SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q
  X
_____  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

       EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2000


                                       OR

______  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

        THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________________



                         Commission File Number: 0-8354


                            nSTOR TECHNOLOGIES, INC.

             (Exact name of Registrant as specified in its Charter)



          Delaware                                           95-2094565
          --------                                           ----------

(State of other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)



                               10140 Mesa Rim Road
                               San Diego, CA 92121

                     (Address of principal executive office)

                                 (858) 453-9191
                                 --------------
                         (Registrant's telephone number)




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

         Number of shares outstanding of the Registrant's Common Stock,
            par value $.05 per share, as of July 31, 2000: 34,806,931


<PAGE>


                    nSTOR TECHNOLOGIES, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS





PART I. FINANCIAL INFORMATION
                                                                    Page

                                                                   Number

  Item 1.      Financial Statements

        Consolidated Balance Sheets as of June 30,
          2000 (Unaudited) and December 31, 1999                      3
        Consolidated Statements of Operations
          (Unaudited) for the three and six months
          ended June 30, 2000 and 1999                                4
        Consolidated Statements of Stockholders'
          Equity (Unaudited) for the six months
          ended June 30, 2000                                         5
        Consolidated Statements of Cash Flows
          (Unaudited) for the six months ended
          June 30, 2000 and 1999                                     6-7
        Notes to Consolidated Financial Statements
          (Unaudited)                                                8-14



  Item 2.  Management's Discussion and Analysis of

             Financial Condition and Results of Operations          14-19


  Item 3.  Quantitative and Qualitative Disclosures about
           Market Risk                                               19

Part II.  OTHER INFORMATION                                          20



SIGNATURE                                                            21


<PAGE>

PART 1.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                            nSTOR TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (dollars in thousands)
<TABLE>
<CAPTION>

                                                          June 30,
                                                            2000        Dec. 31,
         ASSETS                                          (unaudited)      1999
         ------                                          ---------     --------
<S>                                                        <C>          <C>
Current assets:
  Cash and cash equivalents                                $    80      $   650
  Accounts receivable                                        6,311        7,326
  Inventories                                                7,738        6,288
  Prepaid expenses and other                                 1,498        1,637
                                                           -------      -------
     Total current assets                                   15,627       15,901

Property and equipment, net                                  3,026        3,476
Goodwill and other intangible assets, net                   15,663       14,533
Other assets                                                    -           131
                                                           -------      -------
                                                           $34,316      $34,041
         LIABILITIES                                       =======      =======
         -----------
Current liabilities:
  Bank line of credit                                      $ 5,251      $ 5,111
  Director loan                                                550        1,585
  Deferred revenue                                           2,357        2,426
  Accounts payable and other                                 9,578       12,317
                                                           -------      -------
     Total current liabilities                              17,736       21,439

Long-term debt                                               5,345        6,329
                                                           -------      -------
     Total liabilities                                      23,081       27,768
                                                           -------      -------

         STOCKHOLDERS' EQUITY
         --------------------
Preferred stock, $.01 par; shares authorized 1,000,000
 in order of preference:
  Convertible Preferred Stock (aggregate liquidation
  value $1,000 per share except for Series A which is
  $600 per share) issued and outstanding at June 30, 2000
  and December 31, 1999; Series F, 872 and 4,054; Series
  A, 0 and 1,667; Series C, 3,000; Series D, 2,000 and
  2,700; Series E, 3,500                                       -            -
Common stock, $.05 par; shares authorized 75,000,000;
  31,806,931 and 26,517,824 shares issued and outstanding
  at June 30, 2000 and December 31, 1999, respectively       1,589        1,331
Additional paid-in capital                                  68,517       63,164
Deficit                                                    (58,871)     (58,222)
                                                           -------      -------
     Total stockholders' equity                             11,235        6,273
                                                           -------      -------
                                                           $34,316      $34,041
                                                           =======      =======
</TABLE>

              See accompanying notes to consolidated financial statements.
<PAGE>

                            nSTOR TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (dollars in thousands, except per share data)
<TABLE>
<CAPTION>



                                             Three Months           Six Months
                                             Ended June 30,        Ended June 30,
                                           ------------------    ------------------
                                             2000      1999       2000       1999
                                               (unaudited)          (unaudited)
                                           -------    -------    -------    -------
<S>                                        <C>        <C>        <C>       <C>
Sales                                      $10,865    $ 9,398    $23,405    $10,809
Cost of sales                                7,569      8,166     16,538      9,489
                                           -------    -------    -------    -------
     Gross profit                            3,296      1,232      6,867      1,320
                                           -------    -------    -------    -------
Operating expenses:
  Selling, general and administrative        4,186      3,447      8,683      4,882
  Research and development                     894        699      1,510      1,218
  Depreciation and amortization              1,146        583      2,262        978
                                           -------    -------    -------    -------
     Total operating expenses                6,226      4,729     12,455      7,078
                                           -------    -------    -------    -------
     Operating loss                         (2,930)    (3,497)    (5,588)    (5,758)

