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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

|                |  |                                                                                                                           
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------
|(Mark One)     
|X IN BALLOT BOX |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED    
|               
|               
|               
|               
|                |  | July 31, 2001 OR                                                                                                          
|               
|OPEN BALLOT BOX |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO

COMMISSION FILE NUMBER: 0-13994

CNT LOGO

COMPUTER NETWORK TECHNOLOGY CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

|                         |  |                                     
|------------------------ |  | ------------------------------------
|Minnesota                |  | 41-1356476                          
|                         |  |                                     
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

6000 Nathan Lane North, Minneapolis, Minnesota 55442
(Address of principal executive offices) (Zip Code)

Telephone Number: (763) 268-6000
(Registrants telephone number, including area code)

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

As of August 31, 2001, the registrant had 29,926,836 shares of $.01 par value
common stock issued and outstanding.



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TABLE OF CONTENTS



|                                                                                              |                                                                                                 |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)                                                     
|                                                                                              | CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2001 AND 2000
|                                                                                              | CONSOLIDATED BALANCE SHEETS AS OF JULY 31, 2001 AND JANUARY 31, 2001                           
|                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2001 AND 2000
|                                                                                              | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                     
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II. OTHER INFORMATION                                                                   
|ITEM 1-3. NONE                                                                               
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 5. NONE                                                                                 
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                                                   
|Computation of Net Income Per Basic & Diluted Shr                                            



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##### Table of Contents



COMPUTER NETWORK TECHNOLOGY CORPORATION

INDEX

|       |  |                      
|------ |  | ---------------------
|PART I |  | FINANCIAL INFORMATION

|           |  |                                                                                                 |  |     
|---------- |  | ----------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                 |  | Page
|           |  |                                                                                                 |  |     
|Item 1.    |  | Financial Statements (unaudited)                                                                |  |     
|          
|          
|          
|          
|           |  | Consolidated Statements of Operations for the
three and six months ended July 31, 2001 and 2000 |  | 3   
|          
|          
|          
|          
|           |  | Consolidated Balance Sheets as of July 31, 2001
and January 31, 2001                            |  | 4   
|          
|          
|          
|          
|           |  | Consolidated Statements of Cash Flows for the three
and six months ended July 31, 2001 and 2000 |  | 5   
|          
|          
|          
|          
|           |  | Notes to Consolidated Financial Statements                                                      |  | 6   
|          
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations           |  | 9   
|          
|          
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|PART II    |  | OTHER INFORMATION                                                                               |  | 17  
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|Item 1-3.  |  | None                                                                                            |  |     
|          
|          
|          
|          
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                             |  |     
|          
|          
|          
|          
|Item 5.    |  | None                                                                                            |  |     
|          
|          
|          
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                |  | 18  
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|SIGNATURES |  |                                                                                                 |  | 19  

2



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COMPUTER NETWORK TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |        |        |        |        | 
|-------- | ------------------------------------------------------------ | ----------------------- | ---------------------------------------------------------------------------------------- | ------------------------ | ------ | --------------------------- | ------ | ------ | ------------------------- | ------ | ------ | ------- | ------ | ------- | ------ | ------ | ------ | ------ | ------ | 
|         |                                                              |                         |                                                                                          |                          |        | Three months ended July 31, |        |        | Six months ended July 31, |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |       
|         |                                                              |                         |                                                                                          |                          |        | 2001                        |        |        | 2000                      |        |        | 2001    |        |         | 2000   |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |       
|Revenue: |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |       
|        
|        
|        
|        
|         |                                                              | Product sales           |                                                                                          | $                        | 27,682 |                             |        | $      | 31,728                    |        |        | $       | 43,719 |         |        | $      | 59,040 |       
|        
|        
|        
|        
|         |                                                              | Service fees            |                                                                                          |                          | 13,901 |                             |        |        | 12,613                    |        |        |         | 27,277 |         |        |        | 23,908 |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         |                                                              |                         |                                                                                          | Total revenue            |        |                             | 41,583 |        |                           |        | 44,341 |         |        |         | 70,996 |        |        |        | 82,948 | 
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Cost of revenue:                                             |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |        |       
|        
|        
|        
|        
|         |                                                              |                         | Cost of product sales                                                                    |                          |        | 15,556                      |        |        |                           | 12,844 |        |         |        | 25,017  |        |        |        | 24,407 |       
|        
|        
|        
|        
|         |                                                              |                         | Cost of service fees                                                                     |                          |        | 9,467                       |        |        |                           | 7,406  |        |         |        | 18,954  |        |        |        | 14,118 |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         |                                                              |                         |                                                                                          | Total cost of revenue    |        |                             | 25,023 |        |                           |        | 20,250 |         |        |         | 43,971 |        |        |        | 38,525 | 
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Gross profit                                                 |                         |                                                                                          | 16,560                   |        |                             |        | 24,091 |                           |        |        | 27,025  |        |         |        | 44,423 |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Operating expenses:                                          |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |        |       
|        
|        
|        
|        
|         |                                                              |                         | Sales and marketing                                                                      |                          |        | 11,854                      |        |        |                           | 10,384 |        |         |        | 22,749  |        |        |        | 19,994 |       
|        
|        
|        
|        
|         |                                                              |                         | Engineering and development                                                              |                          |        | 5,134                       |        |        |                           | 5,790  |        |         |        | 11,418  |        |        |        | 11,532 |       
|        
|        
|        
|        
|         |                                                              |                         | General and administrative                                                               |                          |        | 2,169                       |        |        |                           | 2,216  |        |         |        | 4,937   |        |        |        | 4,309  |       
|        
|        
|        
|        
|         |                                                              |                         | Restructuring charge                                                                     |                          |        |                            |        |        |                           |       |        |         |        | 996     |        |        |        |       |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         |                                                              |                         |                                                                                          | Total operating expenses |        |                             | 19,157 |        |                           |        | 18,390 |         |        |         | 40,100 |        |        |        | 35,835 | 
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Income (loss) from operations                                |                         |                                                                                          | (2,597                   | )      |                             |        | 5,701  |                           |        |        | (13,075 | )      |         |        | 8,588  |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Other income (expense):                                      |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |        |       
|        
|        
|        
|        
|         |                                                              |                         | Interest income                                                                          |                          |        | 1,489                       |        |        |                           | 394    |        |         |        | 3,465   |        |        |        | 668    |       
|        
|        
|        
|        
|         |                                                              |                         | Interest expense                                                                         |                          |        | (60                         | )      |        |                           | (88    | )      |         |        | (128    | )      |        |        | (176   | )     
|        
|        
|        
|        
|         |                                                              |                         | Loss on sale and write-down of
webMethods stock                                          |                          |        |                            |        |        |                           |       |        |         |        | (10,283 | )      |        |        |       |       
|        
|        
|        
|        
|         |                                                              |                         | Other                                                                                    |                          |        | (58                         | )      |        |                           | (102   | )      |         |        | (114    | )      |        |        | (271   | )     
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         |                                                              |                         |                                                                                          | Other income (expense)   |        |                             | 1,371  |        |                           |        | 204    |         |        |         | (7,060 | )      |        |        | 221    | 
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Income (loss) from continuing operations
before income taxes |                         |                                                                                          | (1,226                   | )      |                             |        | 5,905  |                           |        |        | (20,135 | )      |         |        | 8,809  |       
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|        
|         | Provision (benefit) for income taxes                         |                         |                                                                                          | (405                     | )      |                             |        | 1,949  |                           |        |        | (6,336  | )      |         |        | 2,907  |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Income (loss) from continuing operations                     |                         |                                                                                          | (821                     | )      |                             |        | 3,956  |                           |        |        | (13,799 | )      |         |        | 5,902  |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         | Discontinued Operations:                                     |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |        |       
|        
|        
|        
|        
|         |                                                              |                         | Loss from discontinued operations, net of tax                                            |                          |        |                            |        |        |                           | (1,903 | )      |         |        |        |        |        |        | (2,019 | )     
|        
|        
|        
|        
|         |                                                              |                         | Gain of $21,390 on sale of IntelliFrame,
(net of tax, $8,770)                            |                          |        |                            |        |        |                           |       |        |         |        | 12,620  |        |        |        |       |       
|        
|        
|        
|        
|         |                                                              |                         | Provision of $9,250 for losses until divesture
of Propelis Software, (net of tax $3,053) |                          |        |                            |        |        |                           |       |        |         |        | (6,197  | )      |        |        |       |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         |                                                              |                         |                                                                                         |                          |        |                             | (1,903 | )      |                           |        | 6,423  |         |        |         | (2,019 | )     
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |        
|         |                                                              | Net income (loss)       |                                                                                          | $                        | (821   | )                           |        | $      | 2,053                     |        |        | $       | (7,376 | )       |        | $      | 3,883  |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         | Basic income (loss) per share:                               |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |        |       
|        
|        
|        
|        
|         |                                                              | Continuing operations   |                                                                                          | $                        | (.03   | )                           |        | $      | .16                       |        |        | $       | (.46   | )       |        | $      | .25    |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         |                                                              | Discontinued operations |                                                                                          | $                        |       |                             |        | $      | (.08                      | )      |        | $       | .22    |         |        | $      | (.08   | )     
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         |                                                              | Net income              |                                                                                          | $                        | (.03   | )                           |        | $      | .09                       |        |        | $       | (.25   | )       |        | $      | .16    |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         |                                                              | Shares                  |                                                                                          |                          | 29,729 |                             |        |        | 24,102                    |        |        |         | 29,746 |         |        |        | 24,020 |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         | Diluted income (loss) per share:                             |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |         |        |         |        |        |       
|        
|        
|        
|        
|         |                                                              | Continuing operations   |                                                                                          | $                        | (.03   | )                           |        | $      | .15                       |        |        | $       | (.46   | )       |        | $      | .23    |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         |                                                              | Discontinued operations |                                                                                          | $                        |       |                             |        | $      | (.07                      | )      |        | $       | .22    |         |        | $      | (.08   | )     
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         |                                                              | Net income              |                                                                                          | $                        | (.03   | )                           |        | $      | .08                       |        |        | $       | (.25   | )       |        | $      | .15    |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        
|         |                                                              | Shares                  |                                                                                          |                          | 29,729 |                             |        |        | 25,925                    |        |        |         | 29,746 |         |        |        | 26,152 |       
|         |                                                              |                         |                                                                                          |                          |        |                             |        |        |                           |        |        |        

