain certain other financial ratios. The Company was in compliance
with all such covenants at December 31, 1996 and June 30, 1997. At June 30,
1997, the Company had approximately $2,000,000 outstanding from LIBOR rate
advances with an interest rate of 7.625%.

The Company has a note payable with Zion Credit Corporation for the
purchase of manufacturing equipment. The note accrues interest at 9.4% annually
with monthly payments of $13,185 including

F-13
<PAGE> 59

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

interest through December 1999. At December 31, 1996 and June 30, 1997, $406,825
and $344,109, respectively, was outstanding under the note.

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Convertible subordinated debentures............ $ 595,000 $ -- $ --
Notes payable.................................. 532,119 406,825 586,109
---------- --------- ---------
1,127,119 406,825 586,109
Less current portion........................... (718,743) (128,180) (133,797)
---------- --------- ---------
Long-term debt................................. $ 408,376 $ 278,645 $ 452,312
========== ========= =========
</TABLE>

Annual maturities of long-term debt as of December 31, 1996 are as follows:

(10) STOCKHOLDERS' EQUITY

Convertible Preferred Stock

In January 1996, the Company issued 1,000 shares of convertible preferred
stock for $10,000,000. Net proceeds, after deducting expenses, were $9,400,000.
If a holder did not convert within the first two years, then automatic
conversion would occur at the end of the second year. The convertible preferred
stock would convert at the lesser of 110% of the fixed strike price of $16.55 or
90% of the average five day closing price prior to the conversion date. The
Company was entitled to call the convertible preferred stock at any time in
minimum amounts of $2,000,000 at a price of 125% of par, or upon a merger,
buyout, or acquisition.

Additionally, the Company issued 39,275 common stock warrants in January
1996 to the placement agent. These give the holder the right to purchase from
the Company not more than 39,275 shares of the Company's common stock at a price
of $16.55 per share on or after January 16, 1997, with expiration in four years.

During 1996, 670 shares of convertible preferred stock were converted into
772,161 shares of common stock. Accordingly, 330 shares of convertible preferred
stock were outstanding at December 31, 1996 and June 30, 1997. If the remaining
holders of the convertible preferred stock were to elect to convert their shares
into shares of Cerprobe common stock based on the market price of common stock
as of December 31, 1996, or as of June 30, 1997, the Company would have been
required to issue more than 800,000 shares of common stock. To insure compliance
with Nasdaq National Market rules requiring shareholder approval of issuances of
common stock representing greater than 20% of all shares outstanding, the
Company has the right to redeem any shares of convertible preferred stock that,
if converted, would result in the issuance of more than 800,000 shares of
Cerprobe common stock. See Note 20.

F-14
<PAGE> 60

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

(11) INCOME TAXES

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
---------------------------------- -----------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal............................. $495,000 $1,391,499 $2,093,000 $1,352,000 $1,165,000
State............................... 215,521 420,228 608,000 341,000 325,300
-------- ---------- ---------- ---------- ----------
$710,521 $1,811,727 $2,701,000 $1,693,000 $1,490,300
======== ========== ========== ========== ==========
Current............................. $804,495 $1,922,229 $2,699,000 $1,745,000 $1,508,300
Deferred............................ (93,974) (110,502) 2,000 (52,000) (18,000)
-------- ---------- ---------- ---------- ----------
$710,521 $1,811,727 $2,701,000 $1,693,000 $1,490,300
======== ========== ========== ========== ==========
</TABLE>

A reconciliation of the difference between the provision for income taxes
and income taxes at the statutory U.S. federal income tax rate is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
----------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income tax expense (benefit) at
statutory rate................... $ 654,000 $1,433,000 $ 456,000 $1,211,000 $ (617,000)
State income taxes, net............ 142,000 253,000 362,700 233,000 218,000
Purchased research and development
not benefited.................... -- -- 1,558,560 -- 1,926,000
Foreign losses not benefited....... 149,000 199,000 167,450 99,000 --
Amortization of intangibles........ -- 67,000 90,200 45,000 66,000
Utilization of net operating loss
carryforwards.................... (186,400) (38,045) -- -- (80,000)
Research tax credit................ -- (54,440) -- -- --
Other.............................. (48,079) (47,788) 66,090 105,000 (22,700)
--------- ---------- ---------- ---------- ----------
$ 710,521 $1,811,727 $2,701,000 $1,693,000 $1,490,300
========= ========== ========== ========== ==========
</TABLE>