Gain on sale of assets of Borg
  Adaptive Technologies (Note 7)                  -         -      5,575          -
Other income, net                               350        44        381        144
Interest expense                               (316)     (491)      (614)      (801)
                                            -------    -------    -------    -------
Net loss                                     (2,896)   (3,944)      (246)    (6,415)

Preferred stock dividends                     (192)      (174)      (403)      (306)
Embedded dividends attributable to
  beneficial conversion privileges and
  warrants issued in connection with
  Convertible Preferred Stock                    -       (240)         -       (327)
                                           -------    -------    -------    -------

Net loss applicable to
  common stock                            ($ 3,088)  ($ 4,358)  ($   649)  ($ 7,048)
                                           =======    =======    =======    =======

Basic and diluted net loss per
  common share                            ($   .10)  ($   .19)  ($   .02)  ($   .32)
                                           =======    =======    =======    =======

Weighted average number of common shares
  used in per share computation, basic
  and diluted                           31,651,435  22,488,906  30,603,864  21,838,532
                                        ==========  ==========  ==========  ==========
</TABLE>

              See accompanying notes to consolidated financial statements.

<PAGE>

                            nSTOR TECHNOLOGIES, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (dollars in thousands)
<TABLE>
<CAPTION>


                                                  Preferred      Addi-
                                 Common Stock       Stock       tional
                              ----------------- -------------   Paid-In
                                Shares   Amount Shares Amount   Capital  Deficit   Total
                              ---------- ------ ------ -------  -------  -------  -------
<S>                           <C>        <C>    <C>    <C>      <C>     <C>       <C>
Balances, December
 31, 1999                     26,517,824 $1,331 14,921 $  -     $63,164 ($58,222) $ 6,273

Issuance of common stock
 in connection with:

   Conversion of
    Convertible
    Preferred Stock:
      Series A                1,666,667      83 (1,667)   -         (83)               -
      Series D                  700,000      35   (700)   -         (35)               -
      Series F                1,060,800      53 (3,182)   -         (53)               -

   Acquisition of assets
     of OneofUs                 776,119      39                   2,561             2,600

   Satisfaction of borrowings   296,296      15                     985             1,000

   Commitment to
    terminated executives       123,479       -                       -                 -

   Exercise of options and
    warrants                    629,089      31                   1,147             1,178

   Equity line of credit
    net of costs of $83          36,657       2                      13                15

Compensation expense resulting
 from modifications to stock
 options and warrants in
 connection with the sale of
 assets of Borg Adaptive
 Technologies                                                       818               818

Preferred stock dividends                                                   (403)    (403)

Net loss for the six
 months ended June 30, 2000                                                 (246)    (246)
                             ----------  ------ ------ ------   -------  -------  -------
Balances, June 30,
 2000 (unaudited)            31,806,931  $1,589  9,372 $  -     $68,517 ($58,871) $11,235
                             ==========  ====== ====== ======   =======  =======  =======
</TABLE>


               See accompanying notes to consolidated financial statements.
<PAGE>

                                   nSTOR TECHNOLOGIES, INC.
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (in thousands)
<TABLE>
<CAPTION>

                                                           Six Months
                                                         Ended June 30,
                                                       -------------------
                                                         2000       1999
                                                     (unaudited) (unaudited)
                                                      ---------   ---------
<S>                                                   <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                            ($    246) ($  6,415)
  Adjustments to reconcile net loss to net
    cash used by operating activities:
      Gain on sale of assets of Borg Adaptive
       Technologies                                      (5,575)         -
      Amortization of intangible assets                   1,281        373
      Depreciation                                          981        605
      Provision for losses on accounts receivable            15        853
      Provision for inventory obsolescence                    -        707
      Amortization of deferred financing costs and other     16        494
      Changes in assets and liabilities, net of
        effects from acquisitions:
          Decrease (increase) in accounts receivable      1,089     (2,713)
          Increase in inventories                        (1,450)      (765)
          Decrease in prepaid expenses and other            153        140
            Decrease in accounts payable and other       (2,790)      (534)
                                                       --------   --------
Net cash used by operating activities                    (6,526)    (7,255)
                                                       --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from sale of assets of Borg Adaptive
    Technologies                                          7,013          -
  Additions to property and equipment                      (565)      (216)
  Cash paid for acquisitions                               (293)    (1,250)
                                                       --------   --------
Net cash provided (used) by investing activities          6,155     (1,466)
                                                       --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from revolving credit facilities             140        363
  Additions to other borrowings                             650      5,407
  Repayment on other borrowings                          (1,685)    (1,100)
  Issuance of preferred stock                                 -      2,000
  Proceeds from exercise of stock options
    and warrants                                          1,178      1,554
  Issuance of common stock, net of transaction costs         15      1,000
  Cash paid for preferred stock dividends                  (497)      (288)
                                                       --------   --------
Net cash (used) provided by financing activities           (199)     8,936
                                                       --------   --------
Net (decrease) increase in unrestricted cash
  and cash equivalents during the period                   (570)       215

