SBS TECHNOLOGIES INC, S-2/A, 1996-11-14

SBS TECHNOLOGIES INC
S-2/A, 1996-11-14
INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1996

REGISTRATION NO. 333-13747
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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SBS TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C>
NEW MEXICO 85-0359415
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification Number)
Organization)
</TABLE>

2400 LOUISIANA BOULEVARD NE
AFC BUILDING 5, SUITE 600
ALBUQUERQUE, NEW MEXICO 87110
(505) 875-0600
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

CHRISTOPHER J. AMENSON, CHIEF EXECUTIVE OFFICER AND PRESIDENT
2400 LOUISIANA BOULEVARD NE
AFC BUILDING 5, SUITE 600
ALBUQUERQUE, NEW MEXICO 87110
(505) 875-0600
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------

COPIES TO:

ALISON K. SCHULER, ESQ. EDWARD M. LEONARD, ESQ.
Schuler, Messersmith & McNeill Brobeck, Phleger & Harrison LLP
5700 Harper Drive NE, Suite 430 Two Embarcadero Place
Albuquerque, New Mexico 87109 2200 Geng Road
(505) 822-8826 Palo Alto, California 94303
(415) 424-0160

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (Subject to Completion)

Dated November 14, 1996

Filed Pursuant to Rule 424(a)
Registration No. 333-13747
1,800,000 Shares

[LOGO]

Common Stock
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Of the 1,800,000 shares of common stock, no par value (the "Common Stock"),
offered hereby, 1,500,000 shares are being issued and sold by SBS Technologies,
Inc. ("SBS" or the "Company") and 300,000 shares are being sold by the selling
shareholders (the "Selling Shareholders"). The Company will not receive any
proceeds from the sale of shares by the Selling Shareholders. See "Principal and
Selling Shareholders."

The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "SBSE." The last sale price for the Common Stock on October 21, 1996, as
reported on the Nasdaq National Market, was $24.50 per share. See "Price Range
of Common Stock."
------------------------

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREOF.
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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.
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<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Shareholders
<S> <C> <C> <C> <C>
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Per Share............... $ $ $ $
Total (3)............... $ $ $ $
</TABLE>

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(1) The Company, the Selling Shareholders and the additional selling
shareholders (the "Additional Selling Shareholders") have agreed to
indemnify the Underwriters against certain liabilities including liabilities
under the Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses, estimated at $427,165 payable by the Company,
which includes underwriting discounts and commissions to be paid by the
Company on behalf of certain Selling Shareholders for 100,000 shares of
Common Stock being sold by such Selling Shareholders. See "Underwriting."

(3) The Additional Selling Shareholders have granted the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase an aggregate of
up to 270,000 additional shares at the Price to Public less Underwriting
Discounts and Commissions to cover over-allotments, if any. If all such
shares are purchased, the total Price to the Public, Underwriting Discounts
and Commissions, Proceeds to the Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
------------------------

The Common Stock is offered by the several Underwriters named herein when,
as and if received and accepted by them, subject to their right to reject orders
in whole or in part and subject to certain other conditions. It is expected that
delivery of certificates for the shares will be made at the offices of Cowen &
Company, New York, New York, on or about , 1996.

COWEN & COMPANY SOUNDVIEW FINANCIAL GROUP, INC.
<PAGE>
, 1996
<PAGE>

[Picture of an AMI, an ABI-V5 and a PCMCIA board arranged from left to right on
the page.]

SBS has continually developed its avionics interface products since their
introduction in 1987. The AMI, pictured above, provided a single channel of full
function MIL-STD-1553 interface capability. The ABI-V5 and PCMCIA boards
introduced in 1995 and 1996, respectively, provide enhanced functionality
including multiple channels of full function MIL-STD-1553 capabilty in smaller
form factors.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL
INFORMATION IN THE PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITER'S
OVER-ALLOTMENT OPTION. AS USED IN THIS PROSPECTUS, UNLESS OTHERWISE INDICATED,
THE TERM FISCAL YEAR SHALL REFER TO THE 12 MONTH PERIOD ENDED OR ENDING JUNE 30
OF A GIVEN YEAR. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS INCLUDING THOSE SET FORTH IN THE "RISK FACTORS"
SECTION AND ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

The Company is a leading manufacturer of standard bus embedded computer
components that perform a broad range of central processing unit ("CPU"),
general purpose input/output ("I/O") and special purpose I/O interface
functions. The Company capitalizes on its design expertise and customer service
capabilities to enhance product quality and reduce time to market for OEM
customers. The Company is seeking to enhance its product offerings and has
entered into a definitive agreement to acquire Bit 3 Computer Corporation ("Bit
3"), a manufacturer of high-performance bus interconnect hardware that enables
embedded computers of differing standards to communicate. The Company will fund
the $24.0 million acquisition primarily with the net proceeds of this offering.
See "The Acquisition of Bit 3."

The Company's objective is to become a leading supplier of board level
components to the standard bus embedded computer market. The Company intends to
continue its growth through a combination of internal growth and acquisitions.
Internal growth is achieved through expanding its existing product lines through
new product development and through increasing penetration of its existing
customer base. The Company currently participates in a number of attractive
markets, including the Intel-based VME CPU board market, the IndustryPack ("IP")
market in general purpose I/O, the telemetry interface market and the
MIL-STD-1553 standard avionics interface market. The Acquisition of Bit 3 will
add a line of bus interconnect products for a variety of standard bus embedded
computer buses to the Company's current product offerings.

Unlike computers targeted at business computing applications, embedded
computers perform a single function or a closely related group of functions,
such as I/O and data processing, as part of a larger system and with a high
degree of reliability. Embedded computers generally are design-specific
solutions that require substantial engineering expertise, have extended product
lives reflecting the long product cycles of the systems into which they are
incorporated and often must adhere to specific size and operating requirements.
As a result, the Company believes that performance, reliability, supplier
stability and customer support are often the primary factors in the decision to
purchase a particular embedded computer solution.

OEMs requiring embedded computers either construct systems based on standard
bus designs together with off-the-shelf I/O, processor and memory modules, or
they develop custom or proprietary solutions. Standard bus solutions generally
enable product designers to develop systems quickly and with a high degree of
confidence in the reliability of the solution, to capitalize on the lower cost
of industry-standard components and to modify designs easily so that a single
product design can serve multiple applications. As a result of these factors,
standard bus systems today constitute a large and growing portion of the
embedded computer market. According to a recent industry study, BOARD-LEVEL
EMBEDDED COMPUTER MARKETS AND TRENDS, the standard bus embedded computer market
is projected to grow from approximately $2.5 billion in 1995 to approximately
$3.9 billion in 1999.

The most popular embedded computer standard today is VME, which is widely
used in aerospace and military, telecommunications, networking, industrial
automation and control, medical instruments and

3
<PAGE>
automated test and measurement applications. According to BOARD-LEVEL EMBEDDED
COMPUTER MARKETS AND TRENDS, the VME-bus embedded computer market is projected
to grow from approximately $1.2 billion in 1995 to approximately $2.3 billion in
1999. The modular nature of standard bus embedded computers, their wide range of
applications and the variety of bus architectures available have resulted in a
highly fragmented market. The variety of standard bus embedded computer
architectures supports a growing market for products that interconnect various
types of standard bus embedded computers.

The Company sells its products through a combination of direct sales and
independent manufacturers' representatives. The Company's products serve a broad
range of functions including commercial, communications, industrial automation,
medical device, military and space, test and measurement and transportation. The
Company's customers include The Boeing Company, Caterpillar, Inc., Eastman Kodak
Company, General Electric Company and Lockheed Martin Corporation. International
sales constituted approximately 16% of the Company's sales in fiscal 1996.

The Company was incorporated in New Mexico in November 1986. The Company's
executive offices are located at 2400 Louisiana Boulevard, NE, AFC Building 5,
Suite 600, Albuquerque, New Mexico 87110, and its telephone number is (505)
875-0600. References in this Prospectus to the "Company" or "SBS" are to SBS
Technologies, Inc. and its consolidated subsidiaries. The Company has three
subsidiaries, Berg Systems International, Inc. ("BSI"), GreenSpring Computers,
Inc. ("GreenSpring") and Logical Design Group, Inc. ("LDG").
IndustryPack-Registered Trademark- is a registered trademark of the Company. All
other trademarks or tradenames referred to in this Prospectus are the property
of their respective owners.

4
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THE OFFERING

<TABLE>
<CAPTION>
Common Stock offered:
<S> <C>
By the Company................................ 1,500,000 shares
By Selling Shareholders....................... 300,000 shares
Common Stock to be outstanding after the 5,030,657 shares(1)
offering......................................
Use of proceeds................................. To fund the acquisition of Bit 3, to
repay long term debt, and for general
working capital requirements. See "Use of
Proceeds."
Nasdaq National Market symbol................... SBSE
</TABLE>

SUMMARY CONSOLIDATED AND PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
YEAR ENDED JUNE 30,
---------------------------------------------------------- ---------------------------------
1992 1993 1994 1995 1996 1995 1996
------ ------ ------- ------- ------------------------ ------- ------------------------
ACTUAL PRO FORMA(2)(3) ACTUAL PRO FORMA(2)(3)
------- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Sales....................... $2,542 $5,908 $10,197 $16,218 $31,332 $45,519 $ 7,575 $11,263 $15,092
Gross profit................ 1,448 3,002 5,314 9,461 16,822 26,327 3,994 6,017 8,448
Income from continuing
operations................ 73 168 871 1,845 3,582 491 722 1,392 2,313
Income per common and common
equivalent share from
continuing operations..... $ 0.03 $ 0.05 $ 0.30 $ 0.65 $ 0.97 $ 0.10 $ 0.23 $ 0.33 $ 0.41
Weighted average common and
common equivalent shares
outstanding............... 2,363 2,958 2,948 2,859 3,792 5,142 3,116 4,218 5,649
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------
ACTUAL PRO FORMA(2)
--------- -----------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................................................................... $ 10,146 $ 20,348
Total assets............................................................................ 24,154 49,815
Long term debt, excluding current portion............................................... 4,915 204
Total shareholders' equity.............................................................. 12,434 40,419
</TABLE>

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(1) Based on the number of shares outstanding as of September 30, 1996. Excludes
shares reserved for issuance under the Company's 1992, 1993, 1995 and 1996
Employee Incentive Stock Option Plans ("ISOPs"), the 1993 Director and
Officer Stock Option Plan and the 1996 Employee Stock Purchase Plan, of
which 1,347,886 shares were subject to outstanding unexercised options at
June 30, 1996 (804,283 shares under all ISOPs at an average exercise price
of $8.77 per share, 148,500 shares under the 1993 Director and Officer Stock
Option Plan at an average exercise price of $5.78 per share and 35,103
shares under the 1996 Employee Stock Purchase Plan at an average exercise
price of $7.75 per share) and 360,000 shares at an exercise price of $4.50
per share reserved for issuance under outstanding warrants. Includes 100,000
shares which will be issued upon exercise of warrants, at an exercise price
of $4.80 per share, and sold in this offering. See "Risk Factors--Potential
Dilutive Effect of Outstanding Warrants and Options and Registration Rights"
and "Principal and Selling Shareholders."

(2) Gives Pro Forma effect to the Bit 3 Acquisition and the sale by the Company
of 1,500,000 shares of Common Stock offered hereby at an assumed public
offering price of $24.50 per share, after deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company, and
the application of the estimated net proceeds therefrom. See "Acquisition of
Bit 3," "Use of Proceeds" and "Pro Forma Combined Consolidated Financial
Statements."

(3) Earnings per common and common equivalent share are based on the weighted
average shares of common stock and, if dilutive, common equivalent shares
(options and warrants) outstanding during the period. See Note (l) to "Pro
Forma Combined Consolidated Statement of Operations."

5
<PAGE>
ACQUISITION OF BIT 3

Following completion of this offering, the Company will acquire (the
"Acquisition") Bit 3. Bit 3 is a manufacturer of computer networking and
interconnection hardware for many of the most widely used computer architecture
standards in the standard bus embedded computer market. See "Business--Bit 3
Computer Corporation."

Under the terms of the purchase agreement dated October 8, 1996 (the
"Acquisition Agreement") among the Company and the two shareholders of Bit 3
(the "Sellers"), the Company will acquire all of the outstanding capital stock
of Bit 3 for a total purchase price of $24.0 million, to be paid with the net
proceeds of this offering and cash flow from Company operations. See "Use of
Proceeds." Of this total purchase price, $20.0 million will be paid to the
Sellers in cash upon the closing of this offering. Of the balance of $4.0
million, $1.0 million will be paid to the Sellers on July 1, 1997 and $3.0
million will be paid on July 1, 1998, pursuant to secured promissory according
to the terms of the Acquisition Agreement.

In the Acquisition Agreement, the Sellers have made certain representations
and warranties regarding the business, affairs and assets of Bit 3, the material
breach of which will entitle the Company to indemnification. The Company has
likewise made certain representations and warranties to the Sellers, who are
also entitled to indemnification for material breaches. The Company is relying
upon certain representations and warranties about Bit 3 made by the Sellers of
Bit 3 in the Acquisition Agreement, as well as the Company's own due diligence
investigation. There can be no assurance that these representations and
warranties are true and correct or that the Company's due diligence
investigation discovered all matters of a material nature relating to the
Acquisition. In addition, there can be no assurance that the indemnifications
provided in the Acquisition Agreement will be adequate if a material breach is
discovered. The Acquisition Agreement also requires the Sellers to enter into
covenants not to compete for five years from the date of the covenant and
one-year employment agreements with the Company.

If the net proceeds to the Company from the sale of 1,500,000 shares of
Common Stock offered by the Company in this offering are insufficient to fully
pay the cash portion of the Bit 3 purchase price, the Company may be required to
use existing cash and additional bank borrowings to fund the Acquisition. As a
result, the Company's available cash reserves following this offering could be
substantially depleted. To the extent the Company borrows amounts under its line
of credit to fund a portion of the Acquisition, which would require the lender's
approval amounts available for further borrowings under the credit facility will
be correspondingly reduced. In addition, if the Company were required to utilize
its credit facility to complete the Acquisition, the Company's interest expense
would increase and the Company's available credit would be limited for other
operating requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of SBS Technologies, Inc.--Liquidity and
Capital Resources."

As a result of the Acquisition, the Company will record approximately $9.8
million in intangible assets, including goodwill, which will be amortized on a
straight line basis over their estimated benefit period of ten years. Although
Bit 3's current operating profit offsets the amortization expense and the
earnings dilution associated with this offering, there can be no assurance that
Bit 3's operations will continue to perform at current levels. A decrease in Bit
3's operating profit could adversely affect the Company's overall net income and
earnings per share. In addition, there can be no assurance that changes in
future markets or technologies will not require more rapid levels of goodwill
amortization in such a way that overall Company financial condition or results
of operations would be adversely affected. In connection with the Acquisition,
the Company will record an $11.0 million earnings charge expected to be recorded
in the second fiscal quarter of 1997, the anticipated quarter for closing of the
Acquisition. The earnings charge is based on an assessment by the Company, in
conjunction with an independent valuation firm, of purchased technology of Bit
3. The assessment determined that $11.0 million of Bit 3's purchase price
represented technology that does not meet the accounting definitions of
"completed technology," and thus should be charged to earnings under generally
accepted accounting principles. Based on the Company's historical financial
performance and the historical financial performance of Bit 3, the Company
currently

6
<PAGE>
expects to incur a significant net loss for the second fiscal quarter of 1997 as
a result of the earnings charge. See "Risk Factors--Acquisition of Bit 3,"
"Fluctuations in Operating Results; Expected Second Quarter Loss" and "Pro Forma
Combined Consolidated Financial Statements."

Achieving the anticipated benefits of the Acquisition will depend in part
upon whether the integration of the two companies' businesses can be
accomplished in an efficient and effective manner, and there can be no assurance
that this will occur. The integration of Bit 3 will require, among other things,
integration of the Company's and Bit 3's respective product offerings and the
coordination of their sales and marketing and research and development efforts.
The difficulties of such integration may be increased by the necessity of
coordinating geographically separated organizations. The inability of management
to successfully integrate the operations of the Company and Bit 3 could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors--Acquisition of Bit 3."

7
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS IN EVALUATING AN
INVESTMENT IN THE COMPANY AND BEFORE PURCHASING ANY SHARES OF THE COMMON STOCK
OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW.

ACQUISITION OF BIT 3

The Company will use a significant portion of the net proceeds of this
offering to fund the Acquisition. See "Use of Proceeds." The total cash required
to close the Acquisition will be $20.0 million. If the net proceeds to the
Company from this offering are insufficient to close the Acquisition, the
Company may be required to use existing cash and additional bank borrowings to
fund the remaining portion of the Acquisition. As a result, the Company's
available cash reserves following the offering could be substantially depleted.
To the extent the Company borrows amounts under its line of credit to fund a
portion of the Acquisition, which would require the lender's approval, amounts
available for further borrowings under the credit facility will be
correspondingly reduced. In addition, if the Company were required to utilize
its credit facility to complete the Acquisition, the Company's interest expense
would increase and the Company's available credit would be limited for other
operating requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of SBS Technologies, Inc.--Liquidity and
Capital Resources."

The Acquisition Agreement between the Company and the Sellers, who are the
founders of Bit 3, may be terminated by either party if the offering is not
completed by December 20, 1996. The Acquisition of Bit 3 involves numerous risks
including difficulties in the assimilation of the operations, technologies and
products of Bit 3, diversion of management's attention from other business
concerns, risks of entering markets in which the Company has no or limited
direct prior experience and in which competitors may have stronger market
positions, and the potential loss of key employees of Bit 3. In particular, the
Company anticipates that the Sellers will remain as employees of the Company
under one-year employment agreements. There can be no assurance that the Sellers
will remain with the Company for the period covered by their employment
agreements. In addition, the Company intends to operate Bit 3 in the Minneapolis
metropolitan area with its current employee base. Although the Company will seek
to retain these employees, there can be no assurance that these employees will
continue to remain with Bit 3 after the Acquisition. The Acquisition could
increase the rate of employee turnover, which could have an adverse impact on
Bit 3's performance and the Company's results of operations.

Bit 3 has experienced fluctuations in its operating results in the past and
may experience such fluctuations in the future as a result of factors such as
changes in the marketplace, technology evolution and competition. Given the
possibility of such fluctuations, the Company believes that such comparisons of
the results of its operations for preceding quarters are not necessarily
meaningful and that the results for any one period should not be relied upon as
an indication of future performance.

8
<PAGE>

As a result of the Acquisition, the Company will record approximately $9.8
million in intangible assets, including goodwill, which will be amortized on a
straight line basis over the estimated benefit period of ten years. Although Bit
3's current operating profit offsets the amortization expense and the earnings
dilution associated with this offering, there can be no assurance that Bit 3's
operations will remain at their current levels. A decrease in Bit 3's operating
profit could adversely affect the Company's overall net income and earnings per
share. In addition, there can be no assurance that changes in future markets or
technologies will not require more rapid levels of goodwill amortization in such
a way that overall Company financial condition or results of operations would be
adversely affected. In connection with the Acquisition, the Company will record
an $11.0 million earnings charge expected to be recorded in the second fiscal
quarter of 1997, the anticipated quarter for closing of the Acquisition. The
earnings charge is based on an assessment by the Company, in conjunction with an
independent valuation firm, of purchased technology of Bit 3. The assessment
determined that $11.0 million of Bit 3's purchase price represented technology
that does not meet the accounting definitions of "completed technology," and
thus should be charged to earnings under generally accepted accounting
principles. Based on the Company's historical financial performance and the
historical financial performance of Bit 3, the Company currently expects to
incur a significant net loss for the second fiscal quarter of 1997 as a result
of the earnings charge. See "Acquisition of Bit 3," "--Fluctuations in Operating
Results; Expected Second Quarter Loss" and "Pro Forma Combined Consolidated
Financial Statements."

The Company is relying upon certain representations and warranties about Bit
3 made by the Sellers of Bit 3 in the Acquisition Agreement, as well as the
Company's own due diligence investigation. There can be no assurance that these
representations and warranties are true and correct or that the Company's due
diligence investigation discovered all matters of a material nature relating to
the Acquisition. See "Acquisition of Bit 3."

FLUCTUATIONS IN OPERATING RESULTS; EXPECTED SECOND QUARTER LOSS

The Company has experienced fluctuations in its operating results in the
past and may experience such fluctuations in the future. Sales, on both an
annual and a quarterly basis, are subject to fluctuations as a result of a
variety of factors, many of which are beyond the control of the Company. These
factors include the timing of customer orders, manufacturing delays, delays in
shipment due to component shortages, cancellations of orders, the mix of
products sold, cyclicality or downturns in the markets served by the Company's
customers, including significant reductions in defense spending affecting
certain of the Company's customers, and regulatory changes. In addition, the
Company tends to experience an increase in sales during its first fiscal
quarter, which ends on September 30, due to purchases made by United States
("U.S.") government agencies and contractors at the end of the U.S. government's
fiscal year which also ends on September 30. The Company primarily experiences
this effect in its avionics and telemetry product lines. Similarly, the Company
tends to experience little or no growth in sales during its second fiscal
quarter, as sales dependent on U.S. government funding are often delayed during
the start of the U.S. government's new fiscal year. Given the possibility of
such fluctuations, the Company believes that comparisons of the results of its
operations for preceding quarters are not necessarily meaningful and that the
results for any one quarter should not be relied upon as an indication of future
performance. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Quarterly Results." In the event that the Company's
sales or earnings for any quarter are less than the level expected by securities
analysts or the market in general, such shortfalls could have an immediate and
significant adverse impact on the market price of the Company's Common Stock.

9
<PAGE>
principles. Based on the Company's historical financial performance and the
historical financial performance of Bit 3, the Company currently expects to
incur a significant net loss for the second fiscal quarter of 1997 as a result
of the earnings charge. See "Acquisition of Bit 3" and "Pro Forma Combined
Consolidated Financial Statements."

INTEGRATION OF ACQUISITIONS; EXPANSION THROUGH ACQUISITIONS

The Company has increased the scope of its operations primarily through the
addition of three new product lines acquired since 1992. BSI was acquired in
1992, GreenSpring was acquired in 1995 and LDG was added in August 1996. There
can be no assurance that the Company's management and financial controls,
personnel, and other corporate support systems will be adequate to manage the
increase in the size and the diversity of scope of the Company's operations as a
result of the recent acquisitions, including the Acquisition. In addition, there
can be no assurance that the Company's acquisitions will be accretive to
earnings or that the companies acquired will continue to perform at their
historical levels.

A major element of the Company's business strategy is to continue to pursue
acquisitions that either expand or complement its business. There can be no
assurance that the Company will be able to identify and acquire acceptable
acquisition candidates on terms favorable to the Company and in a timely manner.
A substantial portion of the Company's capital resources could be used for these
acquisitions. Consequently, the Company may require additional debt or equity
financing for future acquisitions, which may not be available on terms favorable
to the Company, if at all. As the Company proceeds with its acquisition
strategy, the Company will continue to encounter the risks associated with the
integration of the acquisitions described above. See "Acquisition of Bit 3" and
"Business--SBS' Strategy."

The Company anticipates that one or more potential acquisition
opportunities, including some that could be material, may become available in
the near future. If and when appropriate acquisition opportunities become
available, the Company intends to pursue them actively. No assurance can be
given that any acquisition by the Company will or will not occur, that if such
an acquisition does occur that it will not materially and adversely affect the
Company or that any such acquisition will be successful in enhancing the
Company's business.

RELIANCE ON DEFENSE SPENDING

In each of fiscal 1994, 1995 and 1996, the majority of the Company's sales
were derived directly or indirectly from the U.S. Department of Defense. The
Company expects that the Department of Defense will continue to be a significant
source of sales. There can be no assurance that changes in the geopolitical
environment or in national policy will not result in significantly reduced
defense spending which could materially and adversely affect the Company's
business, financial condition or results of operations. In addition, the Company
believes that many of its potential customers will rely on U.S. government
funding for the purchase of the Company's products. Accordingly, sales to these
customers may be adversely affected by delays in obtaining, or the
unavailability of, such funds caused by budget constraints or bureaucratic
processes.

RELIANCE ON INDUSTRY STANDARDS; FUNDAMENTAL TECHNOLOGY CHANGE

Most of the Company's products are developed to meet certain industry
standards, including MIL-STD-1553, Telemetry IRIG Standards and various ANSI
standards. These standards are continuing to develop and are subject to change.
Elimination or obsolescence of these standards could materially adversely affect
the design, manufacture and sale of the Company's products and require costly
redesign to meet new or emerging standards. In addition, the Company's success
will depend in part on its ability to develop products that evolve with changing
industry standards and customer preferences. There can be no assurance that the
Company will be successful in developing such products in a timely manner, or
that the Company will be successful in selling the products it develops. The
Company's delay or failure to adapt to

10
<PAGE>
changing industry standards could have a material adverse effect on the
Company's business, financial condition and results of operations.

Many of the Company's product designs rely on state of the art digital
technology. There is no assurance that future advances in technology may not
make obsolete the Company's existing product lines, resulting in increased
competition and requiring the Company to undertake costly redesign of its
products to maintain its competitive position. There can be no assurance that
the Company will be able to incorporate the new technology into its existing
products or redesign its existing products in order to compete effectively.