F-15
<PAGE> 61

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

The components of the Company's deferred tax asset and deferred tax
liability are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
--------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Foreign loss carry forward................................ $ 348,000 $ 545,000 $ 465,000
Reserves and accruals not currently deductible............ 270,599 303,265 421,459
Deferred compensation..................................... 48,784 87,747 87,747
--------- --------- ---------
Total gross deferred tax assets................... 667,383 936,012 974,206
Less valuation allowance.................................. (348,000) (545,000) (465,000)
--------- --------- ---------
Deferred tax asset........................................ 319,383 391,012 509,206
--------- --------- ---------
Deferred tax liability:
Difference between book and tax depreciation of property,
plant and equipment.................................... 114,907 188,536 288,530
--------- --------- ---------
Net deferred tax asset.................................... $ 204,476 $ 202,476 $ 220,676
========= ========= =========
</TABLE>

The valuation allowance increased by $163,000 and $197,000 for the years
ended December 31, 1995 and 1996, respectively, decreased by $80,000 during the
six months ended June 30, 1997, and is due to foreign losses for which there is
no assurance of realizing a tax benefit. A valuation allowance has not been
provided for the other deferred tax assets since management believes realization
of these deferred tax assets is considered more likely than not.

During 1995 and 1996, tax benefits were recorded for the exercise of stock
options under the nonqualified stock option plan. The benefits of $340,170 and
$542,000 were recorded to additional paid-in capital.

(12) STOCK OPTION PLAN

The Company adopted in 1983, 1989, and 1995, respectively, an incentive
stock option plan, a nonqualified stock option plan, and a combination stock
option plan. The combined plans provided for the issuance of options to purchase
1,685,000 shares of the Company's common stock, of which 207,834 were available
for grant as of December 31, 1996. In accordance with the plans, options are to
be granted at no less than 100% of the fair market value of the shares at the
date of grant. The options become exercisable on a basis as established by the
Company's Compensation Advisory Committee of the Board of Directors and are
exercisable for a period of 5 to 10 years. The Company extended the exercise
date on 72,000 options issued under the nonqualified stock option plan in 1995.
Compensation expense related to these options was $145,128 and $49,383 during
the years ended December 31, 1995 and 1996, respectively. On June 4, 1997, the
stockholders approved the amendments to and the restatement of the Company's
1995 stock option plan to increase the number of shares of the Company's common
stock that may be issued pursuant to the 1995 plan from 500,000 to 800,000.

The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its plans
because, as discussed below, the alternative fair value accounting provided for
under SFAS No. 123, "Accounting for Stock-Based Compensation," requires the use
of option valuation models that were not developed for use in valuing employee
stock options. Under

F-16
<PAGE> 62

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

APB No. 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of the grant, no
compensation expense is recognized.

Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS No. 123 and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value of each option granted for 1995 and 1996 was estimated as of the date of
the grant using the Black-Scholes option pricing model with the following
weighted average assumptions for 1995 and 1996, respectively; risk-free interest
rates of 5.8% and 6.1%; dividend yields of zero for both years; volatility
factors of the expected market price of the Company's common stock of 51.3% and
52.5%; and weighted average expected lives of the options of 3 years for both
years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

Pro forma net income (loss) reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for employee stock
options under SFAS No. 123 is not reflected in the pro forma amounts presented
below because compensation cost is reflected over the options' vesting periods
of generally between 3 and 4 years and the compensation cost for options granted
prior to January 1, 1995 is not considered. The Company's pro forma information
follows:

<TABLE>
<CAPTION>
1995 1996
---------- -----------
UNAUDITED
<S> <C> <C>
Net income (loss)
As reported............................................. $2,402,247 $(1,360,790)
Pro forma............................................... $2,360,326 $(1,543,070)
Primary earnings (loss) per share
As reported............................................. $ 0.59 $ (0.30)
Pro forma............................................... $ 0.58 $ (0.34)
Fully diluted earnings (loss) per share
As reported............................................. $ 0.49 $ (0.30)
Pro forma............................................... $ 0.49 $ (0.34)
</TABLE>

F-17
<PAGE> 63

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

A summary of the Company's employee stock option activity and related
information for the years ended December 31, 1995 and 1996 and the six months
ended June 30, 1997 follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
SIX MONTHS ENDED
1995 1996 JUNE 30, 1997
-------------------- -------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year............................ 562,333 $ 3.52 598,333 $ 6.44 593,631 $ 8.46
Granted......................... 206,000 $10.42 160,000 $10.86 153,000 $10.38
Exercised....................... (160,000) $ 1.30 (164,702) $ 3.43 (25,333) $ 5.68
Expired/Canceled................ (10,000) $ 6.75 -- -- --
--------- --------- --------
Outstanding at end of period...... 598,333 $ 6.44 593,631 $ 8.46 721,298 $ 8.97
========= ========= ========
Exercisable at end of period...... 347,940 $ 4.68 360,233 $ 6.94 366,902 $ 7.24
========= ========= ========
Weighted average fair value of
options granted................. $ 4.20 $ 4.45
========= =========
</TABLE>

Exercise prices for the options outstanding as of December 31, 1996 and
June 30, 1997 ranged from $0.50 to $12.88, and from $5.50 to $12.88,
respectively. The weighted average remaining contractual life of those options
was 7.7 years and 8.2 years as of December 31, 1996 and June 30, 1997,
respectively.

(13) RELATED PARTY TRANSACTIONS

Effective May 1, 1991, the Company entered into an agreement with a former
director and officer of the Company, whereby this officer left the employ of the
Company and agreed not to compete with the Company for a two-year period. The
agreement required the Company to pay $3,125 per month from May 1, 1991 through
April 30, 1993 and to provide certain other benefits to this individual. This
agreement was extended for an additional year, through April 30, 1994, and is
presently on a month-to-month basis. Beginning July 1, 1997 the monthly payment
will be reduced to $1,563 and the agreement will terminate on December 31, 1997,
except for certain life insurance and health care benefits which will continue
under the terms of the original agreement.

Two of the Company's stockholders, who together beneficially own 460,000
shares of the Company's common stock, beneficially own an approximately 24%
interest in CRPB Investors, L.L.C.

An Executive Director of Cerprobe Asia, owns 10% of Cerprobe Asia PTE LTD.

(14) COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain equipment under capital leases. These assets
have been capitalized at the present value of the future minimum lease payments
and are included with manufacturing tools and equipment and office furniture at
a cost of $1,043,082 and $3,381,836 with related accumulated amortization of
$266,014 and $896,637 at December 31, 1995 and 1996, respectively. In addition,
the Company is obligated under certain noncancelable operating leases for the
Company's manufacturing and office space. Certain operating lease agreements
provide for annual rent escalations and renewal options.

F-18
<PAGE> 64

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

The following is a schedule of the minimum future lease payments for the
years ending December 31:

<TABLE>
<CAPTION>
RENTALS
RECEIVABLE
CAPITAL OPERATING UNDER
LEASES LEASES SUBLEASES
---------- ----------- --------
<S> <C> <C> <C>
1997........................................ $ 790,075 $ 1,674,262 $111,700
1998........................................ 718,985 1,913,694 75,300
1999........................................ 473,780 1,761,189 78,900
2000........................................ 338,132 1,681,783 47,600
2001........................................ 224,164 1,572,393 --
Thereafter.................................. -- 12,020,464 --
---------- ----------- -------
Total minimum future lease payments........... 2,545,136 $20,623,785 $313,500
=========== =======
Less amounts representing interest (at rates
ranging from 4.5% to 27.5%)................. (447,582)
----------
Present value of net minimum future lease
payments.................................... 2,097,554
Less current portion.......................... (634,755)
----------
Long-term portion............................. $1,462,799
==========
</TABLE>

Amortization expense applicable to assets under capital leases is charged
to depreciation and amortization expense.