Unrestricted cash and cash equivalents at the
  beginning of the period                                   650        147
                                                       --------   --------
Unrestricted cash and cash equivalents at the
  end of the period                                     $    80   $    362
                                                       ========   ========
</TABLE>
<PAGE>


                            nSTOR TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (concluded)
<TABLE>
<CAPTION>

                                                            Six Months
                                                         Ended  June 30,
                                                      -----------------------
                                                          2000       1999
                                                      (unaudited) (unaudited)
                                                      ----------- -----------
<S>                                                    <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during period for interest                 $    539      $    454
                                                       ========      ========

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

  Non-Cash Investing Activities:
    Acquisitions (Note 2):
      Fair value of assets acquired                    $  2,969      $ 27,986
      Liabilities assumed or incurred                       (76)      (21,882)
      Series F Convertible Preferred Stock issued            -         (4,654)
      Common stock issued                                (2,600)           -
      Warrants issued                                        -           (200)
                                                       --------      --------
          Cash paid                                    $    293      $  1,250
                                                       ========      ========

  NON-CASH FINANCING ACTIVITIES:
    Issuance of common stock in satisfaction of
      borrowings                                       $  1,000      $  1,290
                                                       ========      ========

    Issuance of preferred stock in satisfaction
      of borrowings                                    $     -       $  1,500
                                                       ========      ========

</TABLE>








         See accompanying notes to consolidated financial statements.
<PAGE>

                            nSTOR TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Principles of Consolidation and Basis of Presentation

  The  consolidated   financial   statements   include  the  accounts  of  nStor
Technologies,   Inc.  and  all  wholly-owned  subsidiaries  (collectively,   the
"Company").   Significant  intercompany  balances  and  transactions  have  been
eliminated in consolidation.

  In the opinion of management,  the unaudited consolidated financial statements
furnished  herein  include  all   adjustments,   consisting  only  of  recurring
adjustments  necessary for a fair  presentation of the results of operations for
the interim  periods  presented.  These interim  results of  operations  are not
necessarily  indicative  of  results  for  the  entire  year.  The  consolidated
financial  statements  contained  herein should be read in conjunction  with the
consolidated  financial  statements and related notes contained in the Company's
1999 Annual Report on Form 10-K.

  The  accompanying   unaudited  consolidated  financial  statements  have  been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes required for complete financial statements.

  Certain items in the consolidated financial statements for the interim periods
ended  June 30,  1999  have  been  reclassified  to  conform  with  the  current
presentation.  These  reclassifications  had  no  impact  on  operating  results
previously reported.

        Business

  The Company is engaged as a  manufacturer  and supplier of  high-availability,
high-performance  enterprise-class  Storage Area Network (SAN) solutions for the
Windows  NT,  UNIX  and  Linux   computer   operating   systems.   Designed  for
storage-intensive  environments  such as the Internet or other  mission-critical
applications,  the Company's  products include Fibre Channel and SCSI RAID-ready
solutions,  non-RAID storage products, tape backup products and advanced storage
management software solutions. The Company markets its products through a direct
sales  force  and  a  global   network  of  resellers  and  original   equipment
manufacturers (OEM's).

        Use of Estimates

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

        Net Loss Per Common Share ("EPS")
  The effect of including potentially dilutive securities in the EPS calculation
would  have  been  anti-dilutive.  Accordingly,  basic and  diluted  EPS for all
periods presented are equivalent.
<PAGE>

  The  following  table  presents  an  analysis  of  the  Company's  outstanding
securities as of June 30, 2000,  including  11,833,664  outstanding  potentially
dilutive securities:

     Common shares outstanding                            31,806,931
     Potentially dilutive securities:
       Convertible preferred stock         6,457,199
       Stock options and warrants          5,216,465
       Convertible notes                     160,000
                                           ---------
                                                          11,833,664
                                                          ----------
                                                          43,640,595
                                                          ==========


(2)     ACQUISITION OF ASSETS OF ONEOFUS COMPANY, LTD.