Moreover, new and enhanced products and solutions affecting the Company's
markets are continually being introduced by the Company's competitors. These
products and solutions can be expected to affect the competitive environment in
the markets in which they are introduced. Because new products and technologies
require commitments well in advance of sales, decisions with respect to those
commitments must accurately anticipate both future demand and the technology
that will be available to meet that demand. There can be no assurance that the
Company will be able to successfully adapt to future technological changes and
failure to do so may materially adversely affect the Company's business,
financial condition or results of operations. See "Business--Research and
Development" and
"--Competition."

UNCERTAINTY OF MARKET DEVELOPMENT

Many of the Company's potential customers design and manufacture standard
bus embedded computer systems internally. Increased market acceptance of the
Company's products and services is dependent in part on these customers relying
on the Company to provide embedded computer system components rather than
designing and manufacturing these products internally. The Company believes that
a number of factors will be important to achieve increased market acceptance of
its products and services. These factors include the quality of the Company's
design and production expertise, the increasing use and complexity of embedded
computer systems in new and traditional products, the expansion of markets that
are served by standard bus embedded computers, time-to-market requirements of
the Company's actual and potential customers, the assessment of direct and
indirect cost savings and the willingness to rely on the Company for
mission-critical applications by customers. The Company believes that in many
customer applications, the cost of its products may exceed or be perceived to
exceed the cost of internal development. Failure to achieve increased market
acceptance of the Company's products will have a material adverse effect on the
Company's ability to achieve its growth objectives.

COMPETITION

The standard bus embedded computer industry is highly competitive and
fragmented, and the Company's competitors differ depending on product type,
company size, geographic market and application type. The Company faces
competition in each of its product lines. The Company believes that because of
the diverse nature of the Company's products and the fragmented nature of the
embedded computer market, there is little overlap of competitors for each
product line. Competitive factors across the Company's product lines include:
performance, customer support, product longevity, supplier stability, breadth of
product offerings and reliability. Many of the Company's existing and potential
competitors have financial, technological and marketing resources significantly
greater than those of the Company and may have established relationships with
customers or potential customers that afford them a competitive advantage. There
can be no assurance that the Company will be able to compete effectively in its
current or future markets or that competitive pressures will not adversely
affect its business, financial condition or results of operations. See
"Business--Competition."

In the Company's recently acquired CPU product line, the Company competes
with a number of other suppliers of VME CPU boards. The Company's direct
competitors include other companies that build VME CPU boards based on Intel
microprocessor technology such as Force Computers, Inc. (which has

11
<PAGE>
recently agreed to be acquired by Solectron Corporation), Performance
Technologies, Inc., RadiSys Corporation, VME Microsystems, Inc. ("VMIC") and
XYCOM, Inc. Indirectly, however, the Company also competes with suppliers of VME
CPU boards based on other microcomputer architectures such as Motorola 680x0,
Sparc and PowerPC.

In the generalized computer I/O product area serviced by GreenSpring and its
IP product line, the Company has two classes of competition. The first class
includes companies that compete directly by selling IP products. The second
class includes companies that compete with I/O products using a different
implementation to provide functionally equivalent products. The Company's
competitors in each of these classes include Computer Products, Inc., Systran,
Inc. and VMIC.

In the telemetry market, the Company competes with other suppliers of open
architecture telemetry solutions. It also indirectly competes with suppliers of
traditional, closed architecture telemetry systems. The Company's competitors
include Aydin Vector Division, Lockheed Martin Telemetry and Instrumentation,
Terametrix, Inc. and Veda, Inc.

In the avionics interface market, the Company competes with a number of
other companies that produce similar avionics interface products. The Company's
competitors include Ballard Technologies, Inc., Data Devices Corporation,
Digital Technology, Inc., DY-4, Inc., Excalibur Technologies Corporation and
Gesellschaft Fur Angewandte Informatik und Mikroelekernik, GmbH.

RELIANCE ON SPECIALIZED MARKETS

Many of the Company's products, including its telemetry and avionics
interface products, target specialized markets that support attractive profit
margins. There can be no assurance that these markets will continue to support
these margins or that these specialized markets will continue to provide the
Company with an environment to support current sales levels or acceptable growth
rates.

AVAILABILITY OF COMPONENT MATERIALS

Many of the Company's products contain state of the art digital electronic
components. The Company is dependent upon third parties for the continuing
supply of many of these components, some of which are obtained from a sole
supplier, such as Xilinx, Inc., or a limited number of suppliers, for which
alternate sources may be difficult to locate. Moreover, suppliers may
discontinue or upgrade some of the products incorporated into the Company's
products, which could require the Company to redesign a product to incorporate
newer or alternative technology. Although the Company believes that it has
arranged for an adequate supply of components to meet its short term
requirements, the Company does not have contracts which would assure
availability and price. Lack of timely availability of components could cause
delays in shipment of product and affect the Company's revenues during certain
periods as well as lead to customer dissatisfaction. Limited availability of
components could also require the Company to pay premiums for parts to make
shipment deadlines and thus adversely affect the Company's profit margin, or
cause the Company to increase its inventory of scarce parts and thus adversely
affect the Company's cash flow. There can be no assurance that the Company will
continue to be able to obtain all of the components it requires or that the
price of certain components in short supply will not materially and adversely
affect its business, financial condition or results of operations.

RETENTION AND RECRUITMENT OF KEY EMPLOYEES

The Company's ability to maintain its competitive position and to develop
and market new products depends, in part, upon its ability to retain key
employees and to recruit and retain additional qualified personnel, particularly
engineers. There can be no assurance that the Company will be able to continue
to retain or recruit such personnel. An inability by the Company to retain and
recruit key employees could have a material adverse effect on the Company's
business, financial condition and results of operations.

12
<PAGE>
NO PATENT PROTECTION

Although the Company believes that some of its processes and equipment may
be proprietary, the Company has not sought patent protection for its technology.
The Company has relied upon trade secret laws, industrial know-how and employee
confidentiality agreements. There can be no assurance that the Company's
processes and equipment provide it with a sufficient competitive advantage to
overcome its lack of patent protection, or that others will not independently
develop equivalent or superior products or technology. Furthermore, there can be
no assurance that trade secret protection will be established, or that secrecy
obligations will be honored. Also, to the extent that consultants, employees and
other parties apply technological information developed independently, by them
or others, to Company projects, disputes may arise as to the proprietary rights
to that information, which may not be resolved in favor of the Company.

In addition, litigation may be necessary to enforce the Company's
proprietary rights, to protect the Company's trade secrets, to determine the
validity and scope of the intellectual property rights of others or to defend
against claims of infringement. Such litigation could result in substantial
costs and diversion of resources and could have a material adverse effect on the
Company's business, financial condition and results of operations.

Moreover, because patent applications in the United States are not publicly
disclosed until the patents issue, patent applications may have been filed that
relate to the Company's products and technology. The Company does not believe
that it infringes any patents of which it is aware; however, there can be no
assurance that patent infringement claims will not be asserted against the
Company. If such claims were asserted, such claims might have a material adverse
effect on the Company's business, financial condition or results of operations.
If infringement or invalidity claims are asserted against the Company,
litigation may be necessary to defend the Company against such claims, and in
certain circumstances the Company may choose to seek to obtain a license under
the third-party's intellectual property rights. There can be no assurance that
such licenses will be available on terms acceptable to the Company, if at all.

PRODUCT LIABILITY

The Company's products and services potentially may be subject to product
liability or government or commercial warranty claims. The Company maintains
primary product liability insurance with a general aggregate limit of $2.0
million, $1.0 million per occurrence, and an $8.0 million excess policy. While
the Company has never been the subject of any such claims, considering the wide
use of the Company's products in a variety of applications, as well as the
propensity of claimants initially to pursue all possible contributors in a legal
action, there can be no assurance that such coverage will be adequate to protect
the Company from liability, or that the Company will be able to continue such
insurance in effect for premiums acceptable to the Company. In the event of a
successful lawsuit against the Company, a lack or insufficiency of insurance
coverage could have a material adverse effect upon the Company.

DEPENDENCE UPON CERTAIN OFFICERS

The success of the Company is dependent in part upon the services of certain
executive officers and other key employees. The Company maintains key man
insurance on the lives of each of its executive officers in the amount of $1.0
million. Executive officers also have entered into employment agreements with
the Company for varying lengths of time. Other key employees are retained by a
combination of employment agreements and incentive stock option plans. Loss of
the services of such employees could have a material adverse effect on the
Company's business. See "Management."

CONTROL BY MANAGEMENT

Upon completion of this offering, the Officers and Directors of the Company
will beneficially own approximately 27.2% of the Company's issued and
outstanding Common Stock (approximately 22.8% if the Underwriter's
over-allotment is exercised in full). The Company's Articles of Incorporation do
not

13
<PAGE>
permit cumulative voting. The Officers and Directors ownership if voted together
provides management with the power to influence significantly all matters
requiring approval by the shareholders of the Company, including the election of
directors and approval of stock option and stock purchase plans.

POTENTIAL DILUTIVE EFFECT OF OUTSTANDING WARRANTS AND OPTIONS AND REGISTRATION
RIGHTS

The Company, in connection with its acquisition of GreenSpring in August
1995, issued warrants to purchase 400,000 shares of Common Stock at an exercise
price of $4.50 per share (the "GreenSpring Warrants"). The holders of the
GreenSpring Warrants were also granted the right to sell alongside a Company
registration. The Company is obligated to register the GreenSpring Warrants
under the Securities Act of 1933 (the "Securities Act"). In April 1996, the
Company registered under the Securities Act 150,001 GreenSpring Warrants as well
as certain options held by the Company's Chief Executive Officer, President and
Chief Operating Officer, Mr. Amenson. As of June 30, 1996, 360,000 of the
GreenSpring Warrants remained, of which 193,334 were exercisable and warrants to
purchase 166,666 shares of Common Stock become exercisable over the next two
years. The holders of the GreenSpring Warrants also possess until August 2000
the right to sell shares of Common Stock underlying the GreenSpring Warrants
alongside the Company should the Company file a registration statement during
this period.

Additionally, in connection with the Company's acquisition in August 1996 of
LDG, the Company granted to the two selling shareholders of LDG registration
rights and piggyback rights covering an aggregate of 200,000 shares of the
Company's Common Stock.

Such demand, piggyback and alongside registration rights may negatively
influence the Company's ability to raise additional equity capital in the
future. To the extent that outstanding options or warrants to purchase the
Company's Common Stock are exercised, there will be additional dilution in
excess of that resulting from use of common and common equivalent shares in
earnings calculations.

As of September 30, 1996, the Company had 534,283 vested options and 453,603
options subject to vesting.

LIMITED PUBLIC FLOAT; TRADING; VOLATILITY OF STOCK PRICE

The Company's Common Stock is traded on the Nasdaq National Market. While a
public market currently exists for the Company's Common Stock, the number of
shares in the public market is approximately 68.7% of the 5,030,657 shares of
Common Stock that will be outstanding at the completion of this offering.
Trading volume in the four weeks ended October 18, 1996 averaged 151,167 shares
traded per day. Thus, trading of relatively small blocks of stock can have a
significant impact on the price at which the stock is traded. In addition, the
Nasdaq National Market has experienced, and is likely to experience in the
future, significant price and volume fluctuations which could adversely affect
the market price of the Common Stock without regard to the operating performance
of the Company. The Company believes factors such as quarterly fluctuations in
financial results, announcements of new technologies impacting the Company's
products, announcements by competitors or changes in securities analysts'
recommendations may cause the market price to fluctuate, perhaps substantially.
These fluctuations, as well as general economic conditions, such as recessions
or high interest rates, may adversely affect the market price of the Common
Stock. See "--Fluctuations in Operating Results; Expected Second Quarter Loss"
and "Price Range of Common Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Future sales by existing shareholders could adversely affect the prevailing
market price of the Common Stock. Upon completion of the offering, the Company
will have 5,030,657 shares of Common Stock outstanding. Of these shares,
1,800,000 shares offered hereby (2,070,000 shares if the Underwriters'
overallotment option is exercised in full) will be eligible for immediate sale
in the public market without

14
<PAGE>
restriction under the Securities Act, unless such shares are held by affiliates
of the Company, as that term is defined in the Rule 144 under the Securities
Act. In addition, approximately 186,700 shares will be eligible for sale in the
public market without restriction pursuant to Rule 144(k) or Rule 701 under the
Securities Act. Approximately 1,573,200 additional shares outstanding upon
completion of the offering will be eligible for sale pursuant to Rule 144,
assuming no exercise of the over-allotment option.

The holders of approximately 1,418,188 of the shares of Common Stock
outstanding after the offering and the holders of warrants and options to
purchase approximately 374,783 shares of Common Stock have agreed, subject to
certain exceptions, not to sell or otherwise dispose of any of their shares for
a period of 120 days after the date of the Prospectus. Cowen & Company may, in
its sole discretion, at any time without notice, release all or a portion of the
shares subject to lock-up agreements. Following the closing of the offering, the
holders of approximately 449,999 shares of Common Stock will be entitled to
certain demand and piggyback registration rights with respect to such shares.

ABSENCE OF DIVIDENDS

Since its inception, the Company has not paid cash dividends on its Common
Stock. The Company intends to retain future earnings, if any, to provide funds
for business operations and, accordingly, does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. Pursuant to its Credit
Agreement, dated April 28, 1995, as amended, with NationsBank of Texas, N.A.
("NationsBank"), neither the Company nor any of its subsidiaries may, directly
or indirectly, make any cash or other distributions (such as dividends) on or in
respect of any person's interest as a shareholder in the Company.

15
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of 1,500,000 shares of Common
Stock offered by the Company in this offering are estimated to be $34,118,000
assuming a public offering price of $24.50 per share after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Shareholders. The Company intends to use
the net proceeds of the offering first to fund the Acquisition (see "Acquisition
of Bit 3") and then to pay down its long term debt. The total cash required to
close the Acquisition will be $20.0 million. In addition, the Company currently
has approximately $4.9 million of long term debt, excluding the current portion
of that debt, primarily from its acquisition of GreenSpring in April 1995. This
debt, with NationsBank of Texas, N.A. ("NationsBank"), matures on October 30,
1999 and carries an interest rate equal to NationsBank's prime rate plus 0.25%
or LIBOR plus 2.5% in 30, 60 or 90 day options. In fiscal 1996, the average rate
associated with this long term debt was approximately 10% per annum. The Company
anticipates that the balance of the net proceeds will be added to working
capital and used for general corporate purposes. The Company may also consider
using any remaining offering proceeds for the acquisition of complementary
businesses, products or technologies. However, the Company has no specific plans
with respect to any such acquisition. Pending such uses, the Company intends to
invest the net proceeds from this offering in short term, investment-grade,
interest-bearing securities.

DIVIDEND POLICY

Since its inception, the Company has not paid cash dividends on its Common
Stock. The Company intends to retain future earnings, if any, to provide funds
for business operations and accordingly, does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. Pursuant to its Credit
Agreement, dated April 28, 1995, as amended, with NationsBank, neither the
Company nor any of its subsidiaries may, directly or indirectly, make any cash
or other distributions such as dividends on or in respect of any person's
interest as a shareholder in the Company.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "SBSE." The following table sets forth for the periods indicated the high
and low closing prices of the Company's Common Stock as reported by the Nasdaq
National Market.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Fiscal Year 1995
Quarter ended September 30, 1994........................................... $ 6.75 $ 4.00
Quarter ended December 31, 1994............................................ 7.13 4.38
Quarter ended March 31, 1995............................................... 5.00 3.75
Quarter ended June 30, 1995................................................ 5.25 4.00
Fiscal Year 1996
Quarter ended September 30, 1995........................................... $ 9.00 $ 5.00
Quarter ended December 31, 1995............................................ 8.94 7.13
Quarter ended March 31, 1996............................................... 10.13 7.63
Quarter ended June 30, 1996................................................ 17.13 8.88
Fiscal Year 1997
Quarter ended September 30, 1996........................................... $ 19.75 $ 10.63
Quarter ending December 31, 1996 (through October 21)...................... 24.50 19.00
</TABLE>

The last sale price of the Company's Common Stock on October 21, 1996 as
reported on the Nasdaq National Market was $24.50 per share. As of September 30,
1996, there were approximately 2,000 beneficial holders of the Company's Common
Stock.

16
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1996, and as adjusted to give effect to the sale by the Company of
the 1,500,000 shares of Common Stock offered hereby, assuming an offering price
of $24.50 per share, use of the estimated net proceeds to complete the
Acquisition, the effect on earnings of the write-off of in-process research and
development related to the Acquisition and the retirement of up to $6.2 million
of the Company's long-term debt with any remaining proceeds retained by the
Company for general corporate purposes. See "Acquisition of Bit 3," "Use of
Proceeds" and "Pro Forma Combined Consolidated Financial Statements."

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------
PRO FORMA
AS
ACTUAL ADJUSTED(1)(2)
---------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long term debt................................................... $ 1,477 $ --
Long term debt, less current portion................................................ 4,915 204
---------- --------
Shareholders' equity:
Common Stock...................................................................... 4,998 39,596
Common Stock warrants............................................................. 180 180
Retained earnings................................................................... 7,256 643
---------- --------
Total shareholders' equity........................................................ 12,434 40,419
---------- --------
Total capitalization................................................................ $ 24,154 $ 49,815
---------- --------
---------- --------
</TABLE>

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

(1) See "Pro Forma Combined Consolidated Financial Statements."

(2) Based on the number of shares outstanding as of September 30, 1996. Excludes
shares reserved for issuance under the Company's 1992, 1993, 1995, and 1996
Employee ISOPs, the 1993 Director and Officer Stock Option Plan and the 1996
Employee Stock Purchase Plan, of which 1,347,886 shares were subject to
outstanding unexercised options at June 30, 1996 (804,283 shares under all
ISOPs at an average exercise price of $8.77 per share, 148,500 shares under
the 1993 Director and Officer Stock Option Plan at an average exercise price
of $5.78 per share and 35,103 shares under the 1996 Employee Stock Purchase
Plan at an average exercise price of $7.75 per share) and 360,000 shares an
an exercise price of $4.50 per share reserved for issuance under outstanding
warrants. Includes 100,000 shares which will be issued upon exercise of
warrants, at an exercise price of $4.80 per share, and sold in this
offering. See "Risk Factors--Potential Dilutive Effect of Outstanding
Warrants and Options and Registration Rights."

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
OF SBS TECHNOLOGIES, INC.

The following selected consolidated statement of operations data for the
years ended June 30, 1994, 1995 and 1996, and consolidated balance sheet data as
of June 30, 1995 and 1996 are derived from the Consolidated Financial Statements
of the Company and Notes thereto, which have been audited by KPMG Peat Marwick
LLP, independent auditors, and are included elsewhere in this Prospectus. The
following selected consolidated statement of operations data for the years ended
June 30, 1992 and 1993 and consolidated balance sheet data as of June 30, 1992,
1993 and 1994 are derived from audited financial statements not included in this
Prospectus. The following selected consolidated statement of operations data for
the three month periods ended September 30, 1995 and 1996 and the balance sheet
data as of September 30, 1996 are derived from the unaudited consolidated
financial statements of the Company included herein. The unaudited consolidated
financial statements have been prepared on the same basis as the audited
financial statements and in the opinion of the Company, include all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of the financial position and operating results for the unaudited
periods. The following selected data should be read in conjunction with the
Consolidated Financial Statements of the Company and Notes thereto appearing
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER
YEAR ENDED JUNE 30, 30,
------------------------------------------- ----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales...................................... $ 2,542 $ 5,908 $10,197 $16,218 $31,332 $ 7,575 $11,263
Cost of sales.............................. 1,094 2,906 4,883 6,757 14,510 3,581 5,246
------- ------- ------- ------- ------- ------- -------
Gross profit............................. 1,448 3,002 5,314 9,461 16,822 3,994 6,017
Selling, general and administrative........ 867 1,540 2,221 3,891 6,293 1,549 2,674
Research and development................... 422 750 1,187 1,687 2,846 685 655
Amortization of intangible assets.......... -- 312 383 493 884 233 219
------- ------- ------- ------- ------- ------- -------
Operating income from continuing
operations............................. 159 400 1,523 3,390 6,799 1,527 2,469
Interest expense, net of interest income... -- 12 14 188 830 281 149
------- ------- ------- ------- ------- ------- -------
Income from continuing operations before
income taxes............................. 159 388 1,509 3,202 5,969 1,246 2,320
Income taxes............................... 86 220 638 1,357 2,387 524 928
------- ------- ------- ------- ------- ------- -------
Income from continuing operations........ 73 168 871 1,845 3,582 722 1,392
------- ------- ------- ------- ------- ------- -------
Discontinued operations, net of tax(1)..... (33) (35) 855 (1,781) -- -- --
Loss on disposal of discontinued
operations, net of taxes(1).............. -- -- -- (1,354) -- -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) from discontinued
operations(1)............................ (33) (35) 855 (3,135) -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss).......................... $ 40 $ 133 $ 1,726 $(1,290) $ 3,582 $ 722 $ 1,392
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Income (loss) per common and common
equivalent share:
Continuing operations.................... 0.03 0.05 0.30 0.65 0.97 0.23 0.33
Discontinued operations(1)............... (0.01) (0.01) 0.29 (1.10) -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss) per common and common
equivalent share......................... $ 0.02 $ 0.04 $ 0.59 $ (0.45) $ 0.97 $ 0.23 $ 0.33
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Weighted average number of common and
common equivalent shares outstanding..... 2,363 2,958 2,948 2,859 3,792 3,116 4,218
</TABLE>

<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.......................................... $ 3,218 $ 2,542 $ 3,188 $ 3,320 $ 8,233 $ 10,146
Intangible assets, net................................... 100 1,589 1,184 6,077 5,571 5,352
Total assets............................................. 5,515 11,732 13,477 19,905 20,443 24,154
Long-term debt, excluding current portion................ 3 330 274 5,342 5,188 4,915
Total shareholders' equity............................... 3,897 4,846 5,865 5,049 10,051 12,434
</TABLE>

- ---------------
(1) In April 1995, the Company divested its flight simulation business and
ceased operation in this line of business. The results of discontinued
operations reflect the performance of this line of business on the Company's
historical results of operations. The Company has exited from this business
and believes there will be no material future charges associated with this
discontinued business line. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of SBS Technologies,
Inc.--Overview."

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF SBS TECHNOLOGIES, INC.

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE
IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS. 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 HEREIN. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS" AS WELL
AS THOSE DISCUSSED ELSEWHERE HEREIN.

OVERVIEW

The Company is a leading manufacturer of standard bus embedded computer
components that perform a broad range of CPU, general purpose I/O and special
purpose I/O interface applications. In 1988, the Company entered the embedded
computing market with the development of its avionics interface board, which is
used in ground-based avionics systems development and test applications. In
1992, the Company added a second embedded computer product line with the
acquisition of BSI, a developer of telemetry interface circuit boards. In recent
years, the Company has discontinued certain of its operations. From its
inception in 1986 until 1995, the Company provided flight simulators for a
variety of military aircraft to U.S. and foreign entities. In April 1995,
following a decline in the defense industry, the Company divested this business
and recorded a related charge of $2.3 million. Additionally, from 1987 through
the first half of fiscal 1996, the Company provided engineering services that
generated minimal revenue and profit. The Company has subsequently exited this
business.

Following completion of this offering, the Company will acquire Bit 3. Bit 3
is a manufacturer of computer networking and interconnection hardware for many
of the most widely used computer architecture standards in the standard bus
embedded computer market. In connection with the Acquisition, the Company will
record an $11.0 million earnings charge expected to be recorded in the second
fiscal quarter of 1997, the anticipated quarter for closing of the Acquisition.
The earnings charge is based on an assessment by the Company, in conjunction
with an independent valuation firm, of purchased technology of Bit 3. The
assessment determined that $11.0 million of Bit 3's purchase price represented
technology that does not meet the accounting definitions of "completed
technology," and thus should be charged to earnings under generally accepted
accounting principles. Based on the Company's historical financial performance
and the historical financial performance of Bit 3, the Company currently expects
to incur a significant net loss for the second fiscal quarter of 1997 as a
result of the earnings charge. See "Acquisition of Bit 3," "Risk
Factors--Acquisition of Bit 3," "Fluctuations in Operating Results; Expected
Second Quarter Loss" and "Pro Forma Combined Consolidated Financial Statements."

RECENT ACQUISITIONS

On April 28, 1995, the Company acquired GreenSpring, based in Menlo Park,
California, for $7.5 million. GreenSpring is engaged in the design, development,
manufacturing and marketing of general purpose I/O products utilized in multiple
segments of the standard bus embedded computer market. The acquisition was
accounted for as a purchase. The Company recorded $5.8 million in goodwill with
$653,000 expensed through June 30, 1996 and the remainder expected to be
expensed through June 30, 2005, the estimated benefit period. Net income and
earnings per common and common equivalent share for fiscal 1994 would have been
approximately $1.7 million and $0.56, respectively, had the acquisition taken
place on July 1, 1993. Had the acquisition taken place on July 1, 1994, the
Company's reported net loss and net loss per common and common equivalent share
for fiscal 1995 would have been decreased by approximately $804,000 and $0.28,
respectively.