Rental expense for the years ended December 31, 1994, 1995 and 1996 was
$446,422, $723,396, and $1,002,856, respectively.

On August 21, 1996, Cerprobe entered into a long term commercial operating
lease to consolidate its Arizona operations into a single facility on a twelve
acre parcel in Gilbert, Arizona. The lease commenced upon completion of the
83,000 square foot facility in May 1997. The facility serves as the Company's
worldwide headquarters and was built for Cerprobe's use by CRPB Investors,
L.L.C., a limited liability company formed for the purpose of owning and
operating the property. Cerprobe is a 36% shareholder in CRPB Investors, L.L.C.
The initial term of the lease is 15 years with seven options to extend the lease
for successive 5 year terms. The initial lease rate is dependent on final
construction costs, but is currently expected to approximate $875,000 per year.

(15) BUSINESS SEGMENT

The Company is engaged in one business segment, the design, development,
manufacture and marketing of integrated circuit test products and services. For
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1997, 5%, 11%, 20% and 16%, respectively, of the Company's sales were
outside of the United States.

One customer accounted for 16%, 19%, 15% and 21% of net sales for the years
ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1997.
Another customer accounted for 11%, 10%, 12% and 13% of net sales for the years
ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1997.

F-19
<PAGE> 65

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

(16) ACQUISITIONS

Fresh Test Technology Corporation

On April 3, 1995, the Company acquired all of the outstanding stock of
Fresh Test Technology Corporation ("Fresh Test"), a manufacturer of test and
interface hardware products, for 712,500 shares of the Company's common stock.
The acquisition has been accounted for by the purchase method of accounting and,
accordingly, the purchase price has been allocated to the assets purchased and
the liabilities assumed based upon the fair values at the date of acquisition.
The excess of the purchase price over the fair values of the net assets acquired
was $2,120,505 and has been recorded as goodwill, which is being amortized on a
straight-line basis over eight years. The purchase price of $2,662,969 plus
acquisition costs of $402,865 was allocated as follows:

<TABLE>
<S> <C>
Purchase price:
Common stock.................................................. $2,662,969
Costs of acquisition.......................................... 402,865
----------
$3,065,834
==========
Assets acquired and liabilities assumed:
Current assets................................................ $1,252,176
Property, plant and equipment................................. 253,684
Other assets.................................................. 83,051
Goodwill...................................................... 2,120,505
Current liabilities........................................... (531,634)
Noncurrent liabilities........................................ (111,948)
----------
$3,065,834
==========
</TABLE>

The operating results of Fresh Test have been included in the consolidated
statement of operations from the date of acquisition. The following summary,
prepared on a pro forma basis, presents the results of operations as if the
acquisition had occurred January 1, 1994:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales....................................... $18,712,171 $27,601,795
Net income...................................... 998,856 2,543,690
Primary net income per share.................... 0.24 0.62
Fully diluted net income per share.............. 0.21 0.52
</TABLE>

The pro forma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisition had been
effective at the beginning of 1994 or as a projection of future results.

CompuRoute, Inc.

On December 27, 1996, the Company acquired all of the outstanding stock of
CompuRoute, a manufacturer of printed circuit boards, for $7,037,797. The
purchase price consisted of $4,437,797 in cash and 400,000 shares of common
stock. The acquisition has been accounted for by the purchase method of
accounting and accordingly, the purchase price has been allocated to the assets
purchased and the

F-20
<PAGE> 66

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

liabilities assumed based upon the fair values at the date of acquisition. The
excess of the purchase price over the fair values of the net assets acquired was
$969,235 and has been recorded as goodwill, which is being amortized on a
straight-line basis over eight years. The purchase price of $7,037,797 plus
acquisition costs of $474,848 was allocated as follows.