See accompanying Notes to Consolidated Financial Statements

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##### Table of Contents






COMPUTER NETWORK TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

|                                                           |                                                                                                                                        |                            |         |          |         |   |             |         |         | 
|---------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------- | ------- | - | ----------- | ------- | ------- | 
|                                                           |                                                                                                                                        |                            |         | July 31, |         |   | January 31, |        
|                                                           |                                                                                                                                        |                            |         | 2001     |         |   | 2001        |        
|                                                           |                                                                                                                                        |                            |         |          |         |   |             |        
|ASSETS                                                     |                                                                                                                                        |                            |         |          |         |   |             |        
|                                                          
|                                                          
|                                                          
|                                                          
|Current assets:                                            |                                                                                                                                        |                            |         |          |         |   |             |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Cash and cash equivalents                                                                                                              |                            | $       | 21,800   |         |   | $           | 39,444  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Marketable securities                                                                                                                  |                            |         | 89,248   |         |   |             | 111,033 |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Receivables, net                                                                                                                       |                            |         | 36,308   |         |   |             | 43,613  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Inventories                                                                                                                            |                            |         | 39,885   |         |   |             | 22,447  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Net current assets of discontinued operations                                                                                          |                            |         |         |         |   |             | 5,430   |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Deferred tax asset                                                                                                                     |                            |         | 11,482   |         |   |             | 11,415  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Other current assets                                                                                                                   |                            |         | 2,615    |         |   |             | 2,226   |        
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|                                                           |                                                                                                                                        | Total current assets       |         |          | 201,338 |   |             |         | 235,608 | 
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|Property and equipment, net                                |                                                                                                                                        |                            | 25,848  |          |         |   | 25,215      |        
|                                                          
|                                                          
|                                                          
|                                                          
|Field support spares, net                                  |                                                                                                                                        |                            | 4,894   |          |         |   | 4,446       |        
|                                                          
|                                                          
|                                                          
|                                                          
|Deferred tax asset                                         |                                                                                                                                        |                            | 2,454   |          |         |   |            |        
|                                                          
|                                                          
|                                                          
|                                                          
|Goodwill and other intangibles, net                        |                                                                                                                                        |                            | 14,669  |          |         |   | 1,200       |        
|                                                          
|                                                          
|                                                          
|                                                          
|Other assets                                               |                                                                                                                                        |                            | 1,632   |          |         |   | 2,154       |        
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|                                                           |                                                                                                                                        | $                          | 250,835 |          |         | $ | 268,623     |        
|                                                           |                                                                                                                                        |                            |         |          |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                       |                                                                                                                                        |                            |         |          |         |   |             |        
|                                                          
|                                                          
|                                                          
|                                                          
|Current liabilities:                                       |                                                                                                                                        |                            |         |          |         |   |             |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accounts payable                                                                                                                       |                            | $       | 13,602   |         |   | $           | 20,293  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accrued liabilities                                                                                                                    |                            |         | 13,499   |         |   |             | 15,780  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Deferred revenue                                                                                                                       |                            |         | 14,241   |         |   |             | 15,489  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Net current liabilities of discontinued operations                                                                                     |                            |         | 254      |         |   |             |        |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Current installments of obligations under capital lease                                                                                |                            |         | 1,404    |         |   |             | 1,421   |        
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|                                                           |                                                                                                                                        | Total current liabilities  |         |          | 43,000  |   |             |         | 52,983  | 
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|Deferred tax liability                                     |                                                                                                                                        |                            |        |          |         |   | 586         |        
|                                                          
|                                                          
|                                                          
|                                                          
|Obligations under capital lease, less current installments |                                                                                                                                        |                            | 1,198   |          |         |   | 1,952       |        
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|                                                           |                                                                                                                                        | Total liabilities          |         |          | 44,198  |   |             |         | 55,521  | 
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|Shareholders equity:                                      |                                                                                                                                        |                            |         |          |         |   |             |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Undesignated preferred stock, authorized 965
shares; none issued and outstanding                                                       |                            |         |         |         |   |             |        |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Series A Junior participating preferred stock,
authorized 40 shares, none issued & outstanding                                         |                            |         |         |         |   |             |        |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Common stock, $.01 par value; authorized
100,000 shares, issued and outstanding 29,922
at July 31, 2001 and 29,656 at January 31, 2001 |                            |         | 299      |         |   |             | 297     |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Additional paid-in capital                                                                                                             |                            |         | 197,767  |         |   |             | 195,910 |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Unearned compensation                                                                                                                  |                            |         | (1,939   | )       |   |             | (1,304  | )      
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Retained earnings                                                                                                                      |                            |         | 11,789   |         |   |             | 19,165  |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Accumulated other comprehensive income 
Foreign currency translation                                                                  |                            |         | (1,279   | )       |   |             | (966    | )      
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|                                                           |                                                                                                                                        | Total shareholders equity |         |          | 206,637 |   |             |         | 213,102 | 
|                                                           |                                                                                                                                        |                            |         |          |         |   |            
|                                                           |                                                                                                                                        | $                          | 250,835 |          |         | $ | 268,623     |        
|                                                           |                                                                                                                                        |                            |         |          |         |  

See accompanying Notes to Consolidated Financial Statements.