19
<PAGE>
On August 19, 1996, the Company completed a pooling of interest transaction
with LDG. LDG manufactures Intel processor-based CPU boards for the standard bus
embedded computer market. The financial results of LDG are not included in the
Company's Consolidated Financial Statements for the periods prior to July 1,
1996 as historical results did not have a material effect on combined
consolidated results of operations. For its fiscal year ended March 31, 1996,
LDG recorded sales of approximately $4.0 million and income from continuing
operations of approximately $103,000.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------- ------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales....................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................... 47.9 41.7 46.3 47.3 46.6
----- ----- ----- ----- -----
Gross profit.............................................. 52.1 58.3 53.7 52.7 53.4
Selling, general and administrative......................... 21.8 24.0 20.1 20.4 23.7
Research and development.................................... 11.6 10.4 9.1 9.0 5.8
Amortization of intangible assets........................... 3.8 3.0 2.8 3.1 2.0
----- ----- ----- ----- -----
Operating income from continuing operations................. 14.9 20.9 21.7 20.2 21.9
Interest expense, net of interest income.................... 0.1 1.2 2.7 3.7 1.3
----- ----- ----- ----- -----
Income from continuing operations before income taxes..... 14.8 19.7 19.0 16.5 20.6
Income taxes................................................ 6.3 8.3 7.6 6.9 8.2
----- ----- ----- ----- -----
Income from continuing operations........................... 8.5% 11.4% 11.4% 9.6% 12.4%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

THREE MONTHS ENDED SEPTEMBER 30, 1996 AND THREE MONTHS ENDED SEPTEMBER 30, 1995

SALES. For the three month period ended September 30, 1996, sales increased
48.7%, or $3.7 million, from $7.6 million in the three months ended September
30, 1995 to $11.3 million. This increase was primarily attributable to the
additional sales contributed by LDG, which was acquired on August 19, 1996, and
pooled effective July 1, 1996, as well as increases from the Company's avionics
and telemetry products. During the three month period ended September 30, 1996,
prices for the Company's products remained firm and unit shipments increased.

GROSS PROFIT. For the three month period ended September 30, 1996, gross
profit increased 50.0%, or $2.0 million, from $4.0 million in the three months
ended September 30, 1995 to $6.0 million. For the three month period ended
September 30, 1996, gross margin increased to 53.4% of sales from 52.7% in the
three months ended September 30, 1995. This increase was primarily due to the
effects of additional sales volume and reductions in component material costs.

SELLING, GENERAL AND ADMINISTRATION. For the three month period ended
September 30, 1996, selling, general and administration expense increased 80.0%,
or $1.2 million, from $1.5 million in the three months ended September 30, 1995
to $2.7 million and as a percentage of sales increased to 23.7% from 20.7% in
the three months ended September 30, 1995. This increase was primarily the
result of the inclusion of the results of LDG, management's decision to increase
reserves and accruals due to the higher level of business activity and costs
associated with acquisitions.

RESEARCH AND DEVELOPMENT. For the three month period ended September 30,
1996, research and development expense decreased 4.3%, or $30,000, from $685,000
in the three months ended September 30, 1995 to $655,000 and as a percentage of
sales decreased to 5.8% from 9.0% in the three months ended

20
<PAGE>
September 30, 1995. This decrease was a result of expenditures relating to the
completion of certain development programs during the 1996 fiscal year.

AMORTIZATION OF INTANGIBLE ASSETS. For the period ended September 30, 1996,
amortization of intangible assets decreased 6.0%, or $14,000, from $233,000 in
the three months ended September 30, 1995 to $219,000. This decrease was a
result of completing the amortization of intangible assets relating to the
acquisition of Berg Systems International during the first quarter of fiscal
1996.

INTEREST EXPENSE, NET OF INTEREST INCOME. For the period ended September
30, 1996, interest expense, net of interest income decreased 46.8%, or $131,000,
from $280,000 in the three months ended September 30, 1995 to $149,000. This
decrease was the result of the reduction in debt to finance the acquisition of
Green Spring Computers, Inc.

INCOME TAXES. For the period ended September 30, 1996, income taxes
increased $404,000, or 77.1%, from $524,000 in the three months ended September
30, 1995 to $928,000, representing effective tax rates of 40% and 42%,
respectively.

YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995

SALES. In fiscal 1996, sales increased 93.2%, or $15.1 million, from $16.2
million in fiscal 1995 to $31.3 million. This increase reflects a full year of
sales in fiscal 1996 for GreenSpring, whereas fiscal 1995 sales include only two
months of GreenSpring sales. As a result, $11.1 million in GreenSpring sales
were reflected in fiscal 1996 compared to $1.5 million in fiscal 1995. In
addition, sales of the Company's avionics and telemetry product lines increased
by 37.5%, or $5.5 million, in fiscal 1996. The increases in sales in fiscal 1996
reflected increases in unit volume, new product introductions and the addition
of new customers in all of the Company's product lines.

GROSS PROFIT. In fiscal 1996, gross profit increased 77.8%, or $7.4
million, from $9.5 million in fiscal 1995 to $16.8 million, as a result of
increased sales volume. In fiscal 1996, gross margin decreased to 53.7% of sales
from 58.3% in fiscal 1995 as a result of a change in sales mix. While gross
margins on the Company's avionics and telemetry products remained relatively
constant in fiscal 1996, fiscal 1996 sales were comprised of a higher proportion
of GreenSpring products, which generally yield lower gross margins than sales of
the Company's other products. Reductions in component material costs in each of
the Company's product lines partially offset the effect on gross margin of this
shift in sales mix.

SELLING, GENERAL AND ADMINISTRATIVE. In fiscal 1996, selling, general and
administrative expense increased 61.7%, or $2.4 million, from $3.9 million in
fiscal 1995 to $6.3 million. The increase resulted primarily from the addition
of certain expenses of GreenSpring's operations, and additional staffing and
promotional expenses related to the Company's avionics and telemetry product
lines. However, selling, general and administrative expense decreased as a
percentage of sales from 24.0% in fiscal 1995 to 20.1% in fiscal 1996, primarily
due to a more rapid increase in sales than in selling, general and
administrative expense.

RESEARCH AND DEVELOPMENT. In fiscal 1996, research and development expense
increased by 68.8%, or $1.2 million, from $1.7 million in fiscal 1995 to $2.9
million, reflecting the costs of GreenSpring's operations and the additional
staffing required for new product development in the avionics product line.
However, research and development expense decreased as a percentage of sales
from 10.4% in fiscal 1995 to 9.1% in fiscal 1996, primarily due to a more rapid
increase in sales than in research and development expense.

AMORTIZATION OF INTANGIBLE ASSETS. In fiscal 1996, amortization of
intangible assets increased 79.3%, or $391,000, from $493,000 in fiscal 1995 to
$884,000 due to the increase in intangible assets related to the acquisition of
GreenSpring.

21
<PAGE>
INTEREST EXPENSE, NET OF INTEREST INCOME. In fiscal 1996, interest expense,
net of interest income, increased by 342%, or $642,000, from $188,000 in fiscal
1995 to $830,000 as a result of debt assumed late in fiscal 1995 as part of the
acquisition of GreenSpring.

INCOME TAXES. In fiscal 1996, tax expense increased 75.9%, or $1.0 million,
from $1.4 million in fiscal 1995 to $2.4 million representing effective income
tax rates of 40% and 42%, respectively. The lower effective tax rate in fiscal
1996 resulted primarily from the use of a foreign sales corporation.

YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994

SALES. In fiscal 1995, sales increased 59.1%, or $6.0 million, from $10.2
million in fiscal 1994 to $16.2 million. This increase resulted from a number of
factors, including introduction of the PASS 1000 bus analyzer product in
avionics, broader participation in defense-related programs and $1.5 million in
sales of GreenSpring products included for the two months following its
acquisition in April 1995.

GROSS PROFIT. In fiscal 1995, gross profit increased 78.0%, or $4.2
million, from $5.3 million in fiscal 1994 to $9.5 million due to increased sales
volume and improved gross margin. In fiscal 1995, gross margin increased from
52.1% of sales in fiscal 1994 to 58.3% of sales as a result of reductions in per
unit component and labor costs, and more efficient amortization of manufacturing
overheads resulting from increased volume.

SELLING, GENERAL AND ADMINISTRATIVE. In fiscal 1995, selling, general and
administrative expense increased 75.1%, or $1.7 million, from $2.2 million in
fiscal 1994 to $3.9 million. The increase resulted from the addition of
GreenSpring's costs, and increases in staffing and promotional expenses in the
avionics and telemetry product lines. As a percentage of sales, selling, general
and administrative expense increased from 21.8% in fiscal 1994 to 24.0% in
fiscal 1995, reflecting expense incurred in anticipation of increased sales.

RESEARCH AND DEVELOPMENT. In fiscal 1995, research and development expense
increased by 42.1%, or $500,000, from $1.2 million in fiscal 1994 to $1.7
million reflecting the costs of additional staffing required for new product
development in the avionics product line including the ABI V5, ABI V6 and PASS
1000 interface boards. However, research and development expense decreased as a
percentage of sales from 11.6% in fiscal 1994 to 10.4% in fiscal 1995, primarily
due to a more rapid increase in sales than in research and development expense.

AMORTIZATION OF INTANGIBLE ASSETS. In fiscal 1995, amortization of
intangible assets increased 28.8%, or $110,000, from $383,000 in fiscal 1994 to
$493,000 due to the increase in intangible assets related to the acquisition of
GreenSpring.

INTEREST EXPENSE, NET OF INTEREST INCOME. In fiscal 1995, interest expense,
net of interest income, increased by $173,000, or 1,183%, from $15,000 in fiscal
1994 to $188,000 as a result of debt assumed late in fiscal 1995 related to the
acquisition of GreenSpring.

INCOME TAXES. In fiscal 1995, tax expense increased 112.7%, or $719,000,
from $638,000 in fiscal 1994 to $1.4 million, representing an effective income
tax rate of 42% in each year.

22
<PAGE>
QUARTERLY RESULTS

The following tables present certain unaudited financial data for each of
the five fiscal quarters ended September 30, 1996. These data have been derived
from unaudited financial statements that, in the opinion of management, have
been prepared on the same basis as the Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus, including all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial results herein. Such statement of operations data
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus. The operating results for
any previous quarter are not necessarily indicative of results for any future
period. See "Risk Factors--Fluctuations in Operating Results; Expected Second
Quarter Loss."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1996 1996 1996
----------- ----------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales........................................... $ 7,575 $ 7,443 $ 7,896 $ 8,418 $ 11,263
Cost of sales................................... 3,581 3,530 3,683 3,716 5,246
----------- ----------- ----------- ----------- ---------
Gross profit.................................. 3,994 3,913 4,213 4,702 6,017
Selling, general and administrative............. 1,549 1,486 1,560 1,698 2,674
Research and development........................ 685 678 705 778 655
Amortization of intangible assets............... 233 213 222 216 219
----------- ----------- ----------- ----------- ---------
Operating income from continuing operations... 1,547 1,536 1,726 2,010 2,469
Interest expense, net of interest income........ 280 200 200 150 149
----------- ----------- ----------- ----------- ---------
Income from continuing operations before
income taxes................................ 1,247 1,336 1,526 1,860 2,320
Income taxes.................................... 524 560 560 743 928
----------- ----------- ----------- ----------- ---------
Income from continuing operations............. $ 723 $ 776 $ 966 $ 1,117 $ 1,392
----------- ----------- ----------- ----------- ---------
Net income per common and common share
equivalents................................... $ 0.23 $ 0.23 $ 0.26 $ 0.29 $ 0.33
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------

AS A PERCENTAGE OF SALES:
Sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................... 47.3 47.4 46.6 44.2 46.6
----------- ----------- ----------- ----------- ---------
Gross profit.................................. 52.7 52.6 53.4 55.8 53.4
Selling, general and administrative............. 20.4 20.0 19.8 20.2 23.7
Research and development........................ 9.0 9.1 8.9 9.2 5.8
Amortization of intangible assets............... 3.1 2.9 2.8 2.5 2.0
----------- ----------- ----------- ----------- ---------
Operating income from continuing operations... 20.2 20.6 21.9 23.9 21.9
Interest expense, net of interest income........ 3.7 2.7 2.5 1.8 1.3
----------- ----------- ----------- ----------- ---------
Income from continuing operations before
income taxes................................ 16.5 17.9 19.4 22.1 20.6
Income taxes.................................... 6.9 7.5 7.1 8.8 8.2
----------- ----------- ----------- ----------- ---------
Income from continuing operations............. 9.6% 10.4% 12.3% 13.3% 12.4%
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------
</TABLE>

The Company tends to experience an increase in sales during its first fiscal
quarter, which ends September 30, due to purchases made by U.S. government
agencies and contractors at the end of the U.S. government's fiscal year, which
also ends on September 30. The Company primarily experiences this effect

23
<PAGE>
in its avionics and telemetry product lines. Similarly, the Company tends to
experience little or no growth in sales during its second fiscal quarter as
sales dependent on U.S. government funding are often delayed during the start of
the U.S. government's new fiscal year. However, as sales of its non-defense
related product lines continue to grow in proportion to total sales the Company
believes this seasonal effect will diminish.

In connection with the Acquisition, the Company will record an $11.0 million
earnings charge expected to be recorded in the second fiscal quarter of 1997,
the anticipated quarter for the closing of the Acquisition. The earnings charge
is based on an assessment by the Company, in conjunction with an independent
valuation firm, of purchased technology of Bit 3. The assessment determined that
$11.0 million of Bit 3's purchase price represented technology that does not
meet the accounting definitions of "completed technology," and thus should be
charged to earnings under generally accepted accounting principles. Based on the
Company's historical financial performance and the historical financial
performance of Bit 3, the Company currently expects to incur a significant net
loss for the second fiscal quarter of 1997 as a result of the earnings charge.
See "Risk Factors--Acquisition of Bit 3," "Fluctuations in Operating Results;
Expected Second Quarter Loss" and "Pro Forma Combined Consolidated Financial
Statements."

LIQUIDITY AND CAPITAL RESOURCES

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

Cash totaled $2.1 million at September 30, 1996, an increase of $972,000
from June 30, 1996. Net cash provided by operating activities for the three
months ended September 30, 1996 was $1.7 million. Increases in sales volume and
demand for semiconductor parts during the three months ended September 30, 1996
have caused the Company to increase accounts receivable and inventory. In
addition, liabilities increased in line with the current level of business
activity. Net cash used in investing activities for the three months ended
September 30, 1996 of $207,000 was primarily for the purchase of equipment. The
Company utilized cash in financing activities of $491,000 primarily to repay
portions of bank debt.

On April 26, 1996, the Company amended its bank financing agreement with
NationsBank, originally entered into in April 1995, to provide the Company with
a $6.8 million term loan and a $2.5 million revolving line of credit. The term
loan is a three year note with five year amortization maturing on October 30,
1999. This note refinanced a majority of the Company's outstanding debt,
including the $1.0 million note previously payable to the former shareholders
and option holders of GreenSpring entered into in April 1995 at the time the
Company acquired GreenSpring. The revolving line of credit matures on October
30, 1997. The interest rate on the term loan is NationsBank's prime rate plus
0.25% or LIBOR plus 2.5% in 30, 60, or 90 day options. The interest rate of the
revolving line of credit is NationsBank's prime rate or LIBOR plus 2.25% in 30,
60, or 90 day options. The amended financing agreement provides for a security
interest by NationsBank in the Company's receivables, inventories, equipment and
all other personal property and imposes certain performance ratios on the
Company. These ratios include a current maturities ratio which requires that the
Company's net earnings, plus depreciation and amortization expense for the
preceding four quarters from time of measurement compared to the Company's
current portion of its long-term debt, will not be less than a ratio of 2 to 1;
a senior funded debt to EBITDA ratio which requires that the Company's total
debt evidenced by promissory notes, loan agreements, bonds or similar
instruments, but excluding subordinated debt, will not be greater than a ratio
of 1.5 to 1 when compared to the Company's profit before tax plus interest,
depreciation, and amortization expense for the preceding four quarters from time
measurement; and a fixed charge coverage ratio requiring that the Company's
income before tax plus interest expense and operating lease expense for the
preceding four quarters from time of measurement will not be less than a ratio
of 2 to 1 when compared to the Company's interest expense plus operating lease
expense for the same preceding four quarters. The Company is also prohibited
from disposing of or acquiring certain assets and businesses and from incurring
additional debt,

24
<PAGE>

with certain exceptions, without the consent of the lender. At September 30,
1996, the Company was in compliance with all of the covenants of the amended
financing agreement. The outstanding balance on the term loan with NationsBank
at September 30, 1996 was $6.2 million, of which $5.0 million bears interest at
LIBOR plus 2.5% (8.1% at September 30, 1996) and $1.2 million was at
NationsBank's base rate plus 0.25% (8.5% at September 30, 1996). The term loan
is payable in monthly installments of $112,500. As of September 30, 1996, there
were no borrowings drawn on the revolving line of credit.

Management believes that financial resources, including its internally
generated funds, available bank borrowings and the net proceeds from this
offering, will be sufficient to finance the Company's current operations and
capital expenditures, excluding acquisitions, for the next twelve months.

For the three most recent fiscal years, there has been no impact from
inflation or changing prices to the Company's sales or income from continuing
operations.

ACCOUNTING PRINCIPLES

In October 1995, the FASB issued Financial Accounting Standard No. 123 ("FAS
123"), "Accounting for Stock-Based Compensation." Under the provisions of FAS
123, companies may elect to account for stock-based compensation plans using a
fair-value-based method or may continue measuring compensation expense for those
plans using the intrinsic-rate-based method. Companies electing to continue
using the intrinsic-value-based method must provide pro forma disclosures of net
income and earnings per share as if the fair-value-based method had been
applied. Management intends to continue to account for stock-based compensation
using the stock-based method and, as such, does not believe FAS 123 will have an
impact on the Company's results of operations or financial position. FAS 123
becomes effective in fiscal year 1997.

25
<PAGE>
SELECTED FINANCIAL INFORMATION OF
BIT 3 COMPUTER CORPORATION

The following selected statement of operations data for the years ended
December 31, 1993, 1994 and 1995 and balance sheet data as of December 31, 1994
and 1995 are derived from the financial statements of Bit 3, which have been
audited by KPMG Peat Marwick LLP, independent auditors, and are included
elsewhere in this Prospectus. The balance sheet data as of December 31, 1991,
1992 and 1993 and as of September 30, 1996 and the selected statement of
operations data for the years ended December 31, 1991 and 1992 and for the nine
month period ended September 30, 1995 and 1996 have been derived from Bit 3's
unaudited financial statements that have been prepared on the same basis as the
audited financial statements and in the opinion of Bit 3, include all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of the financial position and operating results for the
unaudited periods. The following selected data should be read in conjunction
with the Financial Statements of Bit 3 and Notes thereto elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales.............................. $ 6,175 $ 8,042 $ 10,750 $ 11,599 $ 12,530 $ 9,210 $ 11,466
Cost of sales...................... 2,794 3,085 4,151 4,219 4,438 3,310 3,791
--------- --------- --------- --------- --------- --------- -----------
Gross profit..................... 3,381 4,957 6,599 7,380 8,092 5,900 7,675
Selling, general and
administrative................... 1,300 1,321 1,473 1,661 1,857 1,294 1,284
Research and development........... 1,575 1,621 1,596 1,531 1,571 1,118 1,480
--------- --------- --------- --------- --------- --------- -----------
Income from operations............. 506 2,015 3,530 4,188 4,664 3,488 4,911
Interest income.................... 52 46 28 58 66 38 52
--------- --------- --------- --------- --------- --------- -----------
Income before income taxes......... $ 558 $ 2,061 $ 3,558 $ 4,246 $ 4,730 $ 3,526 $ 4,963
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital............................. $ 1,906 $ 3,360 $ 3,334 $ 3,195 $ 3,426 $ 4,250
Total assets................................ 2,680 3,701 3,680 3,594 3,818 4,698
Total shareholders' equity.................. 2,242 3,599 3,579 3,395 3,590 4,384
</TABLE>

26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF BIT 3 COMPUTER CORPORATION

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH BIT
3 FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF BIT 3'S PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. 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. BIT 3'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE THOSE DISCUSSED IN "RISK FACTORS" AS WELL AS THOSE DISCUSSED ELSEWHERE
HEREIN.

OVERVIEW

Bit 3 manufactures high performance computer bus interconnect hardware and
software used in a wide variety of applications, including data acquisition,
image and visualization processing, industrial process control, medical
electronics, signal processing and system integration. Bit 3, founded in 1979,
currently provides these interconnect products to a wide variety of commercial
users. Sales to a major customer represented 19.2% of sales in 1995 and 22.1% of
sales in the total first nine months ended September 30, 1996. Sales to a
distributor serving the adapter market in Japan, represented 8.1% of sales in
1995 sales and 10.2% of total first nine months ended September 30, 1996.
International sales accounted for approximately 17.0% of total sales in 1995.

The results of operations for Bit 3 have been prepared using the accounting
policies used by the Company. See Note 2 of "Notes to Bit 3's Financial
Statements". During the period for the financial data contained herein, Bit 3
has elected to be taxed under the provisions of Subchapter S of the Internal
Revenue Code. As a result, no provision has been made for federal or state
income taxes, because the applicable tax liability or benefit is the
responsibility of Bit 3's shareholders.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales......................................... 38.6 36.4 35.4 35.9 33.1
--------- --------- --------- --------- ---------
Gross profit........................................ 61.4 63.6 64.6 64.1 66.9
Selling, general and administrative................... 13.7 14.3 14.8 14.0 11.2
Research and development.............................. 14.8 13.2 12.5 12.1 12.9
--------- --------- --------- --------- ---------
Income from operations.............................. 32.9 36.1 37.3 38.0 42.8
Interest income....................................... 0.3 0.5 0.5 0.4 0.5
--------- --------- --------- --------- ---------
Income before income taxes.......................... 33.2% 36.6% 37.8% 38.4% 43.3%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

27
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND NINE MONTHS ENDED SEPTEMBER 30, 1995

SALES. For the nine months ended September 30, 1996, sales increased 24.5%,
or $2.3 million, from $9.2 million in the nine months ended September 30, 1995
to $11.5 million. This increase was attributable to increased sales of new
products and increased sales to existing customers.

GROSS PROFIT. For the nine months ended September 30, 1996, gross profit
increased 30.1%, or $1.8 million, from $5.9 million in the nine months ended
September 30, 1995 to $7.7 million as a result of increased sales volume. For
the nine months ended September 30, 1996, gross margin increased to 66.9% of
sales, from 64.1% in the nine months ended September 30, 1995 primarily as a
result of reductions in material costs and improved manufacturing efficiencies.

SELLING, GENERAL AND ADMINISTRATIVE. For the nine months ended September
30, 1996, selling, general and administrative expense was unchanged from the
nine months ended September 30, 1995. However, selling, general and
administrative expense decreased as a percentage of sales from 14.0% in the nine
months ended September 30, 1995 to 11.2% for the nine months ended September 30,
1996, primarily due to improved operating efficiencies achieved by holding
personnel costs constant as sales increased.

RESEARCH AND DEVELOPMENT. For the nine months ended September 30, 1996,
research and development expense increased by 32.4%, or $362,000, from $1.1
million in the nine months ended September 30, 1995 to $1.5 million. Research
and development expense increased as a percentage of sales from 12.1% in the
nine months ended September 30, 1995 to 12.9% in the nine months ended September
30, 1996, primarily due to increased staffing.

INTEREST INCOME. For the nine months ended September 30, 1996, other income
increased by 36.8%, or $14,000, from $38,000 in the nine months ended September
30, 1995 to $52,000 as a result increased cash reserves in interest bearing
accounts.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

SALES. In 1995, sales increased 8.0%, or $931,000, from $11.6 million in
1994 to $12.5 million. This increase was attributable to increased sales of new
products, particularly Bit 3's PCI to VME adapter, and increased sales to
existing customers.

GROSS PROFIT. In 1995, gross profit increased 9.6%, or $712,000, from $7.4
million in fiscal 1994 to $8.1 million as a result of increased sales volume. In
1995, gross margin increased to 64.6% of sales, from 63.6% in fiscal 1994
primarily as a result of reductions in material costs.

SELLING, GENERAL AND ADMINISTRATIVE. In 1995, selling, general and
administrative expense increased 11.8%, or $196,000, from $1.7 million in 1994
to $1.9 million. Selling, general and administrative expense increased as a
percentage of sales from 14.3% in 1994 to 14.8% in 1995 primarily due to
increased advertising and trade show expense.

RESEARCH AND DEVELOPMENT. In 1995, research and development expense
increased by 2.6%, or $40,000, from $1.5 million in 1994 to $1.6 million.
Research and development expense decreased as a percentage of sales from 13.2%
in 1994 to 12.5% in 1995 primarily due to a more rapid increase in sales than in
research and development expense.

INTEREST INCOME. In 1995, interest income increased by 13.8%, or $8,000,
from $58,000 in 1994 to $66,000 as a result increased cash reserves in interest
bearing accounts.

28
<PAGE>
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

SALES. In 1994, sales increased 7.9%, or $849,000, from $10.8 million in
1993 to $11.6 million. This increase resulted from a number of factors
including, increased sales of existing products, particularly the Sbus to VME
adapter, and increased sales to two major customers.