  On January 19, 2000, the Company acquired  substantially  all of the assets of
OneofUs  Company  Limited  (OneofUs)  for an  aggregate  purchase  price of $2.9
million,  consisting  of $.3 million  cash and 776,119  shares of the  Company's
common  stock with an aggregate  value of $2.6 million  (based on the average of
the closing prices of the Company's stock during the ten (10) trading days ended
January 19, 2000). The shares were issued to four selling stockholders  pursuant
to   employment   agreements   or   a   confidentiality,    noncompetition   and
nonsolicitation agreement.  OneofUs was a Taiwan-based,  privately-held designer
of high  performance  Fibre Channel RAID  controllers and storage  solutions for
open systems and the SAN market.

  The acquisition of OneofUs has been accounted for using the purchase method of
accounting with assets acquired and liabilities  assumed  recorded at their fair
values as of the date of acquisition.  Allocation of the purchase price has been
made on a preliminary basis subject to adjustment should new or additional facts
about the business become known.  The excess of the purchase price over the fair
value of net assets acquired  (goodwill)  approximated $2.8 million and is being
amortized over seven years.

(3)  BALANCE SHEET COMPONENTS (in thousands)

Substantially all assets are pledged as collateral for indebtedness (Note 4).

                                             June 30,
                                               2000     Dec. 31,
                                           (unaudited)    1999
                                             -------    -------
Accounts Receivable

   Trade receivables                         $ 8,136    $ 8,759
   Less allowance for doubtful accounts       (1,912)    (1,604)
                                             -------    -------
                                               6,224      7,155
   Other receivables                              87        171
                                             -------    -------
                                             $ 6,311    $ 7,326
                                             =======    =======
<PAGE>



                                            June 30,
                                              2000     Dec.31,
                                          (unaudited)    1999
                                            --------    -------
Inventories
   Raw materials                             $ 6,810    $ 4,942
   Work-in-process                               209        454
   Finished goods                                719        892
                                             -------    -------
                                             $ 7,738    $ 6,288
                                             =======    =======

Inventories  are  stated  at the  lower  of  cost or  market,  with  cost  being
determined based on the first-in, first-out (FIFO) method. Reserves are recorded
as necessary  to reduce  obsolete  and slow moving  inventory  to estimated  net
realizable value.

Prepaid expenses and other
   Prepaid service costs                     $ 1,200    $ 1,174
   Other                                         298        463
                                             -------    -------
                                             $ 1,498    $ 1,637
                                             =======    =======

Property and Equipment

   Computer equipment                        $ 4,574    $ 4,075
   Computer software                             770        770
   Leasehold improvements                        788        788
   Furniture, fixtures
    and office equipment                         355        465
   Other                                         310        310
                                             -------    -------
                                               6,797      6,408
   Less accumulated depreciation              (3,771)    (2,932)
                                             -------    -------
                                             $ 3,026    $ 3,476
                                             =======    =======

  Property and equipment are stated at cost.  Depreciation is provided under the
straight-line  method over the estimated  useful lives,  principally five years.
Leasehold  improvements are amortized on a straight-line  basis over the shorter
of the useful life of the asset or the lease term. Depreciation and amortization
of property  and  equipment  amounted to $509,000 and $981,000 for the three and
six months ended June 30, 2000, respectively,  and $332,000 and $605,000 for the
three and six months ended June 30, 1999, respectively.

Goodwill and Other Intangible Assets

   Goodwill                                 $17,818     $15,497
   Intellectual assets                          347         347
                                            -------     -------
                                             18,165      15,844
   Less accumulated amortization             (2,502)     (1,311)
                                            -------     -------
                                            $15,663     $14,533
                                            =======     =======
<PAGE>

  Goodwill represents the excess cost of acquired businesses over the fair value
of  net  assets  acquired  and  is  principally   amortized  over  seven  years.
Intellectual  assets  consist of trademarks and  proprietary  technology and are
being  amortized over 15 years.  Amortization  of goodwill and other  intangible
assets  amounted to $638,000 and  $1,281,000  for the three and six months ended
June 30,  2000,  respectively,  and  $251,000 and $373,000 for the three and six
months ended June 30, 1999, respectively.