4



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##### Table of Contents






COMPUTER NETWORK TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

|                                                     |                                                         |                                                        |                                                 |         |                  |         |        |        |        |         |  
|---------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------------ | ----------------------------------------------- | ------- | ---------------- | ------- | ------ | ------ | ------ | ------- | -
|                                                     |                                                         |                                                        |                                                 |         | Six months ended |        
|                                                     |                                                         |                                                        |                                                 |         | July 31          |        
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|                                                     |                                                         |                                                        |                                                 |         | 2001             |         |        | 2000   |       
|                                                     |                                                         |                                                        |                                                 |         |                  |         |        |        |       
|Operating Activities:                                |                                                         |                                                        |                                                 |         |                  |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income (loss)                                       |                                                        | $                                               | (7,376  | )                |         | $      | 3,883  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Discontinued operations                                 |                                                        |                                                 | (6,423  | )                |         |        | 2,019  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Depreciation and amortization                           |                                                        |                                                 | 7,421   |                  |         |        | 5,216  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Compensation expense                                    |                                                        |                                                 | 286     |                  |         |        | 25     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Loss on sale and write-down of webMethods stock         |                                                        |                                                 | 10,283  |                  |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in operating assets and liabilities:            |                                                        |                                                 |         |                  |         |        |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                         | Receivables                                            |                                                 |         | 17,676           |         |        |        | (5,197 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                         | Inventories                                            |                                                 |         | (12,992          | )       |        |        | 341    |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                         | Other current assets                                   |                                                 |         | (52              | )       |        |        | (875   | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                         | Accounts payable                                       |                                                 |         | (25,517          | )       |        |        | 2,217  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                         | Accrued liabilities                                    |                                                 |         | (14,079          | )       |        |        | 9,685  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                         | Deferred revenue                                       |                                                 |         | (1,316           | )       |        |        | 2,653  |        
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|                                                     |                                                         | Net cash provided by (used in) continuing
operations   |                                                 |         | (32,089          | )       |        |        | 19,967 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                         | Net cash provided by (used in)
discontinued operations |                                                 |         | (3,566           | )       |        |        | 613    |        
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|                                                     |                                                         |                                                        | Cash provided by (used in) operating
activities |         |                  | (35,655 | )      |        |        | 20,580  |  
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|Investing Activities:                                |                                                         |                                                        |                                                 |         |                  |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Additions to property and equipment                     |                                                        |                                                 | (3,635  | )                |         |        | (7,500 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Additions to field support spares                       |                                                        |                                                 | (1,717  | )                |         |        | (847   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisition of Articulent, net of cash acquired         |                                                        |                                                 | (11,132 | )                |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net proceeds from the sale of IntelliFrame              |                                                        |                                                 | 5,800   |                  |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from the sale of webMethods stock              |                                                        |                                                 | 6,281   |                  |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net purchase and redemption of marketable
securities    |                                                        |                                                 | 21,876  |                  |         |        | (2,748 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other assets                                            |                                                        |                                                 | 577     |                  |         |        | (599   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Discontinued operations  additions to
long-term assets |                                                        |                                                 |        |                  |         |        | (110   | )     
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|                                                     |                                                         |                                                        | Cash provided by (used in) investing activities |         |                  | 18,050  |        |        |        | (11,804 | )
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|Financing Activities:                                |                                                         |                                                        |                                                 |         |                  |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from issuance of common stock                  |                                                        |                                                 | 1,625   |                  |         |        | 2,235  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of obligations under capital leases          |                                                        |                                                 | (771    | )                |         |        | (549   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repurchase of common stock                              |                                                        |                                                 | (687    | )                |         |        |       |       
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|                                                     |                                                         |                                                        | Cash provided by financing activities           |         |                  | 167     |        |        |        | 1,686   |  
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Effects of exchange rate changes                     |                                                         |                                                        | (206                                            | )       |                  |         | (245   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Net increase (decrease) in cash and cash
Equivalents |                                                         |                                                        | (17,644                                         | )       |                  |         | 10,217 |       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents  beginning of
Period      |                                                         |                                                        | 39,444                                          |         |                  |         | 7,974  |       
|                                                     |                                                         |                                                        |                                                 |         |                  |        
|Cash and cash equivalents  end of
Period            |                                                         | $                                                      | 21,800                                          |         |                  | $       | 18,191 |       
|                                                     |                                                         |                                                        |                                                 |         |                  |        

See accompanying Notes to Consolidated Financial Statements

5



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##### Table of Contents









NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)

(1)  BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and notes required by accounting principles generally accepted in
the United States of America for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and accompanying notes included in the
Companys Annual Report on Form 10-K for the fiscal year ended January 31, 2001
as filed with the Securities and Exchange Commission.

(2)  DISCONTINUED OPERATIONS

Propelis Software, Inc., formerly known as the Enterprise Integration Solutions
Division develops and sells EAI software that automates the integration of computer
software applications, and business workflow processes. The Company previously
determined to divest Propelis Software Inc. and focus on its core storage networking
and storage solutions businesses. Accordingly, Propelis Software, Inc. has been
accounted for as discontinued operations in the accompanying financial statements.

During the first quarter of 2001, the Company completed the sale of IntelliFrame,
which was affiliated with Propelis Software, Inc, including the technology
underlying the Propelis BPm product to webMethods for $8.8 million in cash and
273,542 shares of webMethods stock. The sale resulted in an after tax gain of
$12.6 million in the first quarter of 2001.

In the first quarter of 2001, the Company accrued $9.3 million for the
estimated future operating losses of Propelis Software, Inc. through the
potential date of divestiture, resulting in an after tax loss of $6.2 million.

On August 23, 2001 the Company sold substantially all of the remaining assets and
liabilities of Propelis Software, Inc. to Jacada LTD. for $6.0 million in cash, plus a warrant to purchase 350,0000 ordinary
shares of Jacada LTD. stock at a price of $3.26 per share. The final purchase price is subject to adjustment based on the closing balance sheet of
Propelis. The transaction will result in a gain in the third quarter of 2001.