GROSS PROFIT. In 1994, gross profit increased 11.9%, or $781,000, from $6.6
million in 1993 to $7.4 million due to increased sales volume and improved gross
margin. In 1994, gross margin increased from 61.4% of sales in 1993 to 63.6% of
sales as a result of reductions in material costs.

SELLING, GENERAL AND ADMINISTRATIVE. In 1994, selling, general and
administrative expense increased by 12.8% or $188,000, from $1.5 million in 1993
to $1.7 million. The increase resulted from the addition of increased
promotional and trade show expenses. As a percentage of sales, selling, general
and administrative expense increased from 13.7% in 1993 to 14.3%.

RESEARCH AND DEVELOPMENT. In 1994, research and development expense
decreased by 4.1%, or $65,000, from $1.6 million in 1993 to $1.5 million
reflecting the completion of certain product development programs to the
pre-production stage. Research and development decreased as a percentage of
sales from 14.8% to 13.2% primarily due to a more rapid increase in sales than
in research and development expense.

INTEREST INCOME. In 1994, interest income increased by $30,000, or 107.1%,
from $28,000 in 1993 to $58,000 primarily as a result of increased cash reserves
in interest bearing accounts.

For the three most recent years, there has been no impact from inflation or
changing prices to Bit 3's sales or income from continuing operations.

29
<PAGE>
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
SBS TECHNOLOGIES, INC. AND BIT 3 COMPUTER CORPORATION
(UNAUDITED)

The Company intends to acquire all the outstanding stock of Bit 3 using the
net proceeds from this offering and, as required, additional debt or cash flow
from Company operations. The unaudited Pro Forma Combined Consolidated Financial
Statements reflect the following: (i) adjustment for the purchase accounting and
estimated fair value allocation of the assets to be acquired and the obligations
to be assumed; (ii) provision for income taxes as if the combined operations had
been taxed as a C corporation for the period presented; (iii) the sale of the
shares offered by the Company and the application of the anticipated net
proceeds therefrom to reduce outstanding long term debt and increase working
capital. The unaudited Pro Forma combined consolidated balance sheet as of
September 30, 1996 was prepared as if the transaction had occurred at that date.
The unaudited Pro Forma Statements of Operations for the 12 month period ended
June 30, 1996 and the three month period ended September 30, 1996 prepared as if
the Acquisition had occurred on July 1, 1995.

In the opinion of Company management, all adjustments necessary to present
fairly such Pro Forma Combined Consolidated Financial Statements have been made
based on the proposed terms and structure of the Acquisition. The Company
anticipates, however, that changes in the composition of the assets to be
acquired and the liabilities to be assumed will occur due to changes in the
ordinary course of the Company's business. The Company believes any related
adjustments will not be material to the Pro Forma Combined Consolidated
Financial Statements. Certain of the Pro Forma adjustments are based on the
price per share of the Company's Common Stock on the date of completing the
offering. The adjustments included in the following Pro Forma Combined
Consolidated Financial Statements are based upon an assumed offering price of
$24.50 per share. To the extent that the actual price per share and net proceeds
after deducting underwriting discounts and commissions and offering expenses
payable by the Company to the Company are not the same as the assumed price, the
related adjustments will differ.

These unaudited Pro Forma Combined Consolidated Financial Statements are not
necessarily indicative of what actual results would have been had the
transactions occurred at the beginning of the respective periods nor do they
purport to indicate the results of future operations of the Company.

These unaudited Pro Forma Combined Consolidated Financial Statements should
be read in conjunction with the accompanying notes and with the financial
statements and notes thereto of the Company and Bit 3, respectively, included
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of SBS Technologies, Inc." and
"Management's Discussion and Analysis of Results of Operations of Bit 3 Computer
Corporation."

30
<PAGE>
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET (UNAUDITED)(A)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------- PRO FORMA
SBS BIT 3 ADJUSTMENTS PRO FORMA
--------- --------- ----------- -----------
(IN THOUSANDS)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 2,102 $ 1,210 $ 8,026(b) $ 11,338
Receivables........................................ 7,717 1,743 9,460
Inventories........................................ 6,425 1,593 8,018
Deferred income tax................................ 344 344
Prepaid expenses................................... 224 18 242
Other current assets............................... 138 138
--------- --------- ----------- -----------
Total current assets............................. 16,950 4,564 8,026 29,540

Property and equipment, net.......................... 1,764 134 1,898
Intangible assets:
Pre-acquisition intangible assets, net............. 5,352 5,352
Excess of estimated cost of acquisition over the
estimated fair value of the assets acquired...... 8,531(c) 8,531
--------- --------- ----------- -----------
Intangible assets, net............................. 5,352 8,531 13,883
--------- --------- ----------- -----------
Deferred income taxes................................ 56 4,406(d) 4,462
Other assets......................................... 32 32
--------- --------- ----------- -----------
Total assets..................................... $ 24,154 $ 4,698 $ 20,963 $ 49,815
--------- --------- ----------- -----------
--------- --------- ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current liabilities:
Current portion of long term debt.................. $ 1,477 $ (1,477)(e) --
Accounts payable................................... 1,995 $ 115 $ 2,110
Accrued liabilities................................ 1,921 199 3,550(f) 5,670
Income taxes payable............................... 791 791
Other current liabilities.......................... 557 557
Reserve for discontinued operations................ 64 64
--------- --------- ----------- -----------
Total current liabilities........................ 6,805 314 2,073 9,192
Long term debt, less current portion................. 4,915 (4,711)(e) 204
--------- --------- ----------- -----------
Total liabilities................................ 11,720 314 (2,638) 9,396

Stockholders equity:
Common stock....................................... 4,998 20 34,578(g) 39,596
Common stock warrants.............................. 180 180
Retained earnings.................................. 7,256 4,364 (10,977)(h) 643
--------- --------- ----------- -----------
Total stockholders' equity....................... 12,434 4,384 23,602 40,419
--------- --------- ----------- -----------

Total liabilities and stockholders' equity....... $ 24,154 $ 4,698 $ 20,963 $ 49,815
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>

(see accompanying footnotes)

31
<PAGE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(A)

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1996 PRO FORMA
-------------------- ------------------------
SBS BIT 3 ADJUSTMENTS COMBINED
--------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales........................................................... $ 31,332 $ 14,187 $ 45,519
Cost of sales................................................... 14,510 4,682 19,192
--------- --------- -----------
Gross profit................................................ 16,822 9,505 26,327
Selling, general and administrative............................. 6,293 1,837 $ 11,000(m) 19,130
Research and development........................................ 2,846 1,881 4,727
Amortization of intangible assets............................... 884 -- 975(i) 1,859
--------- --------- ----------- -----------
Operating income from continuing operations................... 6,799 5,787 (11,975) 611
Interest expense (income), net.................................. 830 (76) (960)(j) (206)
--------- --------- ----------- -----------
Income from continuing operations before income taxes......... 5,969 5,863 (11,015) 817
Income taxes.................................................... 2,387 2,345(k) (4,406)(d) 326
--------- --------- ----------- -----------
Income from continuing operations............................. $ 3,582 $ 3,518 $ (6,609) $ 491
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Common and common equivalent shares outstanding................. 3,792 5,144
Income per common and common equivalent share from continuing
operations(l).................................................. $ 0.97 $ 0.10
--------- -----------
--------- -----------
</TABLE>

<TABLE>
<CAPTION>
THREE-MONTHS ENDED
SEPTEMBER 30, 1996 PRO FORMA
-------------------- ------------------------
SBS BIT 3 ADJUSTMENTS COMBINED
--------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales........................................................... $ 11,263 $ 3,829 $ 15,092
Cost of sales................................................... (5,246) (1,398) 6,644
--------- --------- -----------
Gross profit................................................ 6,017 2,431 8,448
Selling, general and administrative............................. 2,674 419 3,093
Research and development........................................ 655 488 1,143
Amortization of intangible assets............................... 219 -- $ 244(i) 463
--------- --------- ----------- -----------
Operating income from continuing operations................... 2,469 1,524 244 3,749
Interest expense (income), net.................................. 149 (18) (240)(j) (109)
--------- --------- ----------- -----------
Income from continuing operations before income taxes......... 2,320 1,542 (4) 3,858
Income taxes.................................................... 928 617(k) 1,545
--------- --------- ----------- -----------
Income from continuing operations............................. $ 1,392 $ 925 $ (4) $ 2,313
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Common and common equivalent shares outstanding................. 4,218 5,649
Income per common and common equivalent share from continuing
operations(l).................................................. $ 0.33 $ 0.41
--------- -----------
--------- -----------
</TABLE>

(see accompanying footnotes)

32
<PAGE>
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

(a) See introductory paragraphs under "Pro Forma Combined Consolidated Financial
Statements."

(b) Adjustment to cash consists of the following:

<TABLE>
<S> <C>
Net proceeds from the offering................................................... $ 34,118
Capital adjustment to Bit 3 net equity of $3.25 million.......................... (1,134)
Cash used at closing............................................................. (20,450)
Use of extra cash to eliminate long term debt.................................... (6,188)
Interest adjustment resulting from increased cash and reduced debt............... 1,200
Proceeds from exercise of warrants............................................... 480
---------
Total adjustment $ 8,026
---------
---------
</TABLE>

<TABLE>
<S> <C>
Purchase price....................................................................... $ 24,000
Estimated acquisition costs.......................................................... 450
Less:
In-process research and development................................................ (11,000)
Bit 3 net assets at closing per the acquisition agreement.......................... (3,250)
Discount on notes payable to selling shareholders.................................. (450)
---------
Intangible assets, including goodwill................................................ $ 9,750
---------
Amortization......................................................................... (1,219)
Pro forma intangible assets, including goodwill...................................... $ 8,531
---------
---------
</TABLE>

(d) Change in income tax resulting from income charges due to the net of
increased amortization of intangible assets associated with the Bit 3
purchase, interest income and interest savings resulting from elimination of
long term debt as a result of the offering on a pro forma basis.

(e) Payment of long term debt financed by cash from the net proceeds from this
offering in excess of cash required at closing.

(f) Liability for future payments to Sellers, see "Acquisition of Bit 3."

(g) Increase in Common Stock from the sale by the Company of 1,500,000 shares at
an assumed public offering price of $24.50 per share, less Underwriting
Discounts and Commissions and estimated expenses, proceeds from exercise of
warrants and the elimination of Bit 3 Common Stock.

(h) Adjustment to eliminate the net investment of Sellers in Bit 3 and the
income effects of other pro forma adjustments.

(i) Amortization of assets in (c) above, $975 for the year ended June 30, 1996
and $244 for the three months ended September 30, 1996.

(j) Interest adjustment in (b) above, $960 for the year ended June 30, 1996 and
$240 for the three months ended September 30, 1996.

(k) Bit 3 income tax when taxed as a C Corporation at a 40% effective income tax
rate.

(l) The Company's earnings per common and common equivalent share are based on
the weighted average shares of common stock and, if dilutive, common
equivalent shares (options and warrants) outstanding during the period.

The numbers of shares used in the earnings per share computations for SBS and
pro forma combined consolidated earnings per share are as follows:

<TABLE>
<CAPTION>
JUNE 30, 1996 SEPTEMBER 30, 1996
-------------------------- --------------------------
PRO FORMA PRO FORMA
COMBINED COMBINED
SBS CONSOLIDATED SBS CONSOLIDATED
--------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Weighted average shares of common stock outstanding during the year.... 3,018 4,516 3,394 4,894
Common equivalent shares--assumed exercise of options and warrants..... 1,378 1,378 1,503 1,503
Shares assumed to be repurchased with proceeds from exercise subject to
20% of average shares outstanding maximum............................. (604) (752) (679) (748)
--------- ----- --------- -----
Total common and common equivalent shares.......................... 3,792 5,142 4,218 5,649
--------- ----- --------- -----
--------- ----- --------- -----
</TABLE>

(m) Earnings change related to Bit 3 in process research and development
expensed in connection with the Acquisition.

33
<PAGE>
BUSINESS

GENERAL

The Company is a leading manufacturer of standard bus embedded computer
components that perform a broad range of CPU, general purpose I/O and special
purpose I/O interface functions. The Company capitalizes on its design expertise
and customer service capabilities to enhance product quality and reduce time to
market for OEM customers. The Company is seeking to enhance its product
offerings and has entered into a definitive agreement to acquire Bit 3, a
manufacturer of high-performance bus interconnect hardware that enables embedded
computers of differing standards to communicate. The Company will fund the $24.0
million acquisition primarily with the net proceeds of this offering. See "The
Acquisition of Bit 3."

The Company's objective is to become a leading supplier of board level
components to the standard bus embedded computer market. The Company intends to
continue its growth through a combination of internal growth and acquisitions.
Internal growth is achieved through expanding its existing product lines through
new product development and increasing penetration of its existing customer
base. The Company currently participates in a number of attractive markets,
including the Intel-based VME CPU board market, the IP market in general purpose
I/O, the telemetry interface market and the MIL-STD-1553 avionics interface
market. The Acquisition will add a line of bus interconnect products for a
variety of standard bus embedded computer buses to the Company's current product
offerings.

The Company sells its products through a combination of direct sales and
independent manufacturers' representatives. The Company's products serve a broad
range of functions including commercial, communications, industrial automation,
medical device, military and space, test and measurement and transportation.
Customers include The Boeing Company, Caterpillar, Inc., Eastman Kodak Company,
General Electric Company and Lockheed Martin Corporation. International sales
constituted approximately 16% of the Company's sales in fiscal 1996. Bit 3
currently provides interconnect products to a wide variety of commercial users
including Digital Equipment Corporation, General Electric Company, Lockheed
Martin Corporation and Rockwell International Corporation.

INDUSTRY BACKGROUND

In recent years, development of electronics and semiconductor technology has
fueled rapid growth in sales of electronics products and systems. This growth
has resulted from the emergence of new markets such as cellular telephones and
personal computers, as well as the application of electronics technology in
existing markets such as factory automation, medical instrumentation, test and
measurement systems, telecommunications, transportation and retailing. The rapid
proliferation of increasingly complex electronics applications and the
widespread trend toward outsourcing of electronics subsystems by product
manufacturers have created attractive markets for experienced, highly-focused
developers and manufacturers of electronics subsystems and components.

EMBEDDED COMPUTER MARKET. Embedded computers, which are computers that
comprise part of larger systems and which often perform functions such as data
I/O and system communication and control, represent an important segment of the
electronics market. Examples of embedded computers include the computer board
that operates an automated teller machine and the computer system that operates
a factory. Embedded computers differ from computers targeted at business
applications in several key respects, including the following:

- Embedded computers are integrated into larger systems and perform a single
function or a closely related group of functions, such as I/O and data
processing, with high degrees of repeatability, accuracy and reliability.

- Embedded computers are design-specific solutions that require substantial
engineering expertise and a comprehensive understanding of the individual
product into which they are incorporated.

- Unlike PC products, which have experienced and will likely continue to
experience short product cycles, typical embedded computer solutions have
an extended product life reflecting the long life cycles of the products
into which embedded computers are typically incorporated and the
manufacturer's desire to maintain a stable product configuration.

- Embedded computers must often adhere to specific requirements, including
size, reliability and ability to withstand the demands of extreme
operating environments.

- Embedded computers typically represent only a small portion of the overall
cost of the larger systems into which they are incorporated.

34
<PAGE>
As a result, the Company believes that performance, reliability, supplier
stability and customer support, rather than price, are often the primary factors
in a decision to purchase a particular embedded computer solution.

A typical embedded computer application consists of an element, such as a
machine tool, to be controlled by or interfaced with the embedded computer,
input boards to transfer status data from the element into the embedded
computer, one or more processor boards to take the status data from the input
boards and select an appropriate action for the element to perform and output
boards to send control instructions back to the element. Embedded computers also
often incorporate a user interface through which an operator can control or
monitor the embedded computer manually. Additionally, multiple embedded
computers of similar or differing architectures are often interconnected to
create larger systems. An example is the interconnection of multiple computer
controlled machines to automate an entire factory. A typical embedded computer
architecture is illustrated by the diagram below which illustrates the use of
the Company's products.

[NEW GRAPHIC TO COME]

35
<PAGE>
OEMs requiring embedded computers either construct systems based on standard
bus designs together with off-the-shelf I/O, processor and memory modules, or
they develop custom or proprietary solutions. Standard bus solutions generally
enable product designers to develop systems quickly and with a high degree of
confidence in the reliability of the solution, to capitalize on the lower cost
of industry-standard components and to modify designs easily so that a single
product design can serve multiple applications. As a result of these factors,
standard bus systems today constitute a large and growing portion of the
embedded computer market. According to a recent industry study, BOARD-LEVEL
EMBEDDED COMPUTER MARKETS AND TRENDS, the standard bus embedded computer market
is projected to grow from approximately $2.5 billion in 1995 to approximately
$3.9 billion in 1999.

The most popular embedded computer standard today is VME, which is widely
used in aerospace and military, telecommunications, networking, industrial
automation and control, medical instruments and automated test and measurement
applications. According to BOARD-LEVEL EMBEDDED COMPUTER MARKETS AND TRENDS,
theVME-bus embedded computer market is projected to grow from approximately $1.2
billion in 1995 to approximately $2.3 billion in 1999.The modular nature of
standard bus embedded computers, their wide range of applications and the
variety of bus architectures available have resulted in a highly fragmented
market. The variety of standard bus embedded computer architectures supports a
growing market for products that interconnect various types of standard bus
embedded computers.

The modular nature of standard bus embedded computers, their wide range of
applications and the variety of bus architectures available have resulted in a
highly fragmented market. The variety of standard bus embedded computer
architectures supports a growing market for products that interconnect various
types of standard bus embedded computers. The acceptance of embedded computers
among industrial product OEMs and the fragmentation of embedded computer
standards have also created a need for interconnection equipment between
individually incompatible embedded computer systems. This need has led to the
development of a growing set of products that support interconnection and
networking between various types of standard bus embedded computers.

TREND TOWARD OUTSOURCING. In recent years, the increasing complexity of
electronics subsystems and components, together with a widespread trend in many
companies to focus on core competencies, has led to growth in outsourcing the
design and manufacture of electronic components and subsystems by OEMs. The
increasing complexity of the design and manufacture of electronics components
and subsystems can require extensive research and divert valuable resources away
from the core competencies of an OEM. An OEM that designs and manufactures an
embedded computer internal typically maintains a specialized design staff, an
investment of inventory of components, and a specialized manufacturing
capability. To address the challenges created by the increasing complexity of
key electronics components and subsystems, such as embedded computers, and to
focus on their core areas of competency, a growing number of OEMs are
outsourcing the design and manufacture of complex embedded computer solutions.
As a result, the Company believes there is a significant opportunity to provide
OEMs with cost-effective, reliable and high value-added embedded computer
solutions.

SBS' STRATEGY

The Company is a leading manufacturer of standard bus embedded computer
components that perform a broad range of CPU, general purpose I/O and special
purpose I/O interface applications. The Company capitalizes on its design
expertise and customer service capabilities to enhance product quality and
reduce time to market for OEM customers. The Company's objective is to become a
leading supplier of board level components to the standard bus embedded computer
market. The Company believes that multiple applications associated with this
market and its fragmented nature provide numerous opportunities for the Company
to expand the scope of its activity. Key elements of the Company's strategy are:

- EXPAND MARKET PENETRATION THROUGH INTERNAL GROWTH. The Company has
achieved internal growth in each of its principal product lines through a
combination of new product development and increased sales of existing
products to new and existing customers. By increasing the direct sales
capability of the companies it has acquired, cross-selling to its existing
customers and to customers gained through acquisitions, and continuing to
update its existing products with state of the art technology, the Company
has been able to expand its available market and increase penetration of
its customer base. For example, after the Acquisition, the Company intends
to expand Bit 3's

36
<PAGE>
marketing focus from catalogue sales to include increased emphasis on
direct sales and thereby offer a wide range of complementary I/O, CPU and
interconnect solutions to both the Company's existing customers and Bit
3's customers. The Company seeks to expand its product offerings to
accommodate popular embedded computer bus standards. The Company currently
has products serving the VME and ISA bus marketplaces and is developing
products compatible with compact PCI bus formats.

- COMPLEMENT INTERNAL GROWTH THROUGH ACQUISITION. The Company has developed
its business through the acquisition of embedded computer companies with
product lines compatible with its own. As a result, the Company is able to
offer integrated solutions to its customers and to enter a number of
complementary markets. The Company's acquisitions of BSI, GreenSpring and
LDG have enabled the Company to expand from its initial specialized
applications markets into larger and broader markets. The Company views
the Acquisition as a key step in its acquisition growth strategy.

- CONTINUED TECHNOLOGY INTEGRATION. The Company invests in research and
development to improve product performance, extend its product offerings,
serve new applications and develop new products for its existing
customers. Existing products are regularly upgraded to incorporate
advanced digital technology and to maintain state of the art performance.
As a result of its efforts to increase product performance, the Company
has also been able to reduce product size and cost through the use of
state of the art components. The Company seeks to share technology between
its divisions to reduce development costs, development risks and time to
market.

- EMPHASIZE CUSTOMER SUPPORT. Because of the critical nature of many of the
applications for the Company's products and the complex nature of the
systems into which they are incorporated, comprehensive and timely
customer support are important aspects of a customer's purchase decision.
The Company provides extensive customer support to assist in the
integration of its products into customer systems. This support can
include providing on-site, applications engineering assistance at no cost.
The Company believes that this focus on customer support has contributed
to high levels of repeat business and has helped expand sales of the
Company's products throughout its customers' organizations.

- EXPAND INTERNATIONAL SALES. Currently, the Company derives approximately
16% of its revenue from international sales, primarily in Europe, Canada
and the Far East. In 1996, the Company opened its first international
office in Scotland to service the European market. The Company seeks to
extend its sales penetration through a combination of international
distributions and sales representatives' networks, potential international
acquisitions, certifying its products to international standards and
opening additional international Company sales offices.

SBS' PRODUCTS

The Company's primary product lines are divided into two groups: general
purpose products including CPU products and general purpose I/O products, and
special purpose products including telemetry and avionics interface products.
The Acquisition will add bus interface products to the Company's general purpose
product grouping.

GENERAL PURPOSE PRODUCTS

CPU PRODUCTS. The Company entered the standard bus embedded computer CPU
board market with its acquisition of LDG in August 1996. CPU boards contain the
computational functionality of an embedded computer system. The Company produces
CPU boards for the VME segment of the embedded computer market, the most widely
accepted bus standard in the industry. The VME CPU board market can be segmented
by processor type. The largest segment is made up of boards designed around the
Motorola 680x0 series processors, upon which the VME standard was based. A
growing segment is comprised of boards based on Intel 80x86 and Pentium
processors which provide access to the large base of Windows and Windows NT
software available from the PC market. The CPU boards sold by LDG are based on
Intel 80x86 and Pentium processors and are focused on the market for "Wintel"
CPU board products in the VME marketplace. In August 1996, the Company began
shipment of its single-slot

37
<PAGE>
Pentium-based VME board. At present, the Company offers six Intel
processor-based CPU boards ranging in price from approximately $2,500 to
approximately $8,500.

GENERAL PURPOSE I/O PRODUCTS. In April 1995, the Company purchased
GreenSpring, a leading developer and producer of I/O modules known as
IndustryPacks ("IPs"). IPs are small mezzanine boards that plug onto an embedded
computer board and provide specific types of I/O for embedded computer systems.
GreenSpring pioneered the development of the IP as a modular I/O solution for
Motorola's MVME162 processor board, which is becoming the most widely used
processor board in the VME market. The Company has continued to expand the
market for IP products by introducing a line of carrier cards for VME systems
that can accommodate up to four IPs. This allows system designers to use IPs
even if they do not use Motorola MVME162 products. The Company's offerings
currently include VME, PCI, compact PCI and ISA bus carrier cards. GreenSpring's
product line of over 100 I/O products service a wide range of applications in
the embedded computer market including analog I/O, bus interface functions,
digital/ parallel I/O, motion control, telecommunications/serial I/O,
telecommunications products, video/graphics adapters and temperature measurement
with prices ranging from approximately $350 to approximately $3,500.

SPECIAL PURPOSE PRODUCTS

TELEMETRY PRODUCTS. In August 1992, the Company purchased BSI, a major
supplier of telemetry interface equipment for the embedded computer market.
Telemetry is the process used to send and receive digital data via radio waves.
The Company's telemetry interface products allow computers to receive, interpret
and process telemetry data. Telemetry is often used to transmit data from some
object under test, such as an aircraft, to a receiving station while the test is
underway. This allows engineers to monitor test performance in real time, often
decreasing total test costs and enhancing test safety. Use of this technology
has expanded to include continuous monitoring of remote sites and transmission
of digital data from satellites to the earth. BSI pioneered the concept of using
special purpose interface boards for telemetry ground station applications based
on standard bus embedded computers. BSI has expanded its product offerings to
include specialized equipment designed to receive and process satellite data.
The Company's telemetry products serve a specialized market and include a
significant software component. BSI sells approximately 30 products for the VME
and ISA bus telemetry markets at prices ranging from approximately $1,600 to
approximately $41,000.