                                            June 30,
                                              2000      Dec. 31,
                                          (unaudited)    1999
                                            --------    -------
Accounts payable and other
   Accounts payable                         $ 5,371     $ 8,072
   Accrued liabilities and other              4,207       4,245
                                            -------     -------
                                            $ 9,578     $12,317
                                            =======     =======


(4)  Borrowings

Short-Term Debt

     Revolving Credit Facility ("Bank Line of Credit")

  The Bank Line of Credit  provides  for  borrowings  based on the lesser of $10
million or: (i) 85% of eligible accounts receivable,  as defined,  plus (ii) the
lesser of $1.75 million or 23% of eligible inventory,  as defined. The Bank Line
of Credit  currently  bears  interest at prime (9.5% at June 30,  2000) plus 1/2
percent,  matures in April 2002 and requires a facility fee of .25% based on the
average unused portion of the maximum  borrowings.  Advances under the Bank Line
of Credit are  collateralized by a significant  portion of the Company's assets.
The Bank Line of Credit  provides  for certain  financial  covenants,  including
tangible net worth requirements. As of June 30, 2000, the outstanding balance of
the Bank Line of Credit was $5.3  million and an  additional  approximately  $.3
million was available based on eligible collateral.

  During 2000, the Company has not been in compliance with the minimum  tangible
net worth covenant of the Bank Line of Credit,  and , as a result,  such line of
credit is in technical  default.  Effective March 29, 2000, the lender agreed to
waive the  default  related to the first  quarter of 2000.  Effective  April 14,
2000, the Company agreed with the lender to amend certain terms of the Bank Line
of Credit,  including an increase in the interest rate and new minimum net worth
and  net  income  covenants  on a  consolidated  basis.  All  other  significant
provisions  of the Bank Line of Credit  are  expected  to remain  the same.  The
Company is currently in discussions with the lender to finalize this amendment.

     Director Loans

  At December 31, 1999, current borrowings included $1.6 million due to H. Irwin
Levy,  Chairman of the Board of  Directors  and a principal  stockholder  of the
Company  ("Mr.  Levy"),  representing  the  maximum  amount  available  under  a
revolving line of credit  facility which bore interest at 10% per annum,  due 30
days  from  demand.  In  January  2000,  the  promissory  note  was paid off and
satisfied in full.  Effective  April 12, 2000, Mr. Levy agreed to commit to a $2
million revolving line of credit facility to the Company (subsequently increased
to $2.5 million  effective  July 31, 2000),  which matures on April 30, 2001, as
revised.  Advances  under this  commitment  bear  interest  at 10% per annum and
<PAGE>

amounted to $550,000 as of June 30, 2000  (consisting  of $650,000  advanced and
$100,000 repaid). On August 1, 2000, the Company borrowed an additional $500,000
under this commitment.

Long-Term Debt

  At June 30,  2000,  long-term  debt  consisted  of $5.1  million  which  bears
interest  at 9.5% per annum and  matures in June 2004 and  $250,000  which bears
interest at 10% per annum and matures in September  2001. On April 26, 2000, the
Company  issued 296,296  shares of its common stock in full  satisfaction  of $1
million of debt which was scheduled to mature in September 2001.

(5)  CONVERTIBLE PREFERRED STOCK

  At December 31, 1999,  the Company had five classes of  convertible  preferred
stock (Series A, C, D, E and F) with an aggregate stated value of $14.3 million.
During the six months  ended June 30,  2000,  preferred  stock with an aggregate
stated  value  of $4.9  million  was  converted  into  3,427,467  shares  of the
Company's common stock,  thereby reducing the aggregate stated value at June 30,
2000 to $9.4  million,  convertible  into  6,457,199  shares,  consisting of the
following:

Series C preferred  stock with a stated  value of $3 million,  held by Mr. Levy,
accrued  dividends at 8% per annum,  payable  quarterly.  In accordance  with an
automatic  conversion  feature,  in July 2000, the Series C preferred  stock was
automatically  converted  into 3,000,000  shares of the Company's  common stock.
Series D preferred stock, with an aggregate stated value of $2.0 million at June
30, 2000, accrues dividends at 8% per annum,  payable quarterly,  is convertible
at any time into an aggregate of 2,000,000 shares of the Company's common stock,
and has an  automatic  conversion  feature in which each share not  converted by
October  2001 is  automatically  converted  into  common  stock.  Series E and F
preferred  stock,  with an  aggregate  stated  value of $4.4 million at June 30,
2000,  accrues  dividends at 8% through June 7, 2000, 9% commencing June 8, 2000
and  10%  commencing  June 8,  2001,  and is  convertible  at any  time  into an
aggregate of 1,457,000 shares of the Company's common stock. At June 30, 2000, a
company  controlled by Mr. Levy held Series E preferred  stock with an aggregate
stated value of $1.5 million  convertible  into 500,000  shares of the Company's
common stock.