6



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##### Table of Contents



Condensed Consolidated Statements of Net Assets (Liabilities) of Discontinued Operations:

|                                    |                                                     |   |          |       |   |             |       |       | 
|----------------------------------- | --------------------------------------------------- | - | -------- | ----- | - | ----------- | ----- | ----- | 
|                                    |                                                     |   | July 31, |       |   | January 31, |      
|                                    |                                                     |   | 2001     |       |   | 2001        |      
|                                    |                                                     |   |          |       |   |             |      
|Receivables, net                    |                                                     | $ | 2,441    |       |   | $           | 4,419 |      
|                                   
|                                   
|                                   
|                                   
|Goodwill and other intangibles, net |                                                     |   | 375      |       |   |             | 1,497 |      
|                                   
|                                   
|                                   
|                                   
|Other assets                        |                                                     |   | 1,857    |       |   |             | 1,934 |      
|                                    |                                                     |   |          |       |   |            
|                                    | Total assets                                        |   |          | 4,673 |   |             |       | 7,850 | 
|                                    |                                                     |   |          |       |   |            
|All other liabilities               |                                                     |   | 4,927    |       |   |             | 2,420 |      
|                                    |                                                     |   |          |       |   |            
|                                    | Net assets (liabilities) of discontinued operations |   | $        | (254  | ) |             | $     | 5,430 | 
|                                    |                                                     |   |          |       |   |            

(3)  MARKETABLE SECURITIES

During the first quarter of 2001, the Company sold 232,511 shares of webMethods
stock received from the sale of Intelliframe for approximately $6.3 million,
resulting in a pre-tax loss of approximately $8.7 million. The Company also
wrote-down the carrying value of the remaining 41,031 shares of webMethods stock
that it still owns, resulting in a pre-tax loss of approximately $1.5 million.

The Companys remaining investments in marketable securities primarily consist
of bank certificates of deposit, U.S. government and agency securities and
commercial paper. Excluding the sale of webMethods stock noted above, the
Company did not realize any gains or losses from the sale of marketable
securities in the first or second quarters of 2001. The amount of gross
unrealized gains and losses with respect to investments in marketable securities
at July 31, 2001 was not significant.

(4)  INVENTORIES

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

|                             |  |          |        |  |             |   |        | 
|---------------------------- |  | -------- | ------ |  | ----------- | - | ------ | 
|                             |  | July 31, |        |  | January 31, |  
|                             |  | 2001     |        |  | 2001        |  
|                             |  |          |        |  |             |  
|Components and subassemblies |  | $        | 27,574 |  |             | $ | 15,218 | 
|                            
|                            
|                            
|                            
|Work in process              |  |          | 2,787  |  |             |   | 2,813  | 
|                            
|                            
|                            
|                            
|Finished goods               |  |          | 9,524  |  |             |   | 4,416  | 
|                             |  |          |        |  |             |  
|                             |  | $        | 39,885 |  |             | $ | 22,447 | 
|                             |  |          |        |  |             |  

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(5)  COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of the following:

|                                                                 |  |                           |        |   |      |   |       |  
|---------------------------------------------------------------- |  | ------------------------- | ------ | - | ---- | - | ----- | -
|                                                                 |  | Six months ended July 31, |       
|                                                                 |  |                           |       
|                                                                 |  | 2001                      |        |   | 2000 |  
|                                                                 |  |                           |        |   |      |  
|Net income (loss)                                                |  | $                         | (7,376 | ) |      | $ | 3,883 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Foreign currency translation adjustment, net of tax
effect of $0 |  |                           | (313   | ) |      |   | (435  | )
|                                                                 |  |                           |        |   |      |  
|Total comprehensive income (loss)                                |  | $                         | (7,689 | ) |      | $ | 3,448 |  
|                                                                 |  |                           |        |   |      |  

(6)  SEGMENT INCOME

The Company has two reportable segments consisting of its Networking Solutions
business unit and Storage Solutions business unit. The Networking Solutions
business unit consists of our storage and channel networking products and
related services. The Storage Solutions business consists of our SAN services
and the storage management business we acquired from Articulent in April of
2001. The Companys two reportable segments are strategic business units that
offer different products and services. They are managed separately because each
business requires different market strategies. The Company evaluates performance
based on operating profit or loss before special charges and income taxes.

|                               |                      |   |                             |        |   |                           |        |        |      |   |         |        |   |   |        |        |  
|------------------------------ | -------------------- | - | --------------------------- | ------ | - | ------------------------- | ------ | ------ | ---- | - | ------- | ------ | - | - | ------ | ------ | -
|                               |                      |   | Three months ended July 31, |        |   | Six months ended July 31, |       
|                               |                      |   |                             |        |   |                           |       
|                               |                      |   | 2001                        |        |   | 2000                      |        |        | 2001 |   |         | 2000   |  
|                               |                      |   |                             |        |   |                           |        |        |      |   |         |        |  
|Revenue:                       |                      |   |                             |        |   |                           |        |        |      |   |         |        |   |   |        |       
|                              
|                              
|                              
|                              
|                               | Networking Solutions |   | $                           | 30,024 |   |                           | $      | 41,058 |      |   | $       | 55,180 |   |   | $      | 77,509 |  
|                              
|                              
|                              
|                              
|                               | Storage Solutions    |   |                             | 11,559 |   |                           |        | 3,283  |      |   |         | 15,816 |   |   |        | 5,439  |  
|                               |                      |   |                             |        |   |                           |        |        |      |   |         |        |  
|                               |                      | $ | 41,583                      |        |   | $                         | 44,341 |        |      | $ | 70,996  |        |   | $ | 82,948 |       
|                               |                      |   |                             |        |   |                           |        |        |      |   |         |       
|Income (loss) from operations: |                      |   |                             |        |   |                           |        |        |      |   |         |        |   |   |        |       
|                              
|                              
|                              
|                              
|                               | Networking Solutions |   | $                           | (1,494 | ) |                           | $      | 5,490  |      |   | $       | (6,930 | ) |   | $      | 8,775  |  
|                              
|                              
|                              
|                              
|                               | Storage Solutions    |   |                             | (1,103 | ) |                           |        | 211    |      |   |         | (2,824 | ) |   |        | (187   | )
|                              
|                              
|                              
|                              
|                               | Special Charges      |   |                             |       |   |                           |        |       |      |   |         | (3,321 | ) |   |        |       |  
|                               |                      |   |                             |        |   |                           |        |        |      |   |         |        |  
|                               |                      | $ | (2,597                      | )      |   | $                         | 5,701  |        |      | $ | (13,075 | )      |   | $ | 8,588  |       
|                               |                      |   |                             |        |   |                           |        |        |      |   |         |       

(7)  ACQUISITION OF ARTICULENT

On April 3, 2001 the Company acquired all of the outstanding stock of Articulent
Inc., a privately held, leading provider of storage solutions and services for $12
million in cash, plus the assumption of approximately $24 million of liabilities
and the acquisition of approximately $19 million of tangible assets. The
agreement includes a potential $10 million incentive payout based upon meeting certain
revenue and earnings milestones over the next twelve months. The acquisition was accounted for as a purchase and the consolidated financial statements of the Company include the results of Articulent since April 3, 2001.
The purchase price was allocated to the fair value of the assets and
liabilities acquired as follows:

|                                                       |                              |  |   |  |         |  
|------------------------------------------------------ | ---------------------------- |  | - |  | ------- | -
|Purchase Price:                                       
|                                                      
|                                                       | Cash paid                    |  | $ |  | 12,360 
|                                                       |                              |  |  
|                                                       |                              |  |   |  |        
|Fair Values of Assets Acquired andLiabilities Assumed: |                              |  |   | 
|                                                       |                              |  |   |  |        
|                                                       | Cash                         |  | $ |  | 624     |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Accounts receivable          |  |   |  | 10,287  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Inventory                    |  |   |  | 4,446   |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Fixed assets                 |  |   |  | 3,393   |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Goodwill                     |  |   |  | 14,314  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Deferred taxes               |  |   |  | 3,107   |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other assets                 |  |   |  | 583     |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Accounts payable             |  |   |  | (18,302 | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Accrued expenses             |  |   |  | (2,324  | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Note payable                 |  |   |  | (3,768  | )
|                                                       |                              |  |   | 
|                                                       |                              |  |   |  |         |  
|                                                       | Total Purchase Consideration |  | $ |  | 12,360  |  
|                                                       |                              |  |   | 

The following table presents the consolidated results of operations of the Company for the six months
ended July 31, 2001 on an unaudited pro forma basis as if the acquisition of Articulent took place as the beginning of the year:

| |                    |  |   |  |        |  
| | ------------------ |  | - |  | ------ | -
| | Total revenue      |  | $ |  | 78,713 |  
| | Net loss           |  | $ |  | (9,442 | )
| | Net loss per share |  | $ |  | (.32   | )

The unaudited pro forma results are for comparative purposes only and do not necessarily reflect the results that would have been recorded had the acquisition occurred at the
beginning of the period presented or the results which might occur in the future.