AVIONICS INTERFACE PRODUCTS. The Company's avionics products interface an
embedded computer system with the MIL-STD-1553 avionics bus used in a wide
variety of military and space applications including aircraft, missiles, ground
vehicles, the International Space Station, the Space Shuttle and naval vessels.
Initial applications for the Company's products were support of system
development, system testing and simulation. Over the past several years, the
Company has expanded its product line to include ruggedized interface products
that are used in operational systems, and monitor and test systems that can be
used as diagnostic tools for operational systems. Like its telemetry products,
the Company's avionics products occupy a niche market and include a significant
software component. The Company offers approximately 20 avionics interface
boards at prices ranging from approximately $4,000 to approximately $20,000.

The Company also produces a judgmental use of force product. This product
utilizes an embedded computer in a device to train police officers and military
personnel in proper responses to crisis situations.

BIT 3 COMPUTER CORPORATION

A significant portion of the net proceeds from this offering will be used to
acquire Bit 3. See "Acquisition of Bit 3" and "Use of Proceeds." Bit 3 was
incorporated in 1980 and its management recognized early on that the rapid
expansion of microprocessor-based industrial computers had resulted in the
proliferation of a number of different computer architecture standards. Bit 3
identified a market for products that interface and network industrial computers
designed around different computer architectures. In 1983, Bit 3 introduced its
first adapter product, an interface device to connect IBM PC equipment with
Multibus architecture computers. Since then, Bit 3 has expanded its product line
to include computer networking and interconnection hardware for many of the
popular computer architecture standards used

38
<PAGE>
in the standard bus embedded computer market, including VME, Sbus, ISA, EISA,
Micro Channel, GIO, TURBOCHANNEL, PCI, Multibus and Qbus. Currently, the
majority of Bit 3's new product development is focused on VME, PCI and compact
PCI bus designs. The development of Bit 3's new products is driven by the
emergence of significant new bus specifications and applications.

Bit 3 produces high performance bus interconnect hardware and software
products that are used in a wide variety of applications, including data
acquisition, image and visualization processing, industrial process control,
medical electronics, signal processing and system integration. Bit 3's typical
customer uses bus adapter products, because of the need for high speed,
low-latency interconnections between computer platforms. This connectivity
cannot be provided at the required performance levels by common local area
networking solutions, such as Ethernet or Token Ring, nor can it in most cases
be provided by higher speed protocols, such as ATM or FDDI. Bit 3 currently
provides interconnect products to a wide variety of commercial users. Bit 3's
customers include Digital Equipment Corporation, General Electric Company,
Lockheed Sanders, Soliton Systems and Westinghouse Electric Corporation. Sales
to General Electric represented approximately 19.2% and 22.1% of Bit 3's sales
for the twelve months ended December 31, 1995 and the nine months ended
September 30, 1996, respectively. A decrease in sales to General Electric could
materially adversely affect Bit 3's business.

The Company believes that Bit 3's products, technology and customers are
synergistic with its existing businesses, particularly its general purpose CPU
and I/O products. As with its other businesses, the Company intends to actively
pursue cross selling opportunities between its existing product lines, including
those acquired with Bit 3. It also believes that the computer interconnect
market will continue to grow as the use of standard bus embedded computers
proliferates and that it can participate in this growth through active marketing
of Bit 3 products. However, there can be no assurance that any synergy will take
place between Bit 3 and the Company's existing product lines or that Bit 3 will
experience future growth or remain at its current level of sales and
profitability in the future. See "Risk Factors--Acquisition of Bit 3."

Achieving the anticipated benefits of the Acquisition will depend upon
whether the integration of the two companies' businesses is accomplished in an
efficient and effective manner, and there can be no assurance that this will
occur. The integration of Bit 3 will require, among other things, integration of
the Company's and Bit 3's respective product offerings and the coordination of
their sales and marketing and research and development efforts. The difficulties
of such integration may be increased by the necessity of coordinating
geographically separated organizations. The inability of management to
successfully integrate the operations of the Company and Bit 3 could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors--Acquisition of Bit 3."

APPLICATIONS AND CUSTOMERS

The Company's broad range of products support a wide range of applications.
In fiscal 1994, 1995 and 1996, no one customer exceeded 10% of the Company's
sales. The following table highlights some of the Company's representative
customers and their applications utilizing the Company's products.

<TABLE>
<CAPTION>
APPLICATION CUSTOMER COMPANY PRODUCT
- ----------------------------------------------- ------------------------- ----------------
COMMERCIAL AND INDUSTRIAL APPLICATIONS
<S> <C> <C>
Airport Ground Traffic Control Norden/Westinghouse CPU
"C" Size Copier Xerox I/O
Color Proof Copier Eastman Kodak I/O
Currency Inspection System Currency Systems CPU
Document Scanner General Scanning I/O
Heavy Machinery Testing Caterpillar Telemetry
Semiconductor Handler Delta Design I/O
Turbine Control System GE Motors CPU
</TABLE>

39
<PAGE>
<TABLE>
<CAPTION>
APPLICATION CUSTOMER COMPANY PRODUCT
- ----------------------------------------------- ------------------------- ----------------
COMMUNICATIONS
<S> <C> <C>
Cellular Telephone Systems ArgoSystems CPU
Commercial Satellite Testing Loral Test & Information Telemetry
Communications Satellite Testing TRW Telemetry
GSP Testing Aerospatiale Telemetry
SS7 Telephone Protocol Undisclosed I/O
Telephone Protocol Undisclosed I/O
Telephone Switch Billing System ACECOM I/O
INDUSTRIAL AUTOMATION
Animatronics Walt Disney I/O
Automotive Brake Tester Burke Porter Machinery CPU
Automotive Wheel Alignment Burke Porter Machinery CPU
Carpet Manufacturer Process Control MOOG I/O
Packaging Machinery Triangle Package I/O
Machinery
PLC Co-processor GE Fanuc CPU
Robot Control Adept Technology I/O
Semiconductor Trim Equipment Control Automation CPU
MEDICAL DEVICES
Blood Analyzer IGEN I/O
Blood Analyzer Helena Laboratories CPU
Ventilators Display NellCor I/O
MILITARY AND SPACE APPLICATIONS
Ariane V System Test and Simulation Aerospatiale Avionics
Ariane V Test Support Lockheed Martin Telemetry
B-2 Flight Testing Northrop Grumman Telemetry
C-17 Aircraft Testing McDonnell Douglas Telemetry
Satellite Imaging TRW Telemetry
TEST AND MEASUREMENT APPLICATIONS
Cyclotron Controller Univ. of Wisconsin I/O
Particle Collision and Detection System CERN I/O
Temperature Control Therm-O-Disk I/O
TRANSPORTATION
Aircraft Flight Testing Cessna Telemetry
Commercial Avionics System Test Honeywell Avionics
Commercial Avionics System Test Rockwell International Avionics
Jet Engine Testing Pratt & Whitney Telemetry
Lane Controllers NYSTA I/O
Maritime Systems NEC Avionics
Personal Rapid Transit Raytheon I/O
777 Aircraft Testing Boeing Telemetry
Train Track Alignment System Fairmont Tamper CPU
</TABLE>

SALES AND MARKETING

The Company markets its products both domestically and internationally. As
of September 30, 1996, the Company had 19 employees, who typically hold
engineering degrees, in sales, marketing and customer relations, over 43
independent manufacturers' representatives and 35 international distributors.
Employee sales personnel are educated on each of the Company's product lines and
refer opportunities to appropriate product line managers. Primary sales methods
vary among the Company's product lines. The Company's avionics interface and
telemetry products generally have the most complex applications and, as a

40
<PAGE>
result, leads are generally identified by independent manufacturers'
representatives and sales are closed by the sales employees. In the case of its
CPU and I/O products, a higher percentage of sales are either closed by
independent manufacturers' representatives or are the result of catalog sales.
In each of the Company's product lines, sales employees generally pursue "design
in" applications where the Company's products are included as part of a system.

The Company sells approximately 16% of its products outside the United
States. It maintains sales offices in Albuquerque for its avionics interface
products, in Raleigh, North Carolina, for its Intel processor-based CPU boards,
in Menlo Park, California, for its I/O products and in Carlsbad, California, for
its telemetry products. The Company also maintains an international sales office
in Glasgow, Scotland to support European sales of its avionics interface
products. Sales and sales leads are generated through a range of activities
performed by the Company including identification of participants in key
defense-related programs, participation in numerous trade shows, direct mail
catalogs, advertisements in leading trade publications and corporate and
subsidiary web sites on the Internet.

RESEARCH AND DEVELOPMENT

The Company invests in research and development programs to develop new
products in related markets and to integrate state of the art technology into
existing products. As of September 1, 1996, the Company had approximately 28
employees engaged in research and development activities. Of these employees, 20
have technical degrees and eight have advanced degrees. The Company seeks to
combine special-purpose hardware, firmware and software in its products to
provide its customers with the desired functionality. Approximately 60% of the
Company's research and development efforts in fiscal year 1996 were software
related. The Company's research and development expense was $2.8 million, $1.7
million and $1.2 million in fiscal 1996, 1995 and 1994, respectively,
corresponding to 9.1%, 10.4% and 11.6% of sales, respectively.

LDG's current research and development activity is focused on evolutionary
improvement of its existing product line. GreenSpring's efforts are directed
towards broadening the scope of its market by developing new IPs and upgrading
existing products to state of the art technology. Examples include a new IP
designed to provide high speed reflective memory for networked computer systems
and an updated set of discrete and digital I/O IPs with increased performance
and functionality. BSI is continuing to upgrade its products' performance by
increasing the operating bit rates, a key performance measure in the telemetry
industry, in its new products. BSI is also continuing to expand its offerings of
high performance, CCSDS packet switching products for the satellite ground
station market. The Company is also extending its avionics interface product
line. For example, the Company has completed development of a new ruggedized
avionics product for the operational system market. Additionally, the Company
has recently introduced a PCMCIA version of its avionics bus analyzer product.
There can be no assurance that the Company will be successful in developing and
bringing to market any products as a result of its research and development
efforts. See "Risk Factors--Reliance on Industry Standards; Fundamental
Technology Change."

COMPETITION

The standard bus embedded computer industry is highly competitive and
fragmented, and the Company's competitors differ depending on product type,
company size, geographic market and application type. The Company faces
competition in each of its product lines. The Company believes that because of
the diverse nature of the Company's products and the fragmented nature of the
embedded computer market, there is little overlap of competitors for each
product line. Competitive factors across the Company's product lines include
performance, customer support, product longevity, supplier stability, breadth of
product offerings and reliability. Many of the Company's existing and potential
competitors have financial, technological and marketing resources significantly
greater than those of the Company and may have established relationships with
customers or potential customers that afford them a competitive advantage. There
can be no assurance that the Company will be able to compete effectively in its
current or future markets or that competitive pressures will not adversely
affect its business, financial condition or results of operations.

41
<PAGE>
In the Company's recently-acquired CPU product line, the Company competes
with a number of other suppliers of VME CPU boards. The Company's direct
competitors include other companies that build VME CPU boards based on Intel
microprocessor technology such as Force Computers, Inc. (which has recently
agreed to be acquired by Solectron Corporation), Performance Technologies, Inc.,
RadiSys Corporation, VME Microsystems, Inc. and XYCOM, Inc. Indirectly, however,
the Company also competes with suppliers of VME CPU boards based on other
microcomputer architectures such as Motorola 680x0, Sparc and PowerPC.

In the generalized computer I/O product area served by GreenSpring and its
IP product line, the Company has two classes of competition. The first class
includes companies that compete directly by selling IP products. The second
class includes companies that compete with I/O products using a different
implementation to provide functionally equivalent products. The Company's
competitors in each of these classes include Computer Products, Inc., Systran,
Inc. and VMIC.

MANUFACTURING

The Company uses contract manufacturing to produce substantially all of its
board-level products. The Company obtains parts from large electronics parts
suppliers and printed circuit boards from printed circuit board manufacturers
and provides these parts and boards as kits to contract manufacturing companies
that fabricate the Company's products. Following manufacturing, the Company
performs test, packaging and support functions for the Company's products.
Dependence on a particular contract manufacturer is reduced by using multiple
contract manufacturers for each of the Company's product lines. However, the
Company may choose in the future to consolidate its contract manufacturing to
gain economies of scale and to shift its inventory control to the contract
manufacturer, in which case the Company would become increasingly dependent on a
smaller number of manufacturers for the continued timely and efficient
production of all of its inventory. See "Risk Factors--Availability of Component
Materials."

EMPLOYEES

As of September 30, 1996, the Company had approximately 144 employees at its
four locations: Albuquerque, New Mexico; Carlsbad, California; Menlo Park,
California and Raleigh, North Carolina. Of these employees, 16 were in executive
and administrative positions; 19 were in sales, marketing and customer
relations; 28 are in research and development; 35 were clerical and 46 are
employed in support of ongoing production. As of October 8, 1996, Bit 3 had
approximately 50 employees in Minneapolis, Minnesota.

FACILITIES

The Company leases office and manufacturing space in Albuquerque, New
Mexico, Carlsbad, California, Menlo Park, California and Raleigh, North
Carolina. The Company's standard practice is to obtain all of its facilities
through operating leases. Management maintains an insurance plan covering all
its facilities and contents.

The Albuquerque, New Mexico leased facility consists of 19,225 square feet
located in a multi-floor office building which includes adequate assembly and
test space for the Company's avionics interface and judgmental use of force
product lines, as well as serving as the Company's corporate headquarters.
Management believes expansion space is available, if required. Currently the
assembly and test operations

42
<PAGE>
utilize approximately 50% of the productive floor space. The lease term for the
Albuquerque, New Mexico location is five years commencing July 1, 1995 with one
additional five year option.

The Carlsbad, California leased facility is a one story, approximately
12,000 square foot building, located in a business park, consisting of
approximately 2,000 square feet of office space and 10,000 square feet of
assembly and test areas for the Company's telemetry products. Management
believes that this facility is capable of handling projected increases in
production for the foreseeable future as the current capacity utilization of the
manufacturing area is approximately 35%. The lease term for the Carlsbad,
California location runs through July 1997, and has a one year option for a
subsequent year.

The Company's general purpose I/O business is located in Menlo Park,
California. The 16,394 square foot facility, which is leased for a four year
term expiring May 2000, is a one story multi-tenanted building in a business
park which consists of 6,000 square feet of office space and 10,394 square feet
of assembly and test areas. Management believes that the facility will be
sufficient to serve the general purpose I/O business' needs through the term of
the lease.

The Company's newly acquired CPU products business, located in Raleigh,
North Carolina, leases a one story multi-tenanted facility consisting of
approximately 4,000 square feet of office space and approximately 7,000 square
feet of assembly and test areas. The lease expires on November 30, 2002.
Management believes that the facility is adequate at the Company's current level
of business and that expansion space is available if required.

Bit 3's operations are located in an approximately 13,647 square foot
facility in Minneapolis, Minnesota leased on a one year lease that expires
October 1997. The Company intends that within the next 18 months it will move
this business to a different location in the Minneapolis metropolitan area.
Management believes that adequate, alternative space is available.

43
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Executive Officers and Directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Andrew C. Cruce, Ph.D........................ 53 Chairman of the Board of Directors
Christopher J. Amenson....................... 46 Chief Executive Officer, President, Chief Operating Officer
and Director
James E. Dixon, Jr........................... 51 Vice President of Finance and Administration, Treasurer and
Chief Financial Officer
Scott A. Alexander........................... 46 Vice President, Secretary and Director
William J. Becker, Brigadier General,
retired(1)(2)............................... 70 Director
Lawrence A. Bennigson, Ph.D.(1)(2)........... 58 Director
A. Wade Black(1)............................. 31 Director
Warren Andrews............................... 53 Director Nominee
</TABLE>

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

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

Andrew C. Cruce, Ph.D., is a founder of the Company and has served as a
Director since the commencement of its business activity in September 1987, as
President and Chief Operating Officer from November 1987 to April 1992, as
Treasurer from late 1991 to November 1995, and as Chief Executive Officer from
early 1992 to October 1996. From April 1985 to September 1987, Dr. Cruce was a
Senior Principal Staff Member of the BDM Corporation. Before 1985, Dr. Cruce was
the technical director for simulation at the Naval Air Test Center, the Navy's
primary facility for Development, Test and Evaluation of Naval aircraft. Dr.
Cruce holds a Master's Degree in Business Management from the Sloan Fellows
Program at the Massachusetts Institute of Technology, as well as a Doctorate in
Aeronautical Engineering and a Master's Degree in Electrical Engineering.

Christopher J. Amenson became the Chief Executive Officer in October 1996,
President and Chief Operating Officer of the Company in April 1992, and a
Director in August 1992. For five years before joining the Company, Mr. Amenson
was President of Industrial Analytics, Inc., a Boston-based firm engaged in
consulting in support of operations, mergers and acquisitions. Mr. Amenson holds
a Bachelor's Degree in Government from the University of Notre Dame and a
Master's Degree in Business Management from the Sloan Fellows Program at the
Massachusetts Institute of Technology.

James E. Dixon, Jr. was appointed Vice President of Finance and
Administration, Treasurer and Chief Financial Officer of the Company in
September 1995. For eight years before joining the Company, Mr. Dixon held the
position of Director of Finance, Howden Group America, Inc., a wholly owned
subsidiary of Howden Group PLC. Howden Group America's subsidiaries, whose
combined annual revenue exceeds $200 million, specialize in the design and
manufacture of air and gas handling equipment, defense-related products and food
processing equipment. Mr. Dixon held various controller positions at
Westinghouse Electric from 1971 to 1985. Mr. Dixon holds a Bachelor's Degree in
Business Education from Indiana University of Pennsylvania.

Scott A. Alexander is a founder of the Company and has served as Director
since the commencement of its business activity in September 1987, and as
Secretary since November 1987. Mr. Alexander was appointed Vice President in
August 1991. Mr. Alexander served as the Company's Treasurer from November 1987
to late 1991. As Chief Engineer for the Company, Mr. Alexander supports the
design, development and implementation of critical architectural requirements
for the Company's computer interface products. From November 1985 to September
1987, Mr. Alexander was a Senior Principal Staff Member of the BDM Corporation.
During this time he participated in the design of a complete flight test range
for the Republic of China, including the design of the Mission Command Center
(including control consoles), computer architecture, display and control
software. Before November 1985, Mr. Alexander was employed at the Naval Air Test
Center, where he was responsible for the continuing development and use

44
<PAGE>
of the Tactical Avionics Software Test and Evaluation Facility and the Manned
Flight Simulator Facility. Mr. Alexander holds a Master's Degree in Electrical
Engineering from Virginia Polytechnic Institute and a Bachelor of Science Degree
in Physics from Old Dominion University.

Warren Andrews became a Director in November 1996. Mr. Andrews is
editor-in-chief of RTC MAGAZINE, the leading publication in the open-systems,
board-level industry. From 1987 to 1994, Mr. Andrews served as a senior editor
for COMPUTER DESIGN MAGAZINE while, at the same time, publishing his own
newsletter, EMBEDDED COMPUTER TRENDS. From 1985 to 1987, he served as managing
editor of ELECTRONIC DESIGN MAGAZINE. Before 1985, Mr. Andrews was semiconductor
editor for ELECTRONIC ENGINEERING TIMES and owned and operated his own business
providing electronic design services and developing, manufacturing and selling
microprocessor-based switching systems for a variety of audio and video
applications in the retail and host industries. In addition, he holds one U.S.
patent and has designed other products for the cable TV, burglar and fire alarm,
and educational communications markets. Mr. Andrews holds a Bachelor of Science
Degree from Fairleigh Dickinson University.

William J. Becker, Brigadier General, retired, became a Director in August
1992. Since 1981 he has been self-employed as a senior independent consultant,
advising on international technology, to such organizations as the United States
Department of Energy, EG&G Inc., Mactec, Inc., Raytheon Services Co.,
Westinghouse Electric Corporation and International Technology, Inc. During his
long career in the United States Air Force, General Becker oversaw a number of
logistics and mobility operations and in his last assignment was commander of
the Defense Property Disposal Services. General Becker attended the University
of Southern California and holds a Bachelor's Degree in Management and a
Master's Degree in Logistics from the Air Force Institute of Technology's
Graduate School of Systems & Logistics at Wright Patterson Air Force Base in
Ohio.

Lawrence A. Bennigson, Ph.D., became a Director in November 1995. Dr.
Bennigson has provided consulting services on corporate, business and
manufacturing strategy and related organizational issues to major corporations
and to governments for over 30 years. Dr. Bennigson has been an independent
management consultant since January 1994. He worked extensively in European
countries, as well as on business matters in Russia and China. As Senior Vice
President of the former MAC Group, Inc., Dr. Bennigson helped to lead the
strategic development of the firm resulting in its 1991 acquisition and merger
to become Gemini Consulting. Dr. Bennigson taught executives, graduate students,
and undergraduates as a faculty member of the School of Engineering, Stanford
University, The Harvard University Graduate School of Business and as a visiting
faculty member at the London Business School and the Graduate School of
Business, Lund University, Sweden. Before his academic and consulting career,
Dr. Bennigson served for six years as a U.S. Naval Officer. Dr. Bennigson holds
a Bachelor's Degree in General Engineering from UCLA, as well as Master's and
Doctorate Degrees in Industrial Engineering (with specialization in Human
Factors Engineering and Industrial Organization) from Stanford University.

A. Wade Black became a Director in November 1995. Mr. Black is president and
CEO of Seven Bar Enterprises, Inc., a privately owned holding company. Seven Bar
Enterprises is one of the founding stockholders of SBS Technologies, Inc. Mr.
Black has been president, CEO and a director of Seven Bar Enterprises since 1990
and oversees the company's operations and subsidiaries within the aviation, air
medical, real estate development, and investment businesses. Mr. Black holds a
Bachelor's Degree in Petroleum Engineering from Texas A&M University and a
Master's Degree in Business Administration from Southern Methodist University.

45
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership, as of November 14, 1996, and as adjusted to reflect the sale of the
Common Stock offered hereby (i) each person known to the Company to own
beneficially more than 5% of the Common Stock, (ii) each Director of the
Company, (iii) each of the Company's Executive Officers, (iv) each Selling
Shareholder and (v) all Officers and Directors as a group. Except as otherwise
noted, the Company believes that the persons listed below have sole investment
and voting power with respect to the Common Stock owned by them.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- SHARES BEING -----------------------
NUMBER PERCENT OFFERED(2) NUMBER PERCENT
---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Andrew C. Cruce, Ph.D.(3)(4)(5)........................ 516,543 14.2% -- 516,543 10.1%
Christopher J. Amenson(3)(5)(6)........................ 267,392 7.1 -- 267,392 5.1
Scott A. Alexander(3)(4)(5)(7)......................... 452,958 12.5 -- 452,958 8.8
Warren Andrews(3)...................................... -- * -- -- *
James E. Dixon, Jr.(3)(5).............................. 178 * -- 178 *
William J. Becker(3)(8)................................ 16,000 * -- 16,000 *
Martin Bell(10)........................................ 1,000 * 1,000 -- --
Lawrence Bennigson(3).................................. -- -- -- -- --
A. Wade Black(3)(9).................................... 440,117 12.5 -- 240,117 4.8
Alison Brown(10)....................................... 300 * 300 -- --
Sylvia Coakley(10)..................................... 500 * 500 -- --
D.H. Blair Investment Banking Corporation(10).......... 9,000 * 9,000 -- --
J. Morton Davis(10).................................... 20,000 * 20,000 -- --
Richard Maio(10)....................................... 1,000 * 1,000 -- --
Stephens Monte(10)..................................... 200 * 200 -- --
David Nachamie(10)..................................... 500 * 500 -- --
Kalman Renov(11)....................................... 20,000 * 20,000 -- --
Lindsay Rosenwald(10).................................. 25,000 * 25,000 -- --
Seven Bar Enterprises, Inc............................. 437,117 12.4 200,000 237,117 4.7
3860 West Northwest Highway, Suite 406
Dallas, TX 75220
Michael Siciliano(10).................................. 500 * 500 -- --
Alan Stahler(10)....................................... 20,000 * 20,000 -- --
Kenton Wood(10)........................................ 2,000 * 2,000 -- --
All directors and officers as a group (8 1,693,188 42.5% 200,000 1,493,188 27.2%
persons)(4)(5)(6)(7)(8)(9)...........................
</TABLE>

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

* Less than 1%.

(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus upon
exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person and that are exercisable within 60 days from the date of this
Prospectus have been exercised.

(2) Assumes no exercise of the Underwriter's over-allotment option. If the
over-allotment option is exercised in full, the number of shares being
offered, the number of shares owned after the offering and the percentage of
shares owned after this offering for the following Additional Selling
Shareholders would be: Scott A. Alexander--70,000; 382,958; 7.5%;
Christopher J. Amenson--33,000; 234,392; 4.3%; J. Kenneth Boyette--27,000;
100,047; 2.0%; Andrew C. Cruce, Ph.D.--140,000; 376,543; 7.3%.

46
<PAGE>
(3) The address for the shareholder is in care of the Company at 2400 Louisiana
Blvd, NE, Albuquerque, NM 87110.

(4) Includes options to purchase 100,000 shares of Common Stock currently
exercisable under the Company's stock option plans.