<TABLE>
<S> <C>
Purchase price:
Cash....................................................... $ 4,437,797
Common stock............................................... 2,600,000
Costs of acquisition....................................... 474,848
-----------
$ 7,512,645
===========
Assets acquired and liabilities assumed:
Current assets............................................. $ 1,870,903
Property, plant and equipment.............................. 1,948,189
Other assets............................................... 18,498
Purchased research and development......................... 4,584,000
Goodwill................................................... 969,235
Current liabilities........................................ (1,177,286)
Noncurrent liabilities..................................... (700,894)
-----------
$ 7,512,645
===========
</TABLE>

At acquisition, the state of the research and development products was not
yet at a technological or commercially viable stage. The Company does not
believe that the research and development products have any future alternative
use because if these products are not finished and brought to ultimate product
completion, they have no other value. Therefore, consistent with generally
accepted accounting principles, the Company recorded a one-time charge for the
full value of the purchased in-process research and development.

The consolidated balance sheet as of December 31, 1996 includes the
accounts of CompuRoute; however, due to the fact that the acquisition occurred
on December 27, 1996, CompuRoute's 1996 results of operations are not included
in the 1996 consolidated statements of operations. The following summary,
prepared on a pro forma basis, excluding the charge for purchased research and
development, presents the results of operations as if the acquisition had
occurred January 1, 1995:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales....................................... $36,296,077 $47,732,502
Net income...................................... 3,261,074 3,585,440
Primary net income per share.................... 0.73 0.63
Fully diluted net income per share.............. 0.62 0.58
</TABLE>

F-21
<PAGE> 67

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

SVTR, Inc.

On January 15, 1997, the Company acquired all of the outstanding stock of
SVTR. The purchase price paid by the Company consisted of $2,753,217 in cash and
300,000 shares of common stock.

Under the terms of the acquisition, the Company has agreed to pay up to an
additional $500,000 in cash and up to 50,000 additional shares of common stock
if certain sales and operating profit targets for calendar year 1997 are
achieved by SVTR. See Note 20.

The acquisition has been accounted for using the purchase method.
Accordingly, the purchase price has been allocated to assets acquired and
liabilities assumed based upon their estimated fair values at the date of
acquisition.

The purchase price of $5,617,467 plus acquisition costs of $97,796 was
allocated as follows.

<TABLE>
<S> <C>
Purchase price:
Cash......................................................... $ 2,753,217
Common stock................................................. 2,864,250
Costs of acquisition......................................... 97,796
-----------
$ 5,715,263
===========
Assets acquired and liabilities assumed:
Current assets............................................... $ 4,979,145
Property, plant and equipment................................ 651,781
Other assets................................................. 185,007
Purchased research and development........................... 5,664,156
Current liabilities.......................................... (4,795,473)
Noncurrent liabilities....................................... (969,353)
-----------
$ 5,715,263
===========
</TABLE>

At acquisition, the state of the research and development products was not
yet at a technologically or commercially viable stage. The Company does not
believe that the research and development products have any future alternative
use because if these products are not finished and brought to ultimate product
completion, they have no other value. Therefore, consistent with generally
accepted accounting principles, the Company recorded a one-time charge of
$5,664,156 on January 15, 1997 for the full value of the purchased research and
development. In addition at the date of acquisition, the Company recorded a
$500,000 accrual for the estimated costs to move SVTR's manufacturing operations
from California to Arizona during 1997.

F-22
<PAGE> 68

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

The following summary, prepared on a pro forma basis, excluding the charges
for acquisition related expenses, presents the results of operations as if the
acquisitions of CompuRoute and SVTR had occurred January 1, 1996:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER ENDED
31, JUNE 30,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales....................................... $62,268,096 $34,636,301
Net income...................................... 2,916,563 2,518,783
Primary net income per share.................... 0.48 0.38
Fully diluted net income per share.............. 0.45 0.38
</TABLE>

The pro forma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisitions had been
effective at the beginning of 1996 or as a projection of future results.