(8)  NEW ACCOUNTING PRONOUNCEMENT

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 141 "Business Combinations," and
SFAS No. 142 "Goodwill and Other Intangible Assets," which change the accounting for business combinations and goodwill.  SFAS No. 141 requires that the purchase method
of accounting be used for business combinations initiated after June 30, 2001.  Use
of the pooling-of-interests method will be prohibited.  SFAS No. 142 changes the
accounting for goodwill from an amortization method to an
impairment-only approach.
Amortization of goodwill, including goodwill recorded in past business combinations, will therefore
cease upon adoption of SFAS No. 142.

The Company will adopt SFAS No. 142 on February 1,
2002.  The Company is in the process of evaluating whether it will
have any transitional impairment
losses which would be required to be recognized as a cumulative effect of
a change in accounting principle.  During the quarter ended July 31,
2001, the Company had goodwill amortization of $200,000, which under
SFAS No. 141 it would not have after February 1, 2002.

8



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##### Table of Contents









|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------

Overview

We are a leading provider of hardware and software products and related
services in the rapidly growing storage networking and solutions market. We
focus primarily on helping our clients design, develop, deploy and manage
storage networks and solutions.

The current global economic slowdown makes it difficult to predict the
demand for our products as we cannot forecast the length, duration and impact of
the slowdown. Slower growth throughout the economy has caused our customers to
reevaluate their capital spending plans, and to defer previously planned
projects for information technology infrastructure. However, we believe the need
for storage networking solutions is significant and will continue to increase.

Due to the slowdown in customer spending for information technology
infrastructure, we took cost reduction actions that reduced our quarterly
expense run rate at the end of April 2001, including:



| |                                                                
| | ---------------------------------------------------------------
| |               a 10 percent workforce reduction                
|
| |               a wage freeze for all employees                 
|
| |               a 10 percent pay cut for executive management   
|
| |               a 5 percent pay cut for other employees; and    
|
| |               significant reductions in discretionary spending

The reduction in demand for our products and services also resulted in the
following charges in the first quarter of 2001:



| |                                                                        
| | -----------------------------------------------------------------------
| |               $2.0 million to write-down slow moving inventory        
|
| |               $325,000 for the write-off of our Filespeed product; and
|
| |               $996,000 for restructuring, principally severance       

Sale and Write-down of webMethods Stock

During the first quarter of 2001, the Company sold 232,511 shares of
webMethods stock received from the sale of Intelliframe for approximately $6.3
million, resulting in a pre-tax loss of approximately $8.7 million. The Company
also wrote-down the carrying value of the remaining 41,031 shares of webMethods
stock that it still owns, resulting in a pre-tax loss of approximately $1.5
million.

Acquisition of Articulent

On April 3, 2001 we acquired all of the outstanding stock of Articulent
Inc., a privately held, leading provider of storage solutions and services for
$12 million in cash, plus the assumption of approximately $24 million of
liabilities and the acquisition of approximately $19 million of tangible assets.
The agreement includes a $10 million incentive payout based upon meeting certain
revenue and earnings milestones over the next twelve months. The acquisition
further strengthens our

9



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##### Table of Contents



storage services organization, which provides companies
with the expertise to manage information enterprise-wide.

Discontinued Operations  Divestiture of Propelis Software, Inc.

Propelis Software, Inc., formerly known as the Enterprise Integration Solutions Division develops and sells EAI
software that automates the integration of computer software applications, and business workflow processes. The Company
previously determined to divest Propelis Software Inc. and focus on its core storage networking and storage solutions
businesses. Accordingly, Propelis Software, Inc. has been accounted for as discontinued operations in the accompanying
financial statements, meaning that the divisions revenues, costs and expenses are not shown and its net income (loss) for
all periods are included under the Discontinued
Operations caption in our statement of operations.

During the first quarter of 2001, we completed the sale of IntelliFrame, which
was affiliated with Propelis Software, Inc, including the technology underlying
the Propelis BPm product to webMethods for $8.8 million in cash and 273,542
shares of webMethods stock. The sale resulted in an after tax gain of $12.6
million in the first quarter of 2001.

In the first quarter of 2001, we accrued $9.3 million for the
estimated future operating losses of Propelis Software, Inc. through the
potential date of divestiture, resulting in an after tax loss of $6.2 million.

In the second
quarter, on August 23, 2001 we sold substantially all of the remaining assets and liabilities of Propelis Software, Inc.
to Jacada LTD. for $6.0 million in cash, plus a warrant to
purchase 350,0000 ordinary shares of Jacada LTD. stock at a
price of $3.26 per share. The final
purchase price is subject to adjustment based on the closing balance sheet of Propelis. The transaction will result in a
gain in the third quarter of 2001.

For additional information regarding Propelis Software, Inc., see note
2, Discontinued Operations to the consolidated financial statements included
in this Form 10-Q. Certain general and administrative, facility and information
technology infrastructure costs that had previously been allocated to and
reported in the operating results of Propelis Software, Inc. have been
reallocated and reported in the results for continuing operations.

10



---



##### Table of Contents



Results of Continuing Operations

The following table sets forth financial data for our continuing operations
for the periods indicated as a percentage of total revenue except for gross
profit, which is expressed as a percentage of the related revenue.

The segment operating information for the three and six months ended July 31,
2001 and 2000 is for illustrative purposes only and such segment
information has been adjusted to eliminate the
effects of special items and other charges recognized during the first quarter
of 2001, including a $2.0 million write-down of inventory, a $325,000 write-off
of our Filespeed product and a $1.0 million restructuring charge.