(6)       COMMON STOCK

  On May  9,  2000,  the  Company  entered  into  an  agreement  with a  private
investment  group  granting  the Company a one-year  $15 million  equity line or
equity draw down  facility.  The agreement does not obligate the Company to draw
any of the funds.  Once per draw down period,  the Company may request a draw of
up to $5 million,  subject to a formula based on average stock price and average
trading  volume,  setting the maximum  amount of any request for any given draw.
The amount of money that the  investment  group will  provide to the Company and
the number of shares the Company  will issue to the  investment  group in return
for that money is  settled  on a weekly  basis  during a 22 day  trading  period
following the draw request  based on a formula as defined in the stock  purchase
agreement.  The investment  group receives a 7% discount to the market price for
the 22 day period and the Company  receives the settled  amount of the draw down
less a 4% fee payable to the placement agent.
<PAGE>

  In connection  with this agreement,  the Company granted the investment  group
and the placement  agent three year warrants to purchase an aggregate of 220,000
shares of the  Company's  common stock at an exercise  price of $3.60 per share,
representing  120% of the average of the closing prices of the Company's  common
stock for the five trading days before May 9, 2000.

  The Company  registered  for resale the  securities to be sold pursuant to the
draw downs and warrants.

  During  June  2000,  the  Company  issued  36,657  shares of common  stock and
received net proceeds of $98,000 pursuant to this agreement. In the accompanying
Statement of Stockholders'  Equity, the approximate $83,000 of transaction costs
incurred to complete  this  agreement  have been charged to  additional  paid-in
capital.

(7)       GAIN ON SALE OF ASSETS OF BORG ADAPTIVE TECHNOLOGIES

  On January 10, 2000, the Company sold  substantially all of the assets of Borg
Adaptive  Technologies,  Inc., a  wholly-owned  subsidiary of the Company,  to a
wholly-owned  subsidiary  of QLogic  Corporation,  for $7  million  cash (net of
approximately  $.5 million of transaction  costs - the "Borg Sale").  The assets
included  all of the  intellectual  property  rights  relating to the  Company's
Adaptive  RAID  technology,  including  software,  patents and  trademarks,  and
certain  tangible  assets,  including  test  and  office  equipment  and  tenant
improvements, subject to the right of the Company to the use of all intellectual
property for its own use. In connection with the Borg Sale, the Company recorded
a gain of $5.6 million,  net of  compensation  expense of $.8 million  resulting
from modifications to certain stock options and warrants.

(8)  INCOME TAXES

  The Company  accounts  for income  taxes in  accordance  with SFAS 109,  which
requires  recognition  of deferred tax assets and  liabilities  for the expected
future tax  consequences  of events  that have been  included  in the  financial
statements  or tax  returns.  Under  the SFAS 109 asset  and  liability  method,
deferred tax assets and  liabilities  are  determined  based upon the difference
between the financial  statement and tax bases of assets and  liabilities  using
enacted  tax rates in  effect  for the  year(s)  in which  the  differences  are
expected to reverse.

  As of December 31, 1999,  there were unused net operating  loss  carryforwards
(the  "NOL's")  for regular  federal  income tax purposes of  approximately  $36
million and California tax purposes of approximately  $4.7 million expiring from
2012 through 2019 and 2001 through 2004, respectively.  In addition, the Company
has research and  development tax credit  carryforwards  of  approximately  $1.4
million  which  expire  from  2002  through  2019  and in  conjunction  with the
Alternative  Minimum Tax ("AMT")  rules,  the Company has  available  AMT credit
carryforwards of approximately  $.8 million,  at December 31, 1999, which may be
used indefinitely to reduce regular federal income taxes.

  The usage of  approximately  $8 million of the federal NOL  carryforwards  and
approximately $2 million of the California NOL carryforwards is limited annually
to  approximately  $.4 million due to an  acquisition  which  caused a change in
ownership for income tax purposes.
<PAGE>

  At June 30, 2000 and December 31, 1999, a 100%  valuation  allowance  has been
provided on the Company's deferred tax assets because it is more likely than not
that loss carryforwards will not be realized based on recent operating results.