(17) 401(K) PLAN

On April 1, 1993, the Company established the Cerprobe Corporation 401(k)
Plan (the "Plan"). Employees who have reached 18 years of age and who have
completed one year of service for the Company are eligible to participate in the
Plan. Participants may elect to defer up to 15% of their salary. Any
contribution by the Company is at its discretion. The Company expensed
discretionary contributions pursuant to the Plan in the amount of $0, $90,000,
and $91,000 for the years ended December 31, 1994, 1995, and 1996, respectively.
The participants are fully vested in their contributions and become fully vested
in the Company's contributions after three years of service.

(18) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires that the Company disclose estimated fair values for its financial
instruments. The following summary presents a description of the methodologies
and assumptions used to determine such amounts.

The carrying amount of cash equivalents approximates fair value because
their maturity is generally less than three months. The carrying amount of
receivables, accounts payable and accrued expenses approximates fair value as
they are expected to be collected or paid within 90 days of year-end. The fair
value of notes payable, demand note payable, capital lease obligations and other
long-term obligations approximate the terms in the marketplace at which they
could be replaced. Therefore, the fair value approximates the carrying value of
these financial instruments.

F-23
<PAGE> 69

CERPROBE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED

(19) SUPPLEMENTAL FINANCIAL INFORMATION

A summary of additions and deductions related to the allowances for
accounts receivable and inventories for the years ended December 31, 1994, 1995
and 1996 follows:

<TABLE>
<CAPTION>
BALANCE BALANCE
AT AT
BEGINNING END OF
OF YEAR ADDITIONS ACQUISITIONS DEDUCTIONS YEAR
-------- ------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994... $ 10,000 $24,000 $ -- $(11,000) $ 23,000
Year ended December 31, 1995... 23,000 12,000 139,094 (1,094) 173,000
Year ended December 31, 1996... 173,000 12,000 44,000 (6,000) 223,000
Allowance for obsolescence of
inventories:
Year ended December 31, 1994... $ 48,500 $67,200 $ -- $(63,700) $ 52,000
Year ended December 31, 1995... 52,000 80,000 30,600 (79,600) 83,000
Year ended December 31, 1996... 83,000 75,000 -- (29,000) 129,000
</TABLE>

(20) SUBSEQUENT EVENTS

On August 18, 1997, a letter of understanding detailing the settlement of
certain open terms related to the purchase of SVTR by the Company on January 15,
1997 was signed by the former owners of SVTR. In general, the letter of
understanding requires these former owners to return 125,000 shares of the
Company's common stock currently held in escrow to the Company. In addition, the
former owners are required to release any claims or interests they may have to
receive any payments or shares of common stock of the Company with respect to an
earnout provision detailed in the January 15, 1997 agreement of merger between
the two entities. Upon completion and execution of documentation evidencing the
terms of the letter of understanding, both parties will release the other from
any future liability related to the purchase of SVTR by the Company. If the
letter of understanding is ultimately consummated through a formal agreement
between the two parties, the Company anticipates recording an estimated one-time
$1,200,000 reduction in acquisition related expenses at the time the agreement
is signed.

On August 28, 1997, the Company redeemed the remaining 330 shares of
convertible preferred stock for $5,250,000 in cash. The redemption was funded
through advances on the Company's line of credit.

F-24
<PAGE> 70
Inside Back Cover:

Pictures of ceramic blade probe card, multilayer DUT board, probe ring assembly,
test board for packaged ICs, Upsys Cobra probe, ATE-to-prober interface system,
and prototype photolithographic probe card.
<PAGE> 71

======================================================

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 12
Price Range of Common Stock........... 12
Dividend Policy....................... 13
Capitalization........................ 13
Selected Consolidated Financial
Data................................ 14
Unaudited Pro Forma Combined Condensed
Financial Information............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 24
Management............................ 36
Principal and Selling Stockholders.... 38
Description of Securities............. 40
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Available Information................. 44
Additional Information................ 44
Incorporation of Certain Information
by Reference........................ 45
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

======================================================
======================================================

2,000,000 SHARES

[CERPROBE LOGO]

COMMON STOCK
--------------------

PROSPECTUS
--------------------
ADAMS, HARKNESS & HILL, INC.

DAIN BOSWORTH
INCORPORATED

SEPTEMBER 24, 1997

======================================================