|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          |  |       |       |       |  |      |      |       | 
|---------- | ----- | -- | -------- | ---- | ----- | ----------------- |  | ---- | -------- | -- |  | ---- | ----- | ------------------- | --------------- | ----------------------------- | ------------------- | ------------------ | -------- | ----- | ----- | -------- | ---- | ---- | -------- |  | ----- | ----- | ----- |  | ---- | ---- | ----- | 
|Networking |       |    |          |      |       | Storage Solutions | 
|           |       |    |          |      |       |                   | 
|Three      |       |    | Three    |      |       | Six               |  |      | Six      |    |  |      |       |                     |                 | Three                         |                     |                    | Three    |       |       | Six      |      |      | Six      | 
|months     |       |    | months   |      |       | months            |  |      | months   |    |  |      |       |                     |                 | months                        |                     |                    | months   |       |       | months   |      |      | months   | 
|ended      |       |    | ended    |      |       | ended             |  |      | ended    |    |  |      |       |                     |                 | ended                         |                     |                    | ended    |       |       | ended    |      |      | ended    | 
|July 31,   |       |    | July 31, |      |       | July 31,          |  |      | July 31, |    |  |      |       |                     |                 | July 31,                      |                     |                    | July 31, |       |       | July 31, |      |      | July 31, | 
|2001       |       |    | 2000     |      |       | 2001              |  |      | 2000     |    |  |      |       |                     |                 | 2001                          |                     |                    | 2000     |       |       | 2001     |      |      | 2000     | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       | Revenue:            |                 |                               |                     |                    |          |       |       |          |      |      |          |  |       |       |       | 
|          
|          
|          
|          
|           | 63.9  | %  |          |      | 74.9  | %                 |  |      | 59.4     | %  |  |      | 74.4  | %                   |                 |                               | Product sales       |                    |          | 73.4  | %     |          |      | 29.4 | %        |  |       | 69.2  | %     |  |      | 25.2 | %     | 
|          
|          
|          
|          
|           | 36.1  |    |          | 25.1 |       |                   |  | 40.6 |          |    |  | 25.6 |       |                     |                 | Service fees                  |                     |                    | 26.6     |       |       |          | 70.6 |      |          |  | 30.8  |       |       |  | 74.8 |     
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 
|           | 100.0 |    |          |      | 100.0 |                   |  |      | 100.0    |    |  |      | 100.0 |                     |                 |                               |                     | Total revenue      |          |       | 100.0 |          |      |      | 100.0    |  |       |       | 100.0 |  |      |      | 100.0 | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     | Gross profit:   |                               |                     |                    |          |       |       |          |      |      |          |  |       |       |       |  |     
|          
|          
|          
|          
|           | 52.7  |    |          |      | 59.4  |                   |  |      | 56.2     |    |  |      | 58.5  |                     |                 |                               | Product sales       |                    |          | 23.7  |       |          |      | 64.9 |          |  |       | 23.7  |       |  |      | 67.5 |      
|          
|          
|          
|          
|           | 48.5  |    |          |      | 44.0  |                   |  |      | 44.8     |    |  |      | 44.7  |                     |                 |                               | Service fees        |                    |          | (26.7 | )     |          |      | 29.3 |          |  |       | (35.2 | )     |  |      | 22.5 |      
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 
|           | 51.2  |    |          |      | 55.5  |                   |  |      | 51.6     |    |  |      | 54.9  |                     |                 |                               |                     | Total gross profit |          |       | 10.3  |          |      |      | 39.8     |  |       |       | 5.6   |  |      |      | 33.8  | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       | Operating expenses: |                 |                               |                     |                    |          |       |       |          |      |      |          |  |       |       |       | 
|          
|          
|          
|          
|           | 32.5  |    |          |      | 22.6  |                   |  |      | 35.3     |    |  |      | 23.3  |                     |                 |                               | Sales and marketing |                    |          | 18.1  |       |          |      | 33.4 |          |  |       | 20.6  |       |  |      | 37.2 |      
|          
|          
|          
|          
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     | Engineering and |                               |                     |                    |          |       |       |          |      |      |          |  |       |       |       |  |     
|           | 17.1  |    |          |      | 14.1  |                   |  |      | 20.7     |    |  |      | 14.8  |                     |                 |                               | development         |                    |          | 0.0   |       |          |      | 0.0  |          |  |       | 0.0   |       |  |      | 0.0  |      
|          
|          
|          
|          
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     | General and     |                               |                     |                    |          |       |       |          |      |      |          |  |       |       |       |  |     
|           | 6.6   |    |          |      | 5.4   |                   |  |      | 8.1      |    |  |      | 5.6   |                     |                 |                               | administrative      |                    |          | 1.7   |       |          |      | 0.0  |          |  |       | 2.8   |       |  |      | 0.0  |      
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 | Total operating               |                     |                    |          |       |       |          |      |      |          |  |       |       |       |  |      |     
|           | 56.2  |    |          |      | 42.1  |                   |  |      | 64.1     |    |  |      | 43.6  |                     |                 |                               |                     | expenses           |          |       | 19.9  |          |      |      | 33.4     |  |       |       | 23.5  |  |      |      | 37.2  | 
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 
|           | (5.0  | )% |          |      | 13.4  | %                 |  |      | (12.6    | )% |  |      | 11.3  | %                   |                 | Income (loss) from operations |                     |                    | (9.5     | )%    |       |          | 6.4  | %    |          |  | (17.9 | )%    |       |  | (3.4 | )%  
|           |       |    |          |      |       |                   |  |      |          |    |  |      |       |                     |                 |                               |                     |                    |          |       |       |          |      |      |          | 

11



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##### Table of Contents



Revenue

Networking Solutions:

Our networking solutions business generated revenues of $30.0 million and
$55.2 million in the second quarter and first half of 2001, respectively, down
27% and 29%, respectively, from $41.1 million and $77.5 million for the second
quarter and first half of 2000. Storage networking product revenues totaled
$16.1 million and $23.8 million in the second quarter and first half of 2001,
respectively, down 23% and 34%, respectively, from $20.9 million and $36.1
million in the second quarter and first half of 2000. Channel networking product
revenues totaled $3.1 million and $8.9 million in the second quarter and first
half of 2001, respectively, down 69% and 59%, respectively, from $9.8 million and
$21.6 million in the second quarter and first half of 2000. The decrease in
revenue from sales of both storage and channel networking products resulted from
the global slow down in capital spending for information technology equipment by
our customers.

Service revenues associated with our networking business totaled $10.8
million and $22.4 million for the second quarter and first half of 2001,
respectively, increases of 5% and 13%, respectively, from $10.8 million and
$22.4 million in the second quarter and first half of 2000. The increases in
both periods are due to the larger installed base of customers using our
networking products.

Storage Solutions:

Our storage solutions business, consisting of our SAN services and the
storage solutions and services business we acquired from Articulent in April of
2001, generated revenue of $11.6 million and $15.8 million in the second
quarter and first half of 2001, respectively, up 252% and 191%, respectively,
from $3.3 million and $5.4 million in the second quarter and first half of 2000.
Articulent accounted for a significant portion of the increase.

General:

Revenue generated from the sale of products and services outside the United
States for the second quarter and first half of 2001 totaled $10.6 million and
$20.1 million, respectively, decreases of 10% and 7%, respectively, from the
second quarter and first half of 2000. The reduction was attributable to the
global slow down in capital spending for information technology equipment by our
customers.

No single customer accounted for more than 10% of our revenue during the
second quarter and first half of 2001. The revenue decline in the second quarter
and first half of 2001 was primarily due to a decline in sales of products and
services. Price discounting had a small impact on our product revenue during
these periods.

During
the six months ended July 31, 2001, approximately 25%, 8%, and
20% of our product revenue was derived from businesses in the financial
services, telecommunications and information outsourcing industries,
respectively.

12



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##### Table of Contents



We expect continued quarter-to-quarter fluctuations in revenue in both
domestic and international markets. The timing of sizable orders, because of
their relative impact on total quarterly sales, may contribute to such
fluctuations. The level of product sales reported by us in any given period will
continue to be affected by the receipt and fulfillment of sizable new orders in
both domestic and international markets.