(5) Includes Common Stock owned through the SBS Technologies, Inc. 401(k) Profit
Sharing Plan.

(6) Includes options to purchase 253,116 shares of Common Stock; options to
purchase 119,783 shares of Common Stock are currently exercisable under the
Company's stock option plans and options to purchase 133,333 shares of
Common Stock are currently exercisable under option agreements between Mr.
Amenson and certain other shareholders of the Company.

(7) Includes 27,000 shares of Common Stock held by Mr. Alexander as trustee for
the benefit of his minor children.

(8) Includes options to purchase 5,000 shares of Common Stock currently
exercisable under the Company's stock option plans.

(9) Includes 437,117 shares owned of record by Seven Bar Enterprises, Inc., of
which Mr. Black is president and a director, 200,000 shares of which are
being sold in this offering by Seven Bar Enterprises, Inc.

(10) Represent shares which will be issued upon exercise of warrants at an
exercise price of $4.80 per share.

47
<PAGE>
DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, each without par value. The following description of the Common
Stock is qualified in all respects by the reference to the Articles of
Incorporation, as amended, and the Bylaws of the Company, copies of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part.

The holders of the Common Stock elect all Directors and are entitled to one
vote per share. All shares of Common Stock participate equally in dividends if,
when and as declared by the Board of Directors (See "Dividend Policy") and in
net assets on liquidation. All outstanding shares are, and the shares to be sold
by the Company and the Selling Shareholders pursuant to this offering will be,
duly authorized, validly issued, fully paid and non-assessable. Shares of Common
Stock have no preemptive rights, are not redeemable, are not liable for further
calls and assessments, and do not have cumulative voting rights.

WARRANTS

The Company, in connection with its acquisition of GreenSpring in April
1995, issued warrants to purchase 400,000 shares of Common Stock at an exercise
price of $4.50 per share (the "GreenSpring Warrants"). The holders of the
GreenSpring Warrants were also granted the right to sell alongside a Company
registration. The Company is obligated to register the GreenSpring Warrants
under the Securities Act of 1933 (the "Securities Act"). In April 1996, the
Company registered under the Securities Act 150,001 GreenSpring Warrants as well
as certain options held by the Company's Chief Executive Officer, President and
Chief Operating Officer, Mr. Amenson. As of June 30, 1996, 360,000 of the
GreenSpring Warrants remained, of which 193,334 were exercisable and warrants to
purchase 166,666 shares of Common Stock become exercisable over the next two
years. The holders of the GreenSpring Warrants also possess until August 2000
the right to sell shares of Common Stock underlying the GreenSpring Warrants
alongside the Company should the Company file a registration statement during
this period.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales by existing shareholders could adversely affect the prevailing
market price of the Common Stock. Upon completion of the offering the Company
will have 5,030,657 shares of Common Stock outstanding. Of these shares,
1,800,000 shares offered hereby (2,070,000 shares if the Underwriters'
over-allotment option is exercised in full) will be eligible for immediate sale
in the public market without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), unless such shares are held by Affiliates of the
Company, as that term is defined in the Rule 144 under the Securities Act. In
addition, approximately 186,700 shares will be eligible for sale in the public
market without restriction pursuant to Rule 144(k) and Rule 701 under the
Securities Act. Approximately 1,573,200 additional shares outstanding upon
completion of the offering will be eligible for sale pursuant to Rule 144,
assuming no exercise of the over-allotment option.

The holders of approximately 1,418,188 of the shares of Common Stock
outstanding after the offering and the holders of warrants and options to
purchase approximately 374,783 shares of Common Stock have agreed, subject to
certain exceptions, not to sell or otherwise dispose of any of their shares for
a period of 120 days after the effective date of the Registration Statement.
Cowen & Company may, in its sole discretion, at any time without notice, release
all or a portion of the shares subject to lock-up agreements. Following the
closing of the offering, the holders of approximately 449,999 shares of Common
Stock will be entitled to certain demand and piggyback registration rights with
respect to such shares.

TRANSFER AGENT AND REGISTRAR

The transfer agent for the Common Stock is First Security Bank of Utah,
Corporate Trust Department, 79 South Main Street, Salt Lake City, Utah 84111.

48
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Shareholders have agreed to sell to each of the
Underwriters named below, for whom Cowen & Company and SoundView Financial
Group, Inc. are acting as Representatives, and each of the Underwriters has
severally agreed to purchase from the Company and the Selling Shareholders, the
respective number of shares of Common Stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- ----------------------------------------------------------------------------------------------- -----------------

<S> <C>
Cowen & Company................................................................................

SoundView Financial Group, Inc.................................................................

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

Total.................................................................................. 1,800,000
-----------------
-----------------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
closing certificates, opinions and letters from the Company, its counsel, the
Selling Shareholders and independent auditors. The nature of the Underwriter's
obligations is that they are committed to purchase all the shares of the Common
Stock being offered hereby if any such shares are purchased.

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

The Additional Selling Shareholders have granted the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 270,000 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 1,800,000 shares of Common Stock
offered hereby. The Underwriters may exercise such options only to cover
over-allotments made in connection with the sale of the 1,800,000 shares of
Common Stock offered hereby.

49
<PAGE>
The Company, the Selling Shareholders and the Additional Selling
Shareholders have agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act, and contribute to
payments the Underwriters may be required to make in respect thereof.

D.H. Blair Investment Banking Corporation, ("D.H. Blair"), a member of the
National Association of Securities Dealers, who served as the Company's
underwriter in the Company's initial public offering (the "IPO"), and certain
other persons associated with D.H. Blair (the "Warrantholders") at the time of
the IPO received 100,000 warrants to purchase the Company's Common Stock at an
exercise price of $4.80 per share (the "Warrants"). The Warrants will be
exercised in connection with the offering and the 100,000 shares of Common Stock
underlying the Warrants will be sold in the offering (the "Warrant Shares"). The
Company is paying, on behalf of the Warrantholders a fee which is equal to the
underwriting discounts and commissions covering the Warrant Shares.

The Company and the Company's Officers and Directors who own shares of the
Common Stock, certain of the Selling Shareholders and the Additional Selling
Shareholders, and certain other shareholders and option holders of the Company
have entered into agreements providing that, from the date of the agreement
through 120 days following the date of this Prospectus, they will not, without
the prior written consent of Cowen & Company, directly or indirectly offer,
sell, assign, transfer, encumber, pledge contract to sell, grant an option to
purchase or otherwise dispose of any shares of Common Stock of the Company, any
options or warrants to purchase any shares of Common Stock of the Company or any
securities convertible into, or exchangeable for, Common Stock of the Company.
See "Description of Capital Stock--Shares Eligible for Future Sale."

The Representatives have advised the Company, the Selling Shareholders and
the Additional Selling Shareholders that the Underwriters do not intend to
confirm sales in excess of 5% of the shares offered hereby to any account over
which they exercise discretionary authority.

In conjunction with this offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Common Stock of
the Company or Nasdaq immediately prior to the commencement of sales in the
offering, in accordance with Rule 10b-6A under the Exchange Act. Passive market
making consists of displaying bids on Nasdaq limited by the bid prices of
independent market makers and purchases limited by such prices and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the Company's Common
Stock during a specified prior period and must be discontinued when such limit
is reached. Passive market making may stabilize the market price of the Common
Stock of the Company at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Schuler, Messersmith & McNeill, Albuquerque, New
Mexico. Certain legal matters relating to this offering will be passed upon for
the Underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto, California.

EXPERTS

The Consolidated Financial Statements of SBS Technologies, Inc. as of June
30, 1996 and 1995 and for each of the years in the three-year period ended June
30, 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.

50
<PAGE>
The Financial Statements of Bit 3 Computer Corporation as of December 31,
1994 and 1995 and June 30, 1996 and for each of the years in the three-year
period ended December 31, 1995 and for the six month period ended June 30, 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.

ADDITIONAL INFORMATION

A Registration Statement on Form S-2, including amendments thereto, relating
to the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission (the "Commission"), Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is made
to such Registration Statement, and exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. SBS Technologies, Inc. is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance with those requirements files reports
and other information with the Commission. Information, including reports and
proxy and information statements, filed by SBS Technologies, Inc. (and by it
under its previous name of SBS Engineering, Inc.) with the Commission and a copy
of the Registration Statement, including exhibits thereto, can be inspected and
copied at the public reference facilities of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street N. W., in Washington, D.C., 20459, or at its
Regional Office located at 1801 California Street, Suite 4800, Denver, Colorado,
80202-2648. Copies of this material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street N.W., in Washington, D.C., 20549 at
prescribed rates. SBS Technologies, Inc. Common Stock is listed on the National
Association of Securities Dealers, Inc. National Market System. Reports, Proxy
and information statements, and other information concerning the Company can be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006. The Commission maintains a web site that
contains proxy and information statements and other information regarding
registrants, such as the Company, that file electronically with the Commission
and the address of such site is www.sec.gov.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, filed by the Company with the Securities and
Exchange Commission (File No. 1-10981), under the Securities Act of 1934, as
amended (the "Exchange Act") are incorporated in this Prospectus by reference
and made a part hereof: The Company's Annual Report on Form 10-K for the year
ended June 30, 1996; Amendment on Form 10-K/A, amending the Company's Annual
Report on Form 10-K for the year ended June 30, 1996; and the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.

The document incorporated into this Prospectus by reference shall be deemed
to be a part of this Prospectus from the date of the filing of such document
with the Commission. Any statement contained in the document incorporated by
reference, or deemed to be incorporated by reference, herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein modifies or supersedes such statement. Any 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 to whom a copy of
this Prospectus has been delivered, upon request, a copy of any documents
incorporated by reference. Requests for such copies should be directed to the
Company's principal executive offices: SBS Technologies, Inc., 2400 Louisiana
Boulevard NE, AFC Building 5, Suite 600, Albuquerque, New Mexico 87110,
Attention: Chief Financial Officer.

51
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets, June 30, 1995 and 1996 and the unaudited September 30, 1996................. F-3
Consolidated Statements of Operations for the Years Ended June 30, 1994, 1995 and 1996 and the unaudited
Three Month Periods Ended September 30, 1995 and 1996.................................................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended June 30, 1994, 1995 and
1996 and the unaudited Three Month Periods Ended September 30, 1995 and 1996........................... F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 1994, 1995 and 1996 and the unaudited
Three Month Periods Ended September 30, 1995 and 1996.................................................. F-6
Notes to Consolidated Financial Statements............................................................... F-7

BIT 3 COMPUTER CORPORATION
Independent Auditors' Report............................................................................. F-19
Balance Sheets, December 31, 1994 and 1995, June 30, 1996 and the unaudited September 30, 1996........... F-20
Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995, for the Six Months Ended
June 30, 1996 and for the unaudited Nine Months Ended September 30, 1995 and 1996...................... F-21
Statements of Stockholders' Equity for the Years Ended December 31, 1993, 1994 and 1995, for the Six
Months Ended June 30, 1996 and for the unaudited Nine Months Ended September 30, 1995 and 1996......... F-22
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995, for the Six Months Ended
June 30, 1996 and for the unaudited Nine Months Ended September 30, 1995 and 1996...................... F-23
Notes to Financial Statements............................................................................ F-24
</TABLE>

F-1
<PAGE>
KPMG Peat Marwick LLP
6565 Americas Parkway, NE #700
Post Office Box 3939
Albuquerque, NM 87190

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
SBS Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of SBS
Technologies, Inc. and subsidiaries as of June 30, 1995 and 1996, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended June 30,
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 SBS
Technologies, Inc. and subsidiaries as of June 30, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1996 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Albuquerque, New Mexico

July 30, 1996

F-2
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30,
---------------------------- SEPTEMBER 30,
1995 1996 1996
------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 883,804 $ 1,130,030 $ 2,101,573
Receivables, net (notes 4, 5 and 6)............................... 7,151,563 6,421,224 7,716,642
Inventories (notes 5 and 6)....................................... 3,903,957 5,160,962 6,425,247
Deferred income taxes (note 7).................................... 360,000 317,100 343,600
Prepaid expenses.................................................. 359,083 303,846 223,970
Other current assets.............................................. 175,649 104,249 138,768
------------- ------------- -------------
Total current assets............................................ 12,834,056 13,437,411 16,949,800
------------- ------------- -------------
Property and equipment, at cost (notes 5 and 6)..................... 1,728,764 2,389,289 3,532,581
Less accumulated depreciation..................................... 784,673 1,041,719 1,768,649
------------- ------------- -------------
Net property and equipment...................................... 944,091 1,347,570 1,763,932
------------- ------------- -------------
Intangible assets, net.............................................. 6,076,894 5,571,135 5,351,764
Deferred income taxes (note 7)...................................... -- 55,900 55,900
Other assets........................................................ 49,881 31,656 31,656
------------- ------------- -------------
Total assets.................................................... $ 19,904,922 $ 20,443,672 $ 24,153,052
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (note 6)........................ $ 1,751,392 $ 1,458,976 $ 1,477,112
Notes payable to bank (note 5).................................... 2,959,920 -- --
Accounts payable.................................................. 1,878,797 1,243,748 1,995,098
Accrued representative commissions................................ 325,468 353,278 503,614
Accrued salaries.................................................. 514,518 1,077,121 931,188
Accrued compensated absences...................................... 282,072 340,342 438,203
Accrued software license fees..................................... 313,000 33,000 48,000
Income taxes (note 7)............................................. 350,913 223,381 790,960
Other current liabilities......................................... 353,877 425,033 556,593
Reserve for discontinued operations (note 3)...................... 784,068 49,553 62,910
------------- ------------- -------------
Total current liabilities....................................... 9,514,025 5,204,432 6,803,678
Long-term liabilities:
Long-term debt, excluding current portion (note 6)................ 5,341,649 5,188,320 4,914,949
------------- ------------- -------------
Total long-term liabilities..................................... 5,341,649 5,188,320 4,914,949
------------- ------------- -------------
Total liabilities............................................... 14,855,674 10,392,752 11,718,627
------------- ------------- -------------
Stockholders' equity:
Common stock, no par value; 30,000,000 shares authorized,
2,893,654 and 3,178,133 issued and outstanding at June 30, 1995
and 1996, respectively.......................................... 3,375,021 4,690,786 4,998,049
Common stock warrants (note 2).................................... 75,000 180,000 180,000
Retained earnings................................................. 1,599,227 5,180,134 7,256,376
------------- ------------- -------------
Total stockholders' equity...................................... 5,049,248 10,050,920 12,434,425
------------- ------------- -------------
Total liabilities and stockholders' equity...................... $ 19,904,922 $ 20,443,672 $ 24,153,052
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------- ---------------------------
1994 1995 1996 1995 1996
------------- ------------- ------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................. $ 10,196,568 $ 16,217,648 $ 31,331,793 $ 7,574,885 $ 11,263,466
Cost of sales......................... 4,881,851 6,756,560 14,510,106 3,580,472 5,245,753
------------- ------------- ------------- ------------ -------------
Gross profit........................ 5,314,717 9,461,088 16,821,687 3,994,413 6,017,713
Selling, general and administrative
expense.............................. 2,221,431 3,891,408 6,292,954 1,549,477 2,673,646
Research and development expense...... 1,186,817 1,686,590 2,846,300 684,724 654,946
Amortization of intangible assets..... 383,085 493,409 884,438 233,376 219,372
------------- ------------- ------------- ------------ -------------
Operating income from continuing
operations........................ 1,523,384 3,389,681 6,797,995 1,526,836 2,469,749
------------- ------------- ------------- ------------ -------------
Interest income....................... 1,761 3,315 9,210 959 14,844
Interest expense...................... (16,395) (191,120) (839,028) (281,360) (163,980)
------------- ------------- ------------- ------------ -------------
(14,634) (187,805) (829,818) (280,401) (149,136)
------------- ------------- ------------- ------------ -------------
Income from continuing operations
before income taxes............... 1,508,750 3,201,876 5,968,177 1,246,435 2,320,613
Income taxes (note 7)................. 638,000 1,357,000 2,387,270 524,000 928,200
------------- ------------- ------------- ------------ -------------
Income from continuing operations... 870,750 1,844,876 3,580,907 722,435 1,392,413
------------- ------------- ------------- ------------ -------------
Discontinued operations (net of tax
benefits (expense) of ($627,000) and
$1,160,000 for 1994 and 1995,
respectively)........................ 855,555 (1,781,235) -- -- --
Loss on disposal of discontinued
operations (net of tax benefits of
$896,000)............................ -- (1,354,000) -- -- --
------------- ------------- ------------- ------------ -------------
Income (loss) from discontinued
operations........................... 855,555 (3,135,235) -- -- --
------------- ------------- ------------- ------------ -------------
Net income (loss)..................... $ 1,726,305 $ (1,290,359) $ 3,580,907 $ 722,435 $ 1,392,413
------------- ------------- ------------- ------------ -------------
------------- ------------- ------------- ------------ -------------
Income (loss) per common and common
equivalent share:
Continuing operations............... $ 0.30 $ 0.65 $ 0.97 $ 0.23 $ 0.33
Discontinued operations............. 0.29 (1.10) -- -- --
------------- ------------- ------------- ------------ -------------
Net income (loss) per common and
common equivalent share.............. $ 0.59 $ (0.45) $ 0.97 $ 0.23 $ 0.33
------------- ------------- ------------- ------------ -------------
------------- ------------- ------------- ------------ -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------------- COMMON STOCK RETAINED STOCKHOLDERS'
SHARES AMOUNT WARRANTS EARNINGS EQUITY
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1993........................ 2,964,957 $ 3,683,074 $ -- $ 1,163,281 $ 4,846,355
Common stock repurchased......................... (154,531) (707,323) -- -- (707,323)
Net income....................................... -- -- -- 1,726,305 1,726,305
------------ ------------ ------------ ------------ -------------
Balances at June 30, 1994........................ 2,810,426 2,975,751 -- 2,889,586 5,865,337
Exercise of stock options........................ 8,228 18,020 -- -- 18,020
Common stock issued under employee stock bonus
plan............................................ 75,000 381,250 -- -- 381,250
Warrants issued for business acquisition (note
2).............................................. -- -- 75,000 -- 75,000
Net loss......................................... -- -- -- (1,290,359) (1,290,359)
------------ ------------ ------------ ------------ -------------
Balance at June 30, 1995......................... 2,893,654 3,375,021 75,000 1,599,227 5,049,248
Exercise of stock options........................ 257,618 1,295,765 -- -- 1,295,765
Warrants issued for business acquisition (note
2).............................................. -- -- 125,000 -- 125,000
Exercise of warrants............................. 26,861 20,000 (20,000) -- --
Net income....................................... -- -- -- 3,580,907 3,580,907
------------ ------------ ------------ ------------ -------------
Balance at June 30, 1996......................... 3,178,133 4,690,786 180,000 5,180,134 10,050,920
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Balance of June 30, 1995......................... 2,893,654 3,375,021 75,000 1,599,227 5,049,248
Exercise of stock options (unaudited)............ 36,456 362,990 -- -- 362,990
Net income (unaudited)........................... -- -- -- 722,435 722,435
------------ ------------ ------------ ------------ -------------
Balance at September 30, 1995 (unaudited)........ 2,930,110 3,738,011 75,000 2,321,662 6,134,673
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Balance at June 30, 1995......................... 3,178,133 4,690,786 180,000 5,180,134 10,050,920
Exercise of stock options (unaudited)............ 52,524 239,263 -- -- 239,263
Acquisition of Logical Design Group Inc.
(unaudited)..................................... 200,000 68,000 -- 683,829 751,829
Net income (unaudited)........................... -- -- -- 1,392,413 1,392,413
------------ ------------ ------------ ------------ -------------
Balance at September 30, 1996 (unaudited)........ 3,430,657 $ 4,998,049 $ 180,000 $ 7,256,376 $ 12,434,425
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------------- --------------------
1994 1995 1996 1995 1996
---------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $1,726,305 $(1,290,359) $3,580,907 $ 722,435 $1,392,413
---------- --------- --------- --------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation......................................... 340,344 384,057 316,494 67,192 117,608
Amortization of intangible assets.................... 459,467 536,328 884,438 233,378 219,372
Bad debt expense..................................... -- -- 56,933 25,000 167,501
Loss on disposition of assets........................ -- -- 44,218 (6,203) --
Loss from sale of discontinued operations............ -- 2,250,000 -- -- --
Stock issued under employee stock bonus plan......... -- 399,270 -- -- --
Changes in assets and liabilities:
Receivables........................................ (1,459,380) 3,314,458 673,406 (15,656) (1,021,640)
Inventories........................................ (539,916) (1,101,607) (1,192,938) (162,566) (443,144)
Deferred income taxes.............................. -- (360,000) (13,000) -- --
Prepaids and other assets.......................... (54,780) (476,828) 144,862 189,576 51,386
Accounts payable................................... (809,055) 1,172,798 (635,049) 88,338 494,366
Accrued representative commissions................. 54,770 218,669 27,810 134,352 133,096
Accrued salaries................................... 372,972 277,433 562,603 55,707 (165,933)
Accrued compensated absences....................... 85,055 (155,833) 58,270 27,899 31,426
Accrued software license fees...................... 41,000 21,000 (280,000) 3,000 15,000
Income taxes....................................... 615,000 (1,500,209) (127,532) 243,783 569,131
Other current liabilities.......................... (120,213) (2,580,768) (663,359) (491,900) 108,542
---------- --------- --------- --------- ---------
Net adjustments................................. (1,014,736) 2,398,768 (142,844) 391,900 276,711
---------- --------- --------- --------- ---------
Net cash provided by operating activities....... 711,569 1,108,409 3,438,063 1,114,335 1,669,124
Cash flow from investing activities:
Business acquisition (note 2).......................... (95,000) (5,196,815) (317,746) -- 1,351
Refund of down payment on contracts.................... 500,000 -- -- -- --
Acquisition of property and equipment.................. (854,671) (426,769) (764,191) (88,143) (207,949)
Cash received from sale of discontinued operations
(note 3)............................................. -- 400,300 -- -- --
---------- --------- --------- --------- ---------
Net cash used by investing activities........... (449,671) (5,223,284) (1,081,937) (88,143) (206,598)
---------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from notes payable to bank.................... 13,501,622 6,950,437 4,095,000 1,395,000 --
Payments on notes payable to bank...................... (12,913,622) (7,690,517) (4,717,383) (1,845,782) --
Payments on liability to stockholder................... (204,166) (116,666) (100,000) (25,000) (25,000)
Proceeds from long-term borrowings..................... -- 7,000,000 -- -- --
Payments on long-term borrowings....................... (55,442) (1,227,901) (3,232,390) (1,471,804) (705,246)
Net proceeds from refinancing long-term borrowings..... -- -- 549,108 -- --
Proceeds from exercise of stock options................ -- -- 1,295,765 362,990 239,263
Repurchase of common stock............................. (707,323) -- -- -- --
---------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities.................................... (378,931) 4,915,353 (2,109,900) (1,584,596) (490,983)
---------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents..... (117,033) 800,478 246,226 (558,404) 971,543
Cash and cash equivalents at beginning of period......... 200,359 83,326 883,804 883,804 1,130,030
---------- --------- --------- --------- ---------
Cash and cash equivalents at end of period............... $ 83,326 $ 883,804 $1,130,030 $ 325,400 $2,101,573
---------- --------- --------- --------- ---------
Supplemental disclosure of cash flow information:
Interest paid.......................................... $ (163,953) $(497,002) $(875,736) $ 274,682 $ 165,738
Income taxes paid...................................... $ (700,000) $(700,000) $(2,431,749) $ 280,217 $ 352,624
Noncash financing and investing activities:
Acquisition of GreenSpring Computers, Inc. (note 2):
Common stock warrants issued....................... $ -- $ 75,000 $ 125,000 $ -- $ --
Long term debt issued.............................. -- 1,000,000 -- -- --
---------- --------- --------- --------- ---------
$ -- $1,075,000 $ 125,000 $ -- $ --
---------- --------- --------- --------- ---------
Assets acquired through capital leases............... $ 145,238 $ -- $ -- $ -- $ 70,733
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Summary of assets, liabilities, and equity acquired
through acquisition (note 14):
Cash and cash equivalents....................................................................... $ 1,351
Receivables..................................................................................... 441,279
Inventories..................................................................................... 821,141
Deferred income tax............................................................................. 26,500
Prepaid expenses................................................................................ 6,029
Net property and equipment...................................................................... 255,288
Accounts payable................................................................................ (256,984)
Accrued representative commissions.............................................................. (17,240)
Accrued salaries................................................................................ (20,000)
Accrued compensated absences.................................................................... (66,435)
Debt............................................................................................ (404,277)
Income taxes.................................................................................... 1,552
Other current liabilities....................................................................... (36,375)
Common stock.................................................................................... (68,000)
Retained Earnings............................................................................... $(683,829)
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) GENERAL

The consolidated financial statements include the accounts of SBS
Technologies, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

SBS Technologies, Inc. and subsidiaries (the Company) is a manufacturer of
standard bus embedded computer components that perform a broad range of central
processing unit, general purpose input/output and special purpose input/output
interface applications.

(B) SALES RECOGNITION

Sales are recognized when goods are delivered to the customer.

Temporary investments with original maturities of ninety days or less are
classified as cash and cash equivalents.