(9)  SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

  The  Company  operates  predominantly  in one  business  segment,  information
storage  solutions,  including  external RAID subsystems.  During the six months
ended June 30, 2000,  no single  customer  accounted for greater than 10% of the
Company  sales while  during the six months  ended June 30,  1999,  one customer
accounted for 22% of the Company's sales.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

         CONDITION AND RESULTS OF OPERATIONS

  With  the   exception  of   discussion   regarding   historical   information,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  contains forward looking  statements.  Such statements are based on
current  expectations  subject  to  uncertainties  and other  factors  which may
involve known and unknown risks that could cause actual results of operations to
differ  materially  from those  projected or implied.  Further,  certain forward
looking  statements are based upon assumptions about future events which may not
prove to be accurate.

  Risks and uncertainties  inherent in forward looking statements  include,  but
are not  limited  to, our future  cash  flows and  ability to obtain  sufficient
financing,  timing  and  volume  of sales  orders,  level of gross  margins  and
operating  expenses,  lack of market acceptance of our new product lines,  price
competition,  conditions in the technology  industry and the economy in general,
as well as legal  proceedings.  The economic risk associated with materials cost
fluctuations  and inventory  obsolescence  is  significant to us. The ability to
manage our inventories and deliver products to our customers through procurement
and utilization of component materials could have a significant impact on future
results  of  operations  or  financial  condition.  Historical  results  are not
necessarily indicative of the operating results for any future period.

  Subsequent  written and oral forward  looking  statements  attributable to our
company  or  persons  acting on our  behalf  are  expressly  qualified  in their
entirety by  cautionary  statements in this Form 10-Q and in other reports filed
by our company  with the  Securities  and  Exchange  Commission.  The  following
discussion  should  be read  in  conjunction  with  the  Consolidated  Financial
Statements and the Notes thereto included elsewhere in this filing.

Overview

  We are a  manufacturer  and  supplier of  high-availability,  high-performance
enterprise-class  SAN  solutions  for the Windows  NT,  UNIX and Linux  computer
operating  systems.  Designed  for  storage-intensive  environments  such as the
Internet or other  mission-critical  applications,  our products  include  Fibre
Channel and SCSI RAID-ready  solutions,  non-RAID storage products,  tape backup
products and  advanced  storage  management  software  solutions.  We market our
products  through a direct  sales force and a global  network of  resellers  and
OEM's.
<PAGE>

  Our  activities  in the  information  storage  industry  have evolved  through
several acquisitions,  the first of which occurred in June 1996 when we acquired
certain assets  associated  with the RAID business in Lake Mary,  Florida,  from
Seagate  Peripherals,  Inc. In December 1996, we acquired  substantially all the
net  assets  of  Parity  Systems,  Inc.  In June  and  July  1999,  we  acquired
approximately 76% of the outstanding  common stock of Andataco,  Inc. located in
San Diego,  California  and in November  1999,  we acquired the remaining 24% of
Andataco.  In early  2000,  we  completed  the  consolidation  of our Lake  Mary
manufacturing  operations  into our San Diego  facility and moved our  corporate
headquarters  to San  Diego.  As a result of the  acquisition  of  Andataco,  we
believe  that period to period  comparisons  for the three and six months  ended
June 30, 2000 may not be meaningful.

  In January 2000, we completed the Borg Sale, consisting of the sale of certain
patented  technology  referred to as Adaptive  RAID, for $7 million cash (net of
approximately  $.5 million of  transaction  costs).  We do not  anticipate  that
future  revenues  will be  materially  adversely  affected  as a result  of this
transaction.

  On January 19, 2000,  we acquired  substantially  all of the assets of OneofUs
for an aggregate purchase price of $2.9 million,  consisting of $.3 million cash
and 776,000  shares of our common stock with an aggregate  value of $2.6 million
(based on the average of the closing  prices of our common  stock during the ten
(10)  trading  days  ended  January  19,  2000).  OneofUs  was  a  Taiwan-based,
privately-held  designer of high performance  Fibre Channel RAID controllers and
storage solutions for open systems and the SAN market.

                              Results of Operations

  We  reported a net loss of $2.9  million for the three  months  ended June 30,
2000  compared to a net loss of $3.9  million for the  corresponding  quarter in
1999.  For the six months  ended  June 30,  2000,  the net loss was $.2  million
compared to a $6.4  million net loss during the prior  year's six month  period.
The 2000  six  month  period  included  a $5.6  million  gain on the  Borg  sale
recognized during the first quarter of 2000.

Sales

  Net sales for the three and six months ended June 30, 2000  increased to $10.9
million and $23.4 million, respectively, from $9.4 million and $10.8 million for
the same  periods in 1999,  respectively,  representing  a 16%  increase for the
quarter and more than a 100% increase for the six month period. This increase is
substantially  the result of a full six months of sales during 2000 attributable
to the June 1999 Andataco  acquisition  while the 1999 periods included only one
month of  Andataco  sales.  This  increase  has  been  partially  offset  by the
inability of one of our  suppliers to deliver a key  component  for  integration
into recently introduced  products,  resulting in delays in initial shipments of
those products until after the end of the current second quarter.