Gross Profit Margin

Networking:

Excluding the $2.0 million write-down of slow moving inventory and the
$325,000 write-off of our Filespeed product in the first quarter of 2001, gross
product margins from the sale of networking products for the second quarter and
first half of 2001 were 53% and 56%, respectively, down from 59% in both the
second quarter and first half of 2000. The decline in gross margin percentage
was due to a higher percentage of sales coming from lower margin third party
products, primarily Wave Division Multiplexers, the continued movement in sales mix toward our
UltraNet product, which carries a lower margin than our older Channelink
products, and higher levels of sales discounts.

Gross service margins for our networking business improved in the second
quarter and first half of 2001 to 49% and 45%, respectively, from 44% and 45%,
respectively, in the second quarter and first half of 2000. The improvement in
gross margins is due to economies of scale resulting from the growing installed
base of customers using our products, and the cost reduction actions that were
taken in April 2001.

Storage Solutions:

Gross product margins for our storage solutions business for both the
second quarter and first half of 2001 were 24%, compared to 65% and 68%,
respectively, in the second quarter and first half of 2000. The decrease was due
to the different mix of products sold by Articulent, compared to our SAN
services business in 2000.

Gross service margins for our storage solutions business for the second
quarter and first half of 2001 were a negative 27% and a negative 35%, respectively,
compared to a positive 29% and 23%, respectively, in the second quarter and
first half of 2000. The decline in gross margin percentage and negative gross
margins in 2001 is due to the fixed cost structure of the services business and
low levels of service revenue. The service costs for the solutions business,
mainly people, tend to be fixed in nature. We expect to generate a gross profit
in the future once business volumes pick up.

13



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##### Table of Contents



Operating Expenses

Networking:

Sales and marketing expense for the second quarter and first half of 2001
totaled $9.8 million and $19.5 million, respectively, increases of 5% and 8%,
respectively, from $9.3 million and $18.0 million for the second quarter and
first half of 2000. Since the beginning of 2001, we have increased our sales
force by over 20% and have added additional sales management to increase revenue
and grow our business.

Engineering and development expense for the second quarter and first half of
2001 totaled $5.1 million and $11.4 million, respectively, down 11% and 1%,
respectively, from $5.8 million and $11.5 million for the second quarter and
first half of 2000. The decrease in spending was primarily the result of the
cost reduction actions that were taken in April 2001.

Storage Solutions:

Sales and marketing expense for the second quarter and first half of 2001
totaled $2.1 million and $3.3 million, respectively, increases of 91% and 61%,
respectively, from $1.1 million and $2.0 million for the second quarter and
first half of 2000. The increases in both periods were due to the incremental
sales and marketing costs associated with the acquisition of Articulent.

General and administrative:

General and administrative expenses for the second quarter and first half
of 2001 totaled $2.1 million and $4.9 million, respectively, down 2% and up 15%,
respectively, from $2.2 and $4.3 million for the second quarter and first half
of 2000. The decline in general and administrative expense compared to the
second quarter of 2000 was due to the cost reduction actions that were initiated
in April 2001. The increase in expense for the first six months of 2001 was due
to the acquisition of Articulent, including charges for goodwill amortization in
the first six months of 2001 totaling $265,000.

Other:

Excluding the $10.3 million loss from the sale and write-down of webMethods
stock in the first quarter of 2001, other income for the second quarter and
first half of 2001 totaled $1.4 million and $3.2 million, respectively, up from
$204,000 and $221,000, in the second quarter and first half of 2000,
respectively. We raised $110 million from a common stock offering in October
2000, resulting in higher balances of cash and marketable securities available
for investment and more interest income when compared to the second quarter and
first half of 2000. Pending use of the offering proceeds for general corporate
purposes or complementary acquisitions, the funds will be invested in investment
grade, interest-bearing securities.

We recorded a provision for income taxes for the first half of 2001 at an
effective income tax rate of 31%, compared to 33% for the first
half of 2000. The $10.3 million loss on the sale and write-down of the
webMethods stock in the first quarter of 2001 was taxed at an effective tax rate
of 30%. Excluding this item, our effective tax rate for the

14



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##### Table of Contents



first half of 2001
would have been 33%. Our effective tax rate for the second quarter of
both 2001 and 2000 was 33%. Based on an assessment of our taxable earnings
history and prospective future taxable income, we have determined it to be more
likely than not that our net deferred tax asset will be realized in future
periods. We may be required to provide a valuation allowance for this asset in
the future if we do not generate sufficient taxable income as planned.

Liquidity and Capital Resources

We have historically financed our operations through the public and private
sale of equity securities, bank borrowings under lines of credit, capital and
operating leases and cash generated by operations.

Cash, cash equivalents and marketable securities at July 31, 2001 totaled
$111.0 million, a decrease of $39.4 million since January 31, 2001. The decrease
in cash and cash equivalents is primarily do to the acquisition of Articulent,
payments to reduce Articulents outstanding liabilities at the time of
acquisition and higher levels of inventory at July 31, 2001.

Expenditures for capital equipment and field support spares have been, and
will likely continue to be, a significant capital requirement. We believe that
our current balances of cash, cash equivalents and marketable securities, when
combined with anticipated cash flows from operations, will be adequate to fund
our operating plans and meet our current anticipated aggregate capital
requirements, at least through the next year.

We believe that inflation has not had a material impact on our operations or
liquidity to date.

15



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##### Table of Contents



Market Risk

We have no derivative financial instruments in our cash and cash
equivalents. We mainly invest our cash and cash equivalents in investment grade,
highly liquid investments, consisting of money market instruments, bank
certificates of deposits, U.S. government and agency securities and commercial
paper.

At
July 31, 2001, our marketable securities included a $131,000 investment
in a Standard and Poors 500 stock price index fund and a $127,000 investment in
a NASDAQ 100 index tracking stock. These investments were purchased to directly
offset any investment gains or losses owed to participants under our executive
deferred compensation plan which has been established for selected key
employees.

We are exposed to market risks related to fluctuations in foreign exchange
rates because some sales transactions, and the assets and liabilities of our
foreign subsidiaries, are denominated in foreign currencies, primarily French
francs, the euro and British pounds sterling. As of July 31, 2001, we had open
forward exchange contracts for one million British pounds sterling and 8 million
French Francs that settle at various times through October 2001.

Forward Looking Statements

This Form 10-Q and other documents we have filed with the Securities and
Exchange Commission contain forward-looking statements, which may include
statements about our:



| |  |  | anticipated receipt of orders and their impact on quarterly sales;                                              
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| |  |  | business strategy;                                                                                              
|
| |  |  | expectations regarding future revenue levels, gross margins, expenses,
operating margins and earnings per share;
|
| |  |  | timing of and plans for the introduction or phase-out of products or
services;                                  
|
| |  |  | enhancements of existing products or services;                                                                  
|
| |  |  | plans for hiring or reducing personnel;                                                                         
|
| |  |  | entering into strategic partnerships;                                                                           
|
| |  |  | ability to integrate Articulent, Inc. with our existing businesses;                                             
|
| |  |  | other plans, objectives, expectations and intentions contained in this
Form 10-Q that are not historical facts. 