(D) INVENTORIES

Inventories are valued at average cost which does not exceed market:

<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Raw materials............................................................... $ 1,724,307 $ 2,254,788
Work in process............................................................. 757,682 1,546,800
Finished goods.............................................................. 1,421,968 1,359,374
------------ ------------
$ 3,903,957 $ 5,160,962
------------ ------------
------------ ------------
</TABLE>

(E) PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Computers................................................................... $ 836,593 $ 1,194,888
Software.................................................................... 226,659 411,839
Furniture and equipment..................................................... 665,512 782,562
------------ ------------
$ 1,728,764 $ 2,389,289
------------ ------------
------------ ------------
</TABLE>

Depreciation of property and equipment is provided over the estimated useful
lives (three to seven years) of the respective assets using straight-line and
accelerated methods.

F-7
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) INTANGIBLE ASSETS

Intangible assets are stated at cost and consisted of the following:

<TABLE>
<CAPTION>
JUNE 30,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Noncompete covenants...................................................... $ 1,540,000 $ 1,540,000
Goodwill.................................................................. 6,172,992 6,551,671
------------- -------------
7,712,992 8,091,671
Less accumulated amortization............................................. (1,636,098) (2,520,536)
------------- -------------
$ 6,076,894 $ 5,571,135
------------- -------------
------------- -------------
</TABLE>

Noncompete covenants are amortized over the life of the covenants using the
straight-line method. Goodwill is amortized over the estimated useful lives
(three to ten years) of the respective assets using the straight-line method.
The Company assesses the recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through projected undiscounted future results. Impairment would be recognized in
operating results if a permanent diminution in value were to occur.

(G) INCOME TAXES

The Company accounts for income taxes under the asset and liability method.
Deferred income taxes are recognized for the tax consequences of differences
between the financial statement carrying amounts and the tax bases of existing
assets and liabilities by applying enacted statutory tax rates applicable to
future years. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the change.

(H) EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

Earnings per common and common equivalent share are based on the weighted
average shares of common stock and, if dilutive, common equivalent shares
(options and warrants) outstanding during the period.

The numbers of shares used in the earnings per share computations are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average shares of common stock outstanding during the
year......................................................... 2,874,058 2,810,426 3,017,575
Common equivalent shares--assumed exercise of options and
warrants..................................................... 74,110 48,514 1,377,923
Shares assumed to be repurchased with proceeds from exercise
subject to 20% of average shares outstanding maximum......... -- -- (603,515)
------------ ------------ ------------
Total common and common equivalent shares................. 2,948,168 2,858,940 3,791,983
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-8
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) FINANCIAL INSTRUMENTS

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107, Disclosures about Fair
Values of Financial Instruments, requires the fair value of financial
instruments be disclosed. The Company's financial instruments are accounts
receivable, accounts payable, and long-term variable rate debt. The carrying
amounts of accounts receivable, accounts payable, and long-term variable rate
debt, because of their nature, approximate fair value.

(J) RECLASSIFICATIONS

Certain amounts in the fiscal 1994 and 1995 financial statements have been
reclassified to conform with the fiscal 1996 presentation.

(K) USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(L) NEW ACCOUNTING STANDARDS

In October 1995, the FASB issued Financial Accounting Standard No. 123 ("FAS
123"), "Accounting for Stock-Based Compensation". Under the provisions of FAS
123, companies may elect to account for stock-based compensation plans using a
fair-value-based method or may continue measuring compensation expense for those
plans using the intrinsic-value-based method. Companies electing to continue
using the intrinsic-value-based method must provide pro forma disclosures of net
income and earnings per share as if the fair-value-based method had been
applied. Management intends to continue to account for stock-based compensation
using the intrinsic-value-based method and, as such, FAS 123 will not have an
impact on the company's results of operations or financial position. FAS 123
becomes effective in fiscal 1997.

(2) BUSINESS ACQUISITIONS

On January 10, 1996, the Company's wholly owned subsidiary, GreenSpring
Computers, Inc., completed an asset purchase of the
IndustryPack-Registered Trademark--compatible product line from Wavetron
Microsystems, Inc. The purchase price, including capitalizable expenses, was
$236,626. In conjunction with the acquisition, goodwill of $172,559 was recorded
and is being amortized over five years. The reported net income and net income
per common and common equivalent shares for the reported periods would not have
been materially different from that reported had the acquisition taken place at
the beginning of the respective fiscal year.

On April 28, 1995, the Company acquired GreenSpring Computers, Inc.
("GreenSpring"), a corporation based in California, for $7,450,000. GreenSpring
is engaged in the design, development, marketing and manufacturing of industrial
circuit boards and computers. The acquisition was accounted for using the
purchase method of accounting, and goodwill is being amortized over 10 years.

F-9
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) BUSINESS ACQUISITIONS (CONTINUED)
Assets acquired and liabilities assumed in the acquisition are as follows:

<TABLE>
<S> <C>
Cash and equivalents.................................................... $1,053,185
Accounts receivable..................................................... 1,725,641
Inventory............................................................... 1,216,904
Other assets............................................................ 39,908
Property and equipment.................................................. 129,695
Goodwill and other intangible assets.................................... 5,752,440
Accounts payable........................................................ (2,467,773)
----------
$7,450,000
----------
----------
</TABLE>

The purchase price was paid as follows:

<TABLE>
<S> <C>
Notes payable issued.................................................... $1,000,000
Warrants issued......................................................... 200,000
Cash.................................................................... 6,250,000
----------
$7,450,000
----------
----------
</TABLE>

Warrants to purchase 400,000 shares of common stock were issued to the
former shareholders and option holders of GreenSpring, of which 150,000 were
exercisable immediately upon closing and the remaining 250,000 warrants vested
during fiscal 1996. At June 30, 1996, 40,000 warrants were exercised under the
net issuance method with the balance exercisable ratably over the next two
fiscal years.

Net income and net income per common and common equivalent share for the
year ended June 30, 1994, would have been approximately $1,655,000 and $0.56,
respectively, had the acquisition taken place on July 1, 1993. Had the
acquisition taken place on July 1, 1994, the reported net loss and net loss per
common and common equivalent share for the year ended June 30, 1995 would have
been decreased by approximately $804,000 and $0.28, respectively.

(3) SIGNIFICANT CUSTOMERS

Sales to significant customers as a percentage of total sales are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------
CUSTOMERS 1994 1995 1996
- ----------------------------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
A.................................................................................. 14 -- --
B.................................................................................. 20 -- --
</TABLE>

Sales to significant customers in 1994 were related to the simulation
division which was sold during 1995. All of the Company's operations are
conducted in the United States. International sales are denominated in U.S.
dollars. During the years ended June 30, 1994, 1995 and 1996, export sales from
continuing operations, all of which were to unaffiliated customers, were
approximately $1.2 million, $1.6 million and $5.1 million, respectively. Export
sales from discontinued operations in 1994 and 1995

F-10
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) SIGNIFICANT CUSTOMERS (CONTINUED)
were $6.8 million and $2.4 million, respectively. Export sales from continuing
operations were made primarily in the following foreign markets:

<TABLE>
<CAPTION>
1994 1995 1996
-------------------- -------------------- --------------------
SALES SALES SALES
FOREIGN MARKET (000'S) % (000'S) % (000'S) %
- ------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
United Kingdom................................... $ 1,000 19.6%
Germany.......................................... 800 15.7
Korea............................................ 500 9.8
France........................................... $ 600 37.5% 400 7.8
Japan............................................ 400 7.8
Canada........................................... $ 800 66.7% 600 37.5 600 11.8
Belgium.......................................... 300 5.9
All Others....................................... 400 33.3 400 25.0 1,100 21.6
--------- --------- --------- --------- --------- ---------
Total............................................ $ 1,200 100.0% $ 1,600 100.0% $ 5,100 100.0%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Sales from continuing operations................. $ 10,200 11.8% $ 16,200 9.9% $ 31,300 16.3%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

(4) RECEIVABLES

Receivables, net consisted of the following:

<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Accounts receivable......................................................... $ 3,276,762 $ 5,527,620
Contract receivables:
Amounts billed............................................................ 2,216,673 721,803
Recoverable costs and accrued profit on progress completed--
not billed.............................................................. 1,665,799 242,038
------------ ------------
3,882,472 963,841
------------ ------------
7,159,234 6,491,461
Less: allowance for doubtful accounts....................................... (7,671) (70,237)
------------ ------------
------------ ------------
$ 7,151,563 $ 6,421,224
------------ ------------
------------ ------------
</TABLE>

Recoverable costs and accrued profit not billed are comprised principally of
amounts of revenue recognized on contracts for which billings had not been
presented to the contract owners since the amounts were not billable at the
balance sheet date, because contract specified milestones had not yet been
reached or because progress billings are restricted by the contract to a
percentage of costs incurred.

(5) FINANCING

The Company has an available bank line of credit of $2,500,000, which
matures October 1997. Interest is payable monthly at LIBOR plus 2.25 percent or
the bank's prime lending rate. The bank's prime lending rate at June 30, 1996
was 8.25 percent. During fiscal 1996, the Company refinanced through long-term
borrowings $2,337,537 previously outstanding on the line of credit. The Company
had no amounts drawn on this line of credit at June 30, 1996. The line of credit
provides for security interests in the Company's

F-11
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) FINANCING (CONTINUED)
receivables, inventories and equipment. Management anticipates that the line of
credit will be renewed at maturity in the normal course of business.

(6) LONG TERM DEBT

Long term debt consisted of the following:

<TABLE>
<CAPTION>
JUNE 30,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Note payable to bank, $5,000,000 at LIBOR plus 2.5% (8.0% at June 30,
1996), $1,525,000 at prime plus 0.25% (8.5% at June 30, 1996), secured by
receivables, inventories and equipment, due in monthly installments of
$112,500................................................................. -- $ 6,525,000

Note payable to bank at prime plus 1.5% (10.5% at June 30, 1995), secured
by receivables, inventories and equipment, due in monthly installments of
$116,667................................................................. $ 5,819,469 --

16% notes payable to former shareholders and option holders of GreenSpring
common stock, secured by receivables but subordinate to the above
described note, due in quarterly installments commencing when the
principal balance of the aforementioned note is less than $3,000,000..... 1,000,000 --

Note payable, non-interest-bearing, payable in monthly installments
through August 1997...................................................... 213,316 113,316

8.24% note due in monthly installments of $2,215 including interest
through August 1996...................................................... 31,470 4,385

8.14% note due in monthly installments of $2,321 including interest
through August 1996...................................................... 28,786 4,595
------------- -------------

7,093,041 6,647,296

Less current portion...................................................... (1,751,392) (1,458,976)
------------- -------------

$ 5,341,649 $ 5,188,320
------------- -------------
------------- -------------
</TABLE>

Principal maturities of long term debt as of June 30, 1996 are as follows:

F-12
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES

Income tax expense (benefit) is comprised of the following:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
1994 1995 1996
------------ ------------- ------------
<S> <C> <C> <C>
Current:
U.S. Federal............................................... $ 716,000 $ 1,211,000 $ 1,916,770
State...................................................... 208,000 352,000 483,500

Deferred:
U.S. Federal............................................... (209,000) (145,000) (11,000)
State...................................................... (77,000) (61,000) (2,000)
------------ ------------- ------------

Income tax before discontinued operations.................... 638,000 1,357,000 2,387,270
Income tax expense (benefit) from
Discontinued operations.................................... 627,000 (1,160,000) --
Loss on disposal........................................... -- (896,000) --
------------ ------------- ------------
Total income tax expense..................................... $ 1,265,000 $ (699,000) $ 2,387,270
------------ ------------- ------------
------------ ------------- ------------
</TABLE>

Income tax expense was provided for at an effective rate of 42.2, 42.4 and
40.0 percent in fiscal 1994, 1995 and 1996, respectively. The actual tax expense
differs from the "expected" tax expense (computed by applying the U.S. Federal
corporate tax rate of 34 percent to income before income taxes) as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1994 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Computed "expected" tax expense........................................... $ 513,000 $ 1,089,000 $ 2,029,180
State income tax, net of federal income tax benefit....................... 65,000 212,000 319,112
Goodwill amortization..................................................... 60,000 66,000 21,508
Other..................................................................... -- (10,000) 17,470
---------- ------------ ------------
$ 638,000 $ 1,357,000 $ 2,387,270
---------- ------------ ------------
---------- ------------ ------------
</TABLE>

The significant components of deferred income tax assets (liabilities) are
as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Vacation and severance accruals........................................................... $ 176,274 $ 136,136
Reserve for discontinued operations....................................................... 169,435 --
Inventory capitalization.................................................................. -- 198,792
Other..................................................................................... 14,291 35,072
---------- ----------
$ 360,000 $ 370,000
---------- ----------
---------- ----------
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.

F-13
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)
Based on the Company's historical taxable transactions, the timing of the
reversal of existing temporary differences, and the evaluation of tax planning
strategies, management believes it is more likely than not that the Company's
future taxable income will be sufficient to realize the benefit of the deferred
tax assets existing at June 30, 1996. Accordingly, management has no allowance
for deferred tax assets at June 30, 1995 or 1996.

(8) LEASES

The Company leases its main facilities in Albuquerque, New Mexico, Carlsbad,
California and Menlo Park, California under noncancelable operating leases which
expire at various dates through 2000. The Company also leases various items of
equipment under noncancelable operating leases which expire at various dates
through the year 2001.

<TABLE>
<CAPTION>
BUILDINGS EQUIPMENT
MINIMUM LEASE MINIMUM LEASE
YEAR ENDING JUNE 30, PAYMENTS PAYMENTS TOTAL
- -------------------------------------------------------------------- -------------- -------------- ------------
<S> <C> <C> <C>
1997................................................................ $ 542,831 $ 45,710 $ 588,541
1998................................................................ 450,633 43,179 493,812
1999................................................................ 443,932 43,179 487,111
2000................................................................ 436,599 43,179 479,778
2001................................................................ -- 13,929 13,929
-------------- -------------- ------------
$ 1,873,995 $ 189,176 $ 2,063,171
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>

Total rental expense for operating leases for the years ended June 30, 1994,
1995, 1996 was $569,188, $511,150 and $521,885, respectively.

(9) STOCK OPTION PLANS

(A) 1991 KEY EMPLOYEE STOCK OPTION PLAN

The Company has a 1991 Key Employee Stock Option Plan (Key Employee Plan)
whereby 42,908 shares of its common stock are reserved for discretionary
issuance by the Board to certain key employees to encourage them to continue to
promote the growth of the Company.

The Key Employee Plan is not intended to be tax-qualified under the Internal
Revenue Code. Options granted under the Key Employee Plan must (i) be
accompanied by an agreement signed by each grantee setting forth the terms of
the option; (ii) may not equal more than $100,000 aggregate purchase price;
(iii) may be transferable by grantees only in accordance with applicable
securities laws; and (iv) have a price per share that will be equal to fair
market value at the time of the decision to grant the option as determined by
the Board of Directors.

(B) 1992, 1993, 1995 AND 1996 INCENTIVE STOCK OPTION PLANS

The Company has 1992, 1993, 1995 and 1996 Incentive Stock Option Plans
(Plans) whereby a total of 1,100,000 shares of its common stock are reserved for
discretionary grant of options by the Board to officers and employees who are
not directors. The Plans all terminate ten years after inception, from 2001 to
2005.

F-14
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) STOCK OPTION PLANS (CONTINUED)
The options are intended to qualify as "incentive stock options" within the
meaning of Section 422A of the Internal Revenue Code (the Code). The option plan
generally permits options to be granted (i) only to employees or officers and
not to directors as such; (ii) for a period of up to ten years; and (iii) at
prices not less than fair market value at the date of grant. Under the Code,
holders of more than 10 percent of the Company's Common stock cannot be granted
options with a duration of more than five years or exercisable at a price less
than 110 percent of the fair market value on the date of grant. Options granted
under the plan may be exercised as provided by the administering committee or
Board of Directors of the Company. All options granted prior to the Company's
initial public offering are exercisable at $4.00 per share, the presumed market
value at that time. All other options are exercisable at the quoted market value
of the Company's stock in effect on the respective dates of the grants.

The 1993 Director and Officer Stock Option Plan permits options to be
granted to all Directors of the Company who are not employees and all Executive
Officers of the Company. Directors who are not employees of the Company receive
automatic grants on the anniversary date of their service as a director of the
Company. Executive Officers receive grants subject to the discretion of the
Board.

(D) 1996 EMPLOYEE STOCK PURCHASE PLAN

The 1996 Employee Stock Purchase Plan was adopted by the Board of Directors
on January 21, 1996, but is subject to shareholder approval at the November 1996
annual meeting. Those eligible to participate in the plan are full-time
employees of the Company who are not participants in any Incentive Stock Option
Plans provided by the Company. The plan provides for the grant of options to
eligible employees on January 21, 1996, 1997 and 1998. Individual grants are
issued for a percentage of the employee's annual base salary, (as determined
each year by the Board of Directors, up to 10%), divided by the fair market
value of one share of the Company's stock on the date of grant. Options are
eligible to be exercised beginning 18 months after the date of grant for a
period of nine months at which time they will expire.

F-15
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) STOCK OPTION PLANS (CONTINUED)
Information regarding the Company's stock option plans is summarized below:

<TABLE>
<CAPTION>
ALL 1993
1991 NSOP ISOP'S D & O 1996 ESPP
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPTIONS OUTSTANDING--JUNE 30, 1993................. 26,512 318,533 20,000 --

Granted.......................................... -- 520,000 10,000 --
Exercised........................................ -- -- -- --
Canceled......................................... -- 75,725 -- --
--------- --------- --------- ---------

OPTIONS OUTSTANDING--JUNE 30, 1994................. 26,512 762,808 30,000 --

Granted.......................................... -- 140,000 10,000 --
Exercised........................................ 8,228 -- -- --
Canceled......................................... -- 236,667 -- --
--------- --------- --------- ---------

OPTIONS OUTSTANDING--JUNE 30, 1995................. 18,284 666,141 40,000 --

Granted.......................................... -- 360,000 118,500 42,894
Exercised........................................ 18,284 234,334 5,000 --
Canceled......................................... -- 60,000 -- 4,889
--------- --------- --------- ---------

OPTIONS OUTSTANDING--JUNE 30, 1996................. -- 731,807 153,500 38,005
--------- --------- --------- ---------
--------- --------- --------- ---------

OPTIONS AVAILABLE TO GRANT--JUNE 30, 1996.......... -- 133,859 157,833 261,995

AVERAGE OPTION PRICE PER SHARE:
at June 30, 1994................................. $ 2.190 $4.600 $5.375 --
at June 30, 1995................................. 2.190 5.102 5.438 --
at June 30, 1996................................. -- 7.047 5.773 $7.750

OPTIONS EXERCISABLE:
at June 30, 1994................................. 26,512 297,546 -- --
at June 30, 1995................................. 18,284 347,807 -- --
at June 30, 1996................................. -- 471,807 115,000 --

AVERAGE PRICE OF OPTIONS EXERCISED:
at June 30, 1995................................. $2.190 -- -- --
at June 30, 1996................................. 2.190 $4.620 $5.500 --
</TABLE>

F-16
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(10) RETIREMENT PLAN

The Company maintains a retirement plan under Section 401(k) of the Internal
Revenue Code for all employees of the Company. The plan provides for employees
to selectively defer a percentage of their wages, which the Company matches at a
predetermined rate not to exceed 4 percent of the employee's wages. The plan
also provides for additional contributions at the discretion of the Board of
Directors. Total Company contributions to the plan during the years ended June
30, 1994, 1995 and 1996 were $273,373, $251,493 and $185,387, respectively.

(11) INITIAL PUBLIC OFFERING

In connection with the Company's initial public offering in 1992, warrants
to purchase 100,000 common shares at $4.80 per share were issued to the
underwriter. The warrants are exercisable from January 9, 1993 through January
8, 1997.

(12) DISCONTINUED OPERATIONS

On April 26, 1995, the company sold its flight simulation business for
$400,300. Included in the sale were net assets of approximately $1,225,000. The
purchaser has agreed to complete simulation contracts in progress at the time of
the sale on a time and material and fixed price basis. The Company is
responsible for completion of these contracts, until novation of the contracts
by the customer, to the purchaser of the simulation operations. As of June 30,
1996, the majority of these contracts have been substantially completed.

The disposition of the flight simulation business has been accounted for as
a discontinued operation and prior years consolidated statements of operations
have been restated accordingly. Revenue of the discontinued operations were
approximately $18,560,00 and $8,700,000 in fiscal 1994 and 1995, respectively.

(13) CONTINGENCIES

The New Mexico Department of Taxation and Revenue is currently auditing the
Company's compliance with applicable New Mexico gross receipts tax laws and
regulations. Certain compliance issues have been identified during the audit
which may result in an assessment of additional tax, penalties and interest. The
Company intends to contest any proposed adjustments vigorously and expects that
the ultimate resolution of this matter will not have a material adverse effect
on the Company's consolidated financial position or results of operations.

Direct and allocable indirect costs charged to government contracts are
subject to audit by the Company's customers or their principal agent, the
Defense Contract Audit Agency. As of June 30, 1996, as a result of past audits,
no significant adjustments were required. Disallowed costs, if any, resulting
from future audits will be recognized in the period of the disallowance.
Management estimates that any such disallowed cost would not be material to the
consolidated financial statements.

The Company has been named as a defendant in a lawsuit filed on June 19,
1996. The Company is vigorously defending the lawsuit and has filed a counter
suit. Management does not believe that the outcome of the litigation will have a
material affect on the Company's financial condition or results of operations.

F-17
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(14) SUBSEQUENT EVENT

On August 19, 1996, the Company acquired Logical Design Group, Inc. ("LDG"),
a Raleigh, North Carolina based designer and manufacturer of Intel-based VME
central processing unit boards. The acquisition qualifies as a pooling of
interests for accounting purposes and will constitute a tax-free reorganization
for federal income tax purposes. Under the terms of the agreement, LDG
shareholders exchanged all outstanding shares of LDG stock for 200,000 shares of
the Company's stock.

The financial position and results of operations of the Company and LDG will
be combined in fiscal 1997 on a prospective basis. LDG's historical results do
not have a material affect on combined results of operations or results of
operations.

EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE
INDEPENDENT AUDITORS' REPORT

On October 8, 1996, the Company entered an agreement to acquire all of the
outstanding shares of Bit 3 Computer Corporation for a total cash purchase price
of $24 million, subject to the successful completion of a public offering of
1,500,000 shares of the Company's common stock with estimated net proceeds to
the Company of approximately $34 million. In connection with the acquisition,
the Company has made an assessment, in conjunction with an independent valuation
firm, of purchased assets and technology. The assessment determined that $11
million of the purchase price represents technology that does not meet the
accounting definitions of "completed technology," and thus should be charged to
earnings under generally accepted accounting principles. Had the acquisition and
the offering of stock occurred at July 1, 1995, reported net income and net
income per common and common equivalent share for the year ended June 30, 1996
would have been approximately $503,000 and $0.10, respectively.

F-18
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Bit 3 Computer Corporation:

We have audited the accompanying balance sheets of Bit 3 Computer
Corporation (the Company) as of December 31, 1994 and 1995 and June 30, 1996,
and the related statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995 and for
the six-month period ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to above present fairly,
in all material respects, the financial position of Bit 3 Computer Corporation
as of December 31, 1994 and 1995 and June 30, 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995 and for the six-month period ended June 30, 1996, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Minneapolis, Minnesota

September 27, 1996

F-19
<PAGE>
BIT 3 COMPUTER CORPORATION
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30, SEPTEMBER 30,
1994 1995 1996 1996
---------- ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 845,026 $ 836,691 $ 887,023 $1,209,835
Accounts receivable, net................... 957,704 1,264,154 1,582,743 1,743,074
Inventory.................................. 1,577,918 1,527,290 1,932,443 1,593,255
Prepaid expenses........................... 12,854 25,993 21,934 18,231
---------- ---------- ---------- -------------
Total current assets..................... 3,393,502 3,654,128 4,424,143 4,564,395
---------- ---------- ---------- -------------
Property and equipment:
Equipment.................................. 786,641 843,430 884,672 899,701
Software................................... 143,279 147,666 151,722 152,756
Furniture and fixtures..................... 22,041 22,041 22,041 22,041
---------- ---------- ---------- -------------
951,961 1,013,137 1,058,435 1,074,498
Less accumulated depreciation.............. (751,856) (849,602) (910,354) (940,730)
---------- ---------- ---------- -------------
Total property and equipment............. 200,105 163,535 148,081 133,768
---------- ---------- ---------- -------------
Total assets............................. $3,593,607 $3,817,663 $4,572,224 $4,698,163
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 43,312 $ 45,134 $ 191,115 $ 115,358
Accrued payroll and related costs.......... 111,555 121,484 158,564 135,378
Accrued warranty........................... 26,427 50,976 40,000 45,000
Other accrued liabilities.................. 17,502 10,395 23,917 18,598
---------- ---------- ---------- -------------
Total current liabilities................ 198,796 227,989 413,596 314,334
---------- ---------- ---------- -------------
Stockholders' equity:
Common stock, no par value, 2,500 shares
authorized, 500 issued and outstanding... 20,400 20,400 20,400 20,400
Retained earnings.......................... 3,374,411 3,569,274 4,138,228 4,363,429
---------- ---------- ---------- -------------
Total stockholders' equity............... 3,394,811 3,589,674 4,158,628 4,383,829
---------- ---------- ---------- -------------
Total liabilities and stockholders'
equity................................. $3,593,607 $3,817,663 $4,572,224 $4,698,163
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------
</TABLE>

See accompanying notes to financial statements.