Cost of Sales/Gross Margins

  Gross margins increased to 30% and 29% for the three and six months ended June
30, 2000, respectively, as compared to 13% and 12% for the same periods in 1999.
The increase in gross margins is primarily the result of the  utilization of the
Andataco  sales  channels to market our  products as well as  economies of scale
attributable to the level of fixed costs inherent in our operations coupled with
higher sales revenues. In addition, certain fixed costs have been reduced by the
completion  in March  2000 of the  consolidation  of our  Florida  manufacturing
<PAGE>

operations into our San Diego headquarters. During the six months ended in 1999,
gross  margins  were  negatively  impacted by a $.7 million  provision  for slow
moving inventory. Our gross margins are dependent, in part, on product mix which
fluctuates from time to time.

Operating Expenses

     Selling, General and Administrative

  Selling,  general  and  administrative  expenses  were $4.2  million  and $3.4
million  for the three  months  ended June 30, 2000 and 1999,  respectively,  an
increase of 21%. Selling, general and administrative expenses for the six months
ended June 30, 2000 increased 78% or $3.8 million,  from $4.9 million in 1999 to
$8.7  million in 2000.  These  increases  are the result of the  acquisition  of
Andataco, the most significant of which is employee compensation and the related
benefits.  We do not expect  selling,  general  and  administrative  expenses to
increase significantly over the remainder of the fiscal year.

     Research and Development

  Research and development  expenses for the three and six months ended June 30,
2000  increased  28% and 24%,  respectively,  to $.9 million  and $1.5  million,
respectively, over the same periods in 1999, principally due to additional costs
incurred in connection with the  introduction of several new products during the
2000 second quarter.  We believe that  considerable  investments in research and
development  will be  required  to remain  competitive  and  expect  that  these
expenses will continue to increase in future periods.

Depreciation and Amortization

  Depreciation and amortization for the three and six months ended June 30, 2000
was $1.1 million and $2.3 million,  respectively, as compared to $.6 million and
$1 million for 1999,  respectively.  These  increases  were primarily due to the
additional  amortization  (over seven years)  attributable  to $14.7  million of
goodwill  associated  with the 1999  Andataco  acquisition  and $2.8  million of
goodwill  associated with the January 2000 acquisition of the assets of OneofUs,
partially offset by reduced amortization  resulting from the fourth quarter 1999
write-down of $4.6 million of goodwill related to our 1996 acquisition of Parity
Systems,  Inc. The Parity goodwill was determined to have been impaired  because
of our inability to generate future operating income from the assets acquired in
the Parity acquisition.

Other Income, net

  Other income increased by $.3 million and $.2 million during the three and six
months ended June 30, 2000,  respectively,  primarily  due to a cash  settlement
received during June 2000.

Interest Expense

  Interest expense for the three and six months ended June 30, 2000 decreased to
$.3 million and $.6  million,  respectively,  as compared to $.5 million and $.8
million in 1999, respectively,  primarily as a result of satisfying indebtedness
of $6.6 million by issuing  common stock ($5.5  million in December  1999 and $1
million  in April  2000).  This  reduction  was  partially  offset  by  interest
attributable to a $5.1 million note incurred in the Andataco acquisition in June
1999.
<PAGE>

Preferred Stock Dividends

  During the three and six months  ended June 30, 2000 and 1999,  all classes of
our convertible  preferred stock required cumulative dividends principally at 8%
per annum.  Preferred stock dividends increased slightly during 2000 principally
due to the issuance of $8.7 million of preferred  stock in June 1999,  partially
offset by the  conversion  of $4.9  million of  preferred  stock to common stock
since  December  1999.  Dividends are expected to decrease over the remainder of
the fiscal year due to the automatic conversion in July 2000 of an additional $3
million  of  preferred  stock  into  common  stock  (see Note 5 to  Consolidated
Financial Statements).

  During the three and six months ended June 30,  1999,  we recorded $.2 million
and $.3 million,  respectively,  as an additional embedded dividend attributable
to: (1) the fair  value at the date of grant of  warrants  issued in  connection
with  the  sale  of  Series  E  convertible   preferred   stock  (based  on  the
Black-Scholes  option-pricing model) and (2) the beneficial conversion privilege
on Series A convertible  preferred stock representing the difference between the
conversion  price and the  quoted  market  price of common  stock at the date of
issuance.

                         Liquidity and Capital Resources

Consolidated Statements of Cash