When used in this Form 10-Q, the words may, should, expect, plan,
anticipate, believe, estimate, predict, intend, potential or
continue and similar expressions are generally intended to identify
forward-looking statements. These forward-looking statements involve risks and
uncertainties. Actual results could differ materially from those
expressed or implied by these forward-looking statements as a result of certain
risk factors, including but not limited to (i) competitive factors, including
pricing pressures; (ii) variability in quarterly sales; (iii) economic trends
generally and in various geographic markets; (iv) relationships with our
strategic partners; (v) technological change affecting our products; (vi) our
ability to integrate Articulent Inc. with our existing businesses, and, (vii)
other events and other important factors, including those discussed under
cautionary statements in Exhibit 99 to our Form 10-K filing with the Securities
and Exchange Commission for the year ended January 31, 2001. We assume no
obligation to update any forward-looking statements. These statements are only
predictions. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.

16



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##### Table of Contents









PART II. OTHER INFORMATION







|          |  |     
|--------- |  | ----
|Item 1-3. |  | None







|        |  |                                                    
|------- |  | ---------------------------------------------------
|Item 4. |  | Submission of matters to a vote of security holders

|    |  |                                                                   
|--- |  | ------------------------------------------------------------------
|(a) |  | The annual meeting of shareholders was held on June 28, 2001      
|   
|   
|   
|   
|(b) |  | Elected as directors of the company:                              
|   
|   
|   
|   
|    |  | Thomas G. Hudson
Erwin A. Kelen
John A. Rollwagen
Patrick W. Gross
|   
|   
|   
|   
|(c) |  | Matters voted upon                                                

|   |  |                          |  |             |  |            |  |         |  |          
|-- |  | ------------------------ |  | ----------- |  | ---------- |  | ------- |  | ---------
|   |  |                          |  | Affirmative |  | Negative   |  | Abstain |  | Broker   
|   |  |                          |  | Votes       |  | Votes      |  | Votes   |  | Non-Votes
|   |  |                          |  |             |  |            |  |         |  |          
|1. |  | Election of Directors    |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | Thomas G. Hudson         |  | 24,228,396  |  | 2,079,022  |  |        |  |         
|  
|  
|  
|  
|   |  | Erwin A. Kelen           |  | 25,560,261  |  | 747,157    |  |        |  |         
|  
|  
|  
|  
|   |  | John A. Rollwagen        |  | 25,560,013  |  | 747,405    |  |        |  |         
|  
|  
|  
|  
|   |  | Patrick W. Gross         |  | 25,570,218  |  | 737,200    |  |        |  |         
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|2. |  | Proposal to amend the    |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | 1992 stock award plan    |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | increasing the number    |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | of shares authorized     |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | for issuance by          |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | 1,450,000                |  | 15,167,341  |  | 11,088,708 |  | 63,469  |  |         
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|3. |  | Proposal to ratify and   |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | approve the appointment  |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | of KPMG LLP as           |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | independent auditors for |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | the fiscal year ending   |  |             |  |            |  |         |  |          
|  
|  
|  
|  
|   |  | January 31, 2002         |  | 25,801,283  |  | 463,844    |  | 42,416  |  |         







| |  | 
| |  | 

|        |  |     
|------- |  | ----
|Item 5. |  | None

17



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##### Table of Contents









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

|    |  |                         
|--- |  | ------------------------
|(a) |  | Exhibits filed herewith.

|    |  |                                                              
|--- |  | -------------------------------------------------------------
|3A. |  | Second Restated Articles of Incorporation of the             
|   
|   
|   
|   
|    |  | Company. (Incorporated by reference to Exhibits 3 (i)-1      
|   
|   
|   
|   
|    |  | and 3(i)-2 to current report on Form 8-K dated May 25, 1999.)
|   
|   
|   
|   
|3B. |  | By-laws of the Company (Incorporated by reference to         
|   
|   
|   
|   
|    |  | Exhibit 3 (ii)-1 to current report on Form 8-K dated May     
|   
|   
|   
|   
|    |  | 25, 1999.)                                                   
|   
|   
|   
|   
|4.1 |  | Rights Agreement between the Company and Chase Mellon        
|   
|   
|   
|   
|    |  | Shareholder Services, L.L.C., as Rights Agent including      
|   
|   
|   
|   
|    |  | the form of Rights Certificate and the Summary of Rights     
|   
|   
|   
|   
|    |  | to Purchase Preferred Shares and First Amendment of Rights   
|   
|   
|   
|   
|    |  | Agreement dated November 21, 2000.                           
|   
|   
|   
|   
|    |  | (Incorporated by reference to Exhibit 1 to                   
|   
|   
|   
|   
|    |  | Form 8-A dated July 29, 1998 and Exhibit 1                   
|   
|   
|   
|   
|    |  | to Form 8-A/A dated November 27, 2000.)                      
|   
|   
|   
|   
|4.2 |  | Form of Common Stock Certificate. (Incorporated by           
|   
|   
|   
|   
|    |  | reference to Exhibit 4.2 to Form S-3 Registration            
|   
|   
|   
|   
|    |  | Statement No. 333-80841.)                                    
|   
|   
|   
|   
|11. |  | Statement Re: Computation of Net Income per Basic and        
|   
|   
|   
|   
|    |  | Diluted Share.                                               

|    |  |                                                           
|--- |  | ----------------------------------------------------------
|(b) |  | Reports on Form 8-K                                       
|   
|   
|   
|   
|    |  | On June 15, 2001 the Company filed a Form 8-K/A amending  
|   
|   
|   
|   
|    |  | its Form 8-K filing on April 17, 2001 announcing the      
|   
|   
|   
|   
|    |  | acquisition of Articulent. The Form 8-K/A incorporated the
|   
|   
|   
|   
|    |  | audited financial statements and related pro forma        
|   
|   
|   
|   
|    |  | information for Articulent in the original Form 8-K       
|   
|   
|   
|   
|    |  | filing.                                                   

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SIGNATURES

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

COMPUTER NETWORK TECHNOLOGY CORPORATION
(Registrant)

|      |  |                    |  |     |  |                                                                                                               
|----- |  | ------------------ |  | --- |  | --------------------------------------------------------------------------------------------------------------
|Date: |  | September 10, 2001 |  | By: |  | /s/ Gregory T. BarnumGregory T. Barnum
Chief Financial Officer
(Principal financial officer)                  
|     
|      |  |                    |  | By: |  | /s/ Jeffrey A. BertelsenJeffrey A. Bertelsen
Corporate Controller and Treasurer
(Principal accounting officer)

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##### Table of Contents



EXHIBIT INDEX

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|3A.  |  | Second Restated Articles of Incorporation of the Company. (Incorporated by
reference to Exhibit 3(i)-1 and 3(i)-2 to current report on Form 8-K
dated May 25, 1999.)                                                                                                                                                                                                                              
|    
|3B.  |  | By-laws of the Company (Incorporated by reference to Exhibit 3(ii)-1 to
current report on Form 8-K dated May 25, 1999.)                                                                                                                                                                                                                                                                           
|    
|4.1  |  | Rights Agreement between the Company and Chase Mellon Shareholder
Services, L.L.C., as Rights Agent including the form of Rights
Certificate and the Summary of Rights to Purchase Preferred Shares and
First Amendment of Rights Agreement dated November 21, 2000.
(Incorporated by reference to Exhibit 1 to Form 8-A dated July 29, 1998
and Exhibit 1 to Form 8-A/A dated November 27, 2000.)
|    
|4.2  |  | Form of Common Stock Certificate. (Incorporated by reference to Exhibit
4.2 Form S-3 Registration Statement No. 333-80841.)                                                                                                                                                                                                                                                                       
|    
|11.  |  | Statement Re: Computation of Net Income per

Basic and Diluted Share                                         Electronically Filed                                                                                                                                                                                                                                                                 

20