F-20
<PAGE>
BIT 3 COMPUTER CORPORATION
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED SEPTEMBER 30,
------------------------------------------- ENDED JUNE ----------------------------
1993 1994 1995 30, 1996 1995 1996
------------- ------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Sales:
Hardware.................... $ 10,516,609 $ 11,298,950 $ 12,220,614 $ 7,460,612 $ 8,980,152 $ 11,122,133
Software.................... 233,530 299,788 309,138 176,592 229,834 343,982
------------- ------------- ------------- ------------- ------------- -------------
Total sales............... 10,750,139 11,598,738 12,529,752 7,637,204 9,209,986 11,466,115
Cost of sales................. 4,151,451 4,218,957 4,437,909 2,392,914 3,309,610 3,791,118
------------- ------------- ------------- ------------- ------------- -------------
Gross profit.............. 6,598,688 7,379,781 8,091,843 5,244,290 5,900,376 7,674,997
------------- ------------- ------------- ------------- ------------- -------------
Operating expenses:
Selling, general and
administrative
expense................... 1,472,835 1,660,787 1,856,689 864,507 1,294,425 1,283,812
Research and development.... 1,595,887 1,531,302 1,570,502 992,390 1,117,912 1,479,597
------------- ------------- ------------- ------------- ------------- -------------
Total operating
expenses................ 3,068,722 3,192,089 3,427,191 1,856,897 2,412,337 2,763,409
------------- ------------- ------------- ------------- ------------- -------------
Income from operations.... 3,529,966 4,187,692 4,664,652 3,387,393 3,488,039 4,911,588
------------- ------------- ------------- ------------- ------------- -------------
Interest income............. 27,609 58,468 65,727 33,561 37,843 51,679
------------- ------------- ------------- ------------- ------------- -------------
Net income................ $ 3,557,575 $ 4,246,160 $ 4,730,379 $ 3,420,954 $ 3,525,882 $ 4,963,267
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes to financial statements.

F-21
<PAGE>
BIT 3 COMPUTER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
--------- ------------- -------------
<S> <C> <C> <C>
Balance, December 31, 1992............................................... $ 20,400 $ 3,474,676 $ 3,495,076
Net income for the year.................................................. -- 3,557,575 3,557,575
Distributions to stockholders............................................ -- (3,500,000) (3,500,000)
--------- ------------- -------------
Balance, December 31, 1993............................................... 20,400 3,532,251 3,552,651
Net income for the year.................................................. -- 4,246,160 4,246,160
Distributions to stockholders............................................ -- (4,404,000) (4,404,000)
--------- ------------- -------------
Balance, December 31, 1994............................................... 20,400 3,374,411 3,394,811
Net income for the year.................................................. -- 4,730,379 4,730,379
Distributions to stockholders............................................ -- (4,535,516) (4,535,516)
--------- ------------- -------------
Balance, December 31, 1995............................................... 20,400 3,569,274 3,589,674
Net income for the six month period...................................... -- 3,420,954 3,420,954
Distributions to stockholders............................................ -- (2,852,000) (2,852,000)
--------- ------------- -------------
Balance, June 30, 1996................................................... $ 20,400 $ 4,138,228 $ 4,158,628
--------- ------------- -------------
--------- ------------- -------------
Balance, December 31, 1994............................................... 20,400 3,374,411 3,394,811
Net income for the nine month period (unaudited)......................... -- 3,525,882 3,525,882
Distributions to stockholders (unaudited)................................ -- (3,226,000) (3,226,000)
--------- ------------- -------------
Balance, September 30, 1995 (unaudited).................................. 20,400 3,674,293 3,364,693
--------- ------------- -------------
--------- ------------- -------------
Balance, December 31, 1995............................................... $ 20,400 $ 3,569,274 $ 3,589,674
Net income for the nine month period (unaudited)......................... -- 4,963,267 4,963,267
Distribution to stockholders (unaudited)................................. -- (4,169,112) (4,169,112)
--------- ------------- -------------
Balance, September 30, 1996 (unaudited).................................. $ 20,400 $ 4,363,429 $ 4,383,829
--------- ------------- -------------
--------- ------------- -------------
</TABLE>

See accompanying notes to financial statements.

F-22
<PAGE>
BIT 3 COMPUTER CORPORATION
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED SEPTEMBER 30,
------------------------------------- ENDED JUNE -------------------------------
1993 1994 1995 30, 1996 1995 1996
----------- ----------- ----------- ----------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income................................. $ 3,557,575 $ 4,246,160 $ 4,730,379 $ 3,420,954 $ 3,525,882 $ 4,963,267
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation........................... 134,854 128,390 97,746 60,752 69,288 91,128
Increase in receivables................ (28,205) (71,661) (306,450) (318,589) (198,077) (478,920)
(Increase) decrease in inventory....... (162,368) (95,185) 50,628 (405,153) 112,178 (65,965)
(Increase) decrease in prepaid
expenses............................. (3,381) 7,247 (13,139) 4,059 (1,490) 7,762
Increase (decrease) in accounts
payable.............................. (3,179) (7,970) 1,822 145,981 113,936 70,224
Increase in accrued liabilities........ 32,512 4,835 27,371 39,626 21,359 16,121
----------- ----------- ----------- ----------- -------------- --------------
Net cash provided by operating
activities......................... 3,527,808 4,211,816 4,588,357 2,947,630 3,643,076 4,603,617
Cash flow from investing activities--purchase
of equipment, software, and furniture...... (140,340) (83,692) (61,176) (45,298) (27,575) (61,361)
Cash flow from financing
activities--distributions to
stockholders............................... (3,500,000) (4,404,000) (4,535,516) (2,852,000) (3,226,000) (4,169,112)
----------- ----------- ----------- ----------- -------------- --------------
Net increase (decrease) in cash...... (112,532) (275,876) (8,335) 50,332 389,501 373,144
Cash and cash equivalents at the beginning of
period..................................... 1,233,434 1,120,902 845,026 836,691 845,026 836,691
----------- ----------- ----------- ----------- -------------- --------------
Cash and cash equivalents at the end of
period..................................... $ 1,120,902 $ 845,026 $ 836,691 $ 887,023 $ 1,234,527 $ 1,209,835
----------- ----------- ----------- ----------- -------------- --------------
----------- ----------- ----------- ----------- -------------- --------------
</TABLE>

See accompanying notes to financial statements.

F-23
<PAGE>
BIT 3 COMPUTER CORPORATION
NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

Bit 3 Computer Corporation (a Minnesota corporation) is in the business of
designing and selling computer connectivity equipment. Products consist
primarily of printed circuit card hardware and software designed to support
hardware products. Product users are primarily large manufacturing companies,
the aerospace industry, defense agencies and their subcontractors, and the
automaker industry.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

REVENUE RECOGNITION

Revenue on hardware sales and software licenses is recognized upon product
shipment.

INVENTORIES

Inventories are carried at the lower of cost or market.

CAPITALIZED SOFTWARE COSTS

Software development costs are accounted for in accordance with Statement of
Financial Accounting Standards No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE MARKETED. Costs associated with the
planning and designing phase of software development, including coding and
testing activities necessary to establish technological feasibility, are
classified as research and development and expensed as incurred. Once
technological feasibility has been determined, additional costs incurred in
development, including coding, testing, and product quality assurance, are
capitalized when material. During the years ended December 31, 1993, 1994, and
1995 and the six-month period ended June 30, 1996, software development costs
subject to capitalization were not material and, accordingly, were not
capitalized.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided
utilizing the accelerated and straight line methods.

Estimated useful lives are as follows:

<TABLE>
<S> <C>
Equipment......................................................... 3-7 years
Software.......................................................... 5 years
Furniture and fixtures............................................ 5-7 years
</TABLE>

F-24
<PAGE>
BIT 3 COMPUTER CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. As a result, no provision has been made for federal
or state income taxes, since the applicable tax liability or benefit is the
responsibility of the Company's stockholders.

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

WARRANTY COSTS

Estimated product warranty costs are accrued at date of shipment.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of the fair value of all
financial instruments to which the Company is a party. All financial instruments
are carried at amounts that approximate estimated fair value.

(3) INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials....................................... $ 458,848 $ 455,504 $ 770,081
Work-in-process..................................... 442,260 309,079 282,697
Finished goods...................................... 676,810 762,707 879,665
------------ ------------ ------------
$ 1,577,918 $ 1,527,290 $ 1,932,443
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

(4) EMPLOYEE BENEFIT PLANS

The Company has adopted a savings plan (the Plan) in compliance with Section
401(k) of the Internal Revenue Code. Employees are eligible to participate in
the Plan the day subsequent to the first day of service. The Plan is primarily
funded by employee contributions but the Company is permitted to make
discretionary contributions to the Plan. The Company did not make a contribution
to the Plan during the three-year period ended December 31, 1995 or the
six-month period ended June 30, 1996.

(5) OPERATING LEASE

The Company conducts its operations from facilities that are leased under a
month-to-month operating lease. Rent expense was $157,000, $175,000, $167,000,
and $91,000 for the years ended December 31, 1993, 1994, and 1995 and the
six-month period ended June 30, 1996, respectively.

(6) SIGNIFICANT CUSTOMERS

The Company had sales to one customer that represented 17%, 14%, 16%, and
22% of the Company's net sales for the years ended December 31, 1993, 1994, and
1995 and the six-month period

F-25
<PAGE>
BIT 3 COMPUTER CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(6) SIGNIFICANT CUSTOMERS (CONTINUED)
ended June 30, 1996, respectively, and had sales to a different customer that
represented 10% and 12% of the Company's net sales for the year ended December
31, 1994 and the six-month period ended June 30, 1996, respectively.

(7) SUBSEQUENT EVENT

The Company is currently negotiating an agreement with a third party to sell
all the stock of the Company. The sale is contingent upon the acquiring company
successfully completing a public offering.

F-26
<PAGE>

[Picture of an AMI, an ABI-V5 and a PCMCIA board arranged from left to right on
the page.]

Many of SBS' products have a substantial software component. SBS provides
real-time data analysis and display software to accompany its telemetry
products. The software SBS supplies provides graphical display of real time
data. Displays like those shown above allow engineers to monitor a test while it
is in progress, decreasing total test costs and enhancing test efficiency. The
telemetry interface board products shown above install in a standard bus
embedded computer and transform it into a self-contained PCM telemetry ground
station.

SBS' IndustryPack I/O products can be
installed either on CPU boards, such as
the Motorola MVME162, or on
GreenSpring-designed carrier cards for
use on non-VME systems. IndustryPacks [Picture of a monitor displaying
such as those shown include standard I/O real-time T-mate displays with several
products and communications-related BSI boards beside the monitor.]
products such as the T1/E1 interface and
the Comm 360
IndustryPacks.

<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------

No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations not contained herein must
not be relied upon as having been authorized by the Company, the Selling
Shareholders, any of the Underwriters or by any other person. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the shares of Common Stock offered hereby, nor does it
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby, to any person in any jurisdiction in which it is
unlawful to make such offer or solicitation to such person. 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
Acquisition of Bit 3.................................. 6
Risk Factors.......................................... 8
Use of Proceeds....................................... 16
Dividend Policy....................................... 16
Price Range of Common Stock........................... 16
Capitalization........................................ 17
Selected Consolidated Financial Information of
SBS Technologies, Inc................................ 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations of
SBS Technologies, Inc................................ 19
Selected Financial Information of Bit 3 Computer
Corporation.......................................... 26
Management's Discussion and Analysis of Financial
Condition and Results of Operations of Bit 3 Computer
Corporation.......................................... 27
Pro Forma Combined Consolidated Financial
Statements........................................... 30
Business.............................................. 34
Management............................................ 44
Principal and Selling Shareholders.................... 46
Description of Capital Stock.......................... 48
Underwriting.......................................... 49
Legal Matters......................................... 50
Experts............................................... 50
Additional Information................................ 51
Incorporation of Certain Documents by Reference....... 51
Consolidated Financial Statements..................... F-1
</TABLE>

1,800,000 Shares

[LOGO]

Common Stock

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

PROSPECTUS

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

COWEN & COMPANY

SOUNDVIEW FINANCIAL
GROUP, INC.

, 1996

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses incurred or to be incurred by
the Registrant. Underwriting commissions payable by the Registrant, the Selling
Shareholders and the Additional Selling Shareholders are not reflected in the
listed expenses. The Registrant will pay all expenses on behalf of the Selling
Shareholders and the Additional Selling Shareholders except for underwriting
commissions, if any, which will be paid by the Selling Shareholders and the
Additional Selling Shareholders. D.H. Blair Investment Banking Corporation,
("D.H. Blair"), a member of the National Association of Securities Dealers,
served as the Company's underwriter in the Company's initial public offering
(the "IPO") and certain other persons associated with D.H. Blair (the
"Warrantholders") at the time of the IPO received 100,000 warrants to purchase
the Company's Common Stock at an exercise price of $4.80 per share (the
"Warrants"). The Warrants will be exercised in connection with the offering and
the 100,000 shares of Common Stock underlying the Warrants will be sold in the
offering (the "Warrant Shares"). The Company is paying, on behalf of the
Warrantholders, a fee which is equal to the underwriting discounts and
commissions covering the Warrant Shares. All amounts are estimated except the
Registration Fee, the NASD Filing Fee and the Nasdaq Listing Fee.

<TABLE>
<CAPTION>
ITEM AMOUNT OF MONEY
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Registration Fee............................................................ $ 12,703
NASD Filing Fee............................................................. 4,692
Nasdaq Listing Fee.......................................................... 17,500
Blue Sky Fees and Expenses.................................................. 7,000
Printing Expenses........................................................... 85,000
Legal Fees and Expenses..................................................... 100,000
Accountants Fees and Expenses............................................... 40,000
Transfer Agent and Registrar Fees........................................... 4,000
Miscellaneous............................................................... 9,270
--------
Total................................................................... $ 280,165
--------
--------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Amended Articles of Incorporation provide that the directors
of the Company will not be personally liable to the Company or its shareholders
for monetary damages for any breach of a director's fiduciary duty as a
director, except for liability for breach or for failure to perform the duties
of the office of director in compliance with the New Mexico Business Corporation
Act, as amended, ("Corporation Act") if that breach or failure constitutes
wilful misconduct or recklessness (or, in the case of an ownership interest in
the Company, if the breach or failure constitutes negligence, willful misconduct
or recklessness).

The Bylaws of the Company provide for indemnification, in accordance with
the Corporation Act of directors and officers of the Company for certain
expenses (including attorney's fees), judgments, fines and settlement amounts
incurred by that person in any action or proceeding, on account of services as a
director or officer of the Company, as a director or officer of any subsidiary
of the Company, or as a director or officer of any other company or enterprise
for which the person provides services at the request of the Company. The
Company believes that these provisions and agreements are necessary to attract
and retain qualified persons as directors and officers. The Corporation Act
currently provides that if the proceeding was by or in the right of the
corporation, indemnification may be made only against reasonable expenses and
may not be made for proceedings in which the person is adjudged to be liable to
the

II-1
<PAGE>
corporation. No indemnification is permitted for any proceeding charging
improper personal benefit to the person, whether or not involving action in the
person's official capacity, if the person is adjudged to be liable on the basis
that personal benefit was improperly received by the person.

Reference is made to Section 6 of the Underwriting Agreement filed as
Exhibit 1.1 hereto for certain provisions as to the indemnification of the
Underwriters by the Company and the Selling Shareholders and as to
indemnification by the Underwriters of the Company and the Selling Shareholders
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.

ITEM 16. EXHIBITS.

The following exhibits are filed with this Registration Statement:

4.1 Article VI of the Articles of Incorporation, as amended, as included in the Articles of
Incorporation of SBS Technologies, Inc. filed as Exhibit 3.1 of the Registrant's Form 10-Q
for the quarter ended December 31, 1995.*

4.2 Articles I, II of the Bylaws of SBS Engineering, Inc., as amended, as included in the Bylaws
filed as Exhibit 3.2 of the Registrant's Form 10-Q for the quarter ended December 31, 1995.*

4.3 Form of certificate evidencing Common Stock, filed as Exhibit 4.3 of the Registrant's
Registration Statement on Form S-3 (No. 333-58), effective April 16, 1996.*

5 Opinion of Schuler, Messersmith & McNeill.

10.1 Employment Agreement between Registrant and Dr. Andrew C. Cruce, dated October 1, 1993, as
amended, filed as Exhibit 10(a) of the Registrant's Form 10-K for the fiscal year ended June
30, 1996.*

10.2 Employment Agreement between Registrant and Scott A. Alexander, dated October 1, 1993, as
amended, filed as Exhibit 10(b) of the Registrant's Form 10-K for the fiscal year ended June
30, 1996.*

10.3 Employment Agreement between Registrant and Christopher J. Amenson, dated August 24, 1992, as
amended, filed as Exhibit 10(d) of the Registrant's Form 10-K for the fiscal year ended June
30, 1996.*

10.4 1991 Key Employee Stock Option Plan, filed as Exhibit 10(d) of the Registrant's Registration
Statement on Form S-18 (No. 33-43256-D), effective January 9, 1992.*

10.5 1992 Incentive Stock Option Plan, filed as Exhibit 10(e) of the Registrant's Registration
Statement on Form S-18 (No. 33-43256-D), effective January 9, 1992.*

10.6 Stock Bonus Plan, filed as Exhibit 10(f) of the Registrant's Registration Statement on Form
S-18 (No. 33-43256-D), effective January 9, 1992.*

10.7 1993 Incentive Stock Option Plan, filed as Exhibit A of the Registrant's Proxy Statement for
its annual meeting held November 10, 1992.*

10.8 1993 Director and Officer Stock Option Plan, filed as Exhibit B of the Registrant's Proxy
Statement for its annual meeting held November 10, 1992.*
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------
10.9 Asset Purchase Agreement dated April 26, 1995 between Registrant and Camber Corporation, filed
as Exhibit 10(q) of the Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995.*
<C> <S>

10.10 Purchase Agreement dated April 28, 1995 between Registrant and GreenSpring Computers, Inc.,
filed as Exhibit 10(r) of the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1995.*

10.11 Credit Agreement dated April 28, 1995 with NationsBank of Texas, N.A., filed as Exhibit 10(s)
of the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1995.*

10.12 Lease dated May 25, 1995 between the Registrant and PARS Asset Management Company, filed as
Exhibit 10(t) of the Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1995.*

10.13 1996 Employee Stock Purchase Plan adopted January 21, 1996, as amended, subject to shareholder
approval, filed as Exhibit 10(v) of the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996.*

10.14 Amended and Restated Term Loan and Revolver Credit Facility from NationsBank of Texas, N.A.
dated April 26, 1996, filed as Exhibit 10.w of the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996.*

10.15 Lease dated March 5, 1996, between the Registrant and Bohannon Trust Partnership II, filed as
Exhibit 10(x) of the Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1996.*

10.16 Pooling Agreement dated August 19, 1996 between the Registrant and Logical Design Group, Inc.
et al, filed as Exhibit 10(y) of the Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996.*

10.17 Management Incentive Plans, filed as Exhibit 10.2 of the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1996.*

10.18 Stock Purchase Agreement dated October 8, 1996 between the Registrant and Philip M. Vukovic and
Larry L. Larsen.+

10.19 Amendment to lease dated September 21, 1996 between Registrant and PARS Asset Management
Company, filed as Exhibit 10.j of the Registrant's Form 10-KA amending the Registrant's Form
10-K for the fiscal year ended June 30, 1996.*

10.20 Lease dated July 18, 1995 between Logical Design, Inc. and Carolantic Realty, filed as Exhibit
10.k of the Registrant's Form 10-KA amending the Registrant's Form 10-K for the fiscal year
ended June 30, 1996.*

10.21 Lease dated January 18, 1994 between the Berg Systems International, Inc., a subsidiary of the
Registrant, and Equity Growth Investments, filed as Exhibit 10.1 of the Registrant's Form
10-KA amending the Registrant's Form 10-K for the fiscal year ended June 30, 1996.*

11 Statement Re Computation of Per-Share Income.*

23.1 Consent of Schuler, Messersmith & McNeill (included in Exhibit 5).

23.2 Consent of KPMG Peat Marwick LLP.

23.3 Consent of Warren Andrews.+
</TABLE>

II-3

<PAGE>

27 Financial Data Schedule.+
</TABLE>

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

* Incorporated by reference.
+ Previously filed.

II-4
<PAGE>
ITEM 17. UNDERTAKINGS.

(a) Undertaking Concerning Claim for Indemnification Against Certain
Liabilities

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification against liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(b) Undertakings For a Registration Statement Permitted by Rule 430A:

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Albuquerque, State of New Mexico, on November 14,
1996.

SBS TECHNOLOGIES, INC.

By: /S/ CHRISTOPHER J. AMENSON
-----------------------------------------
Christopher J. Amenson
CHIEF EXECUTIVE OFFICER, PRESIDENT,
CHIEF OPERATING OFFICER AND DIRECTOR

Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed below by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ ------------------- ----------------
<C> <S> <C>

/S/ ANDREW C. CRUCE,
PH.D.* Chairman of the November 14,
- ------------------------------ Board of Directors 1996
Andrew C. Cruce, Ph.D.

Vice President of
/S/ JAMES E. Finance and
DIXON Administration, November 14,
- ------------------------------ Treasurer and Chief 1996
James E. Dixon Financial Officer

Chief Executive
/S/ CHRISTOPHER J. Officer, President,
AMENSON Chief Operating November 14,
- ------------------------------ Officer and 1996
Christopher J. Amenson Director

/S/ SCOTT A.
ALEXANDER* Vice President, November 14,
- ------------------------------ Secretary and 1996
Scott A. Alexander Director

/S/ WARREN ANDREWS
- ------------------------------ Director November 14,
Warren Andrews 1996

/S/ WILLIAM J.
BECKER* November 14,
- ------------------------------ Director 1996
William J. Becker

/S/ LAWRENCE A.
BENNIGSON* November 14,
- ------------------------------ Director 1996
Lawrence A. Bennigson

/S/ A. WADE BLACK*
- ------------------------------ Director November 14,
A. Wade Black 1996

*By: /S/ CHRISTOPHER J.
AMENSON November 14,
---------------------------- 1996
Attorney-in-fact
</TABLE>

II-6

<PAGE>

November 8, 1996

SBS Technologies, Inc.
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 07110

Ladies and Gentlemen:

We are general counsel to SBS Technologies, Inc., a New Mexico
corporation ("Company"), in connection with the underwritten public offering
of 2,070,000 shares of the Company's common stock, no par value ("Shares") on
Form S-2 ( "Registration Statement"). Of the Shares issuable, 1,500,000
Shares are being offered by the Company, 100,000 are being offered by the
Company on behalf of holders ("Warrant Holders") of warrants ("Warrants"),
and 470,000 Shares are being affected by selling shareholders ("Selling
Shareholders").

For purposes of this opinion, we have examined such records, certificates
and documents, and such questions of law, as we have deemed necessary as a
basis for the opinion expressed. In all such examinations, we have assumed
the genuineness of all signatures on original or certified copies and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduction copies. As to various questions of fact relevant to
this opinion, we have relied upon statements and written information of
representatives of the Company, the Warrant Holders, the Selling Shareholders
and of others.

Based upon the foregoing and subject to the limitations set forth above,
it is our opinion that:

1. The Shares to be offered by the Company have been duly authorized
and, when issued, delivered and paid for in accordance with the terms of the
Company's Registration Statement and the Underwriting Agreement among the
Company, the Selling Shareholders, the Warrant Holders and Cowen & Company
and Soundview Financial Group, Inc. ("Underwriting Agreement") will be duly
and validly issued, fully paid and non-assessable with no personal liability
attaching, and no shareholder of the Company will have any preemptive rights
in respect to them.

2. The Shares to be offered by the Selling Shareholders have been duly
authorized and validly issued and are fully paid and non-assessable.

3. The Shares issuable pursuant to the Warrants have been

<PAGE>

duly reserved for issuance, have been duly authorized and when issued,
delivered and paid for in accordance with the terms of those Warrants and the
Underwriting Agreement, will be validly issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming part of the Registration Statement.
In giving this consent, we do not admit that we are in the category of those
persons whose consent is required under Section 7 of the Securities Act of
1933.

The opinions expressed herein are solely for your benefit and may not be
relied upon by any other person or used in any manner or for any purpose
except as specifically provided for in this opinion.

Very truly yours,

/s/ SCHULER MESSERSMITH & MCNEILL

Schuler, Messersmith & McNeill

<PAGE>

KPMG Peat Marwick LLP
6565 Americas Parkway, NE Suite 700
Post Office Box 3939
Albuquerque, New Mexico 87190

The Board of Directors
SBS Technologies, Inc. and
Bit 3 Computer Corporation:

We consent to the use of our reports included herein and to the references to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.

KPMG Peat Marwick LLP

Albuquerque, New Mexico
November 5, 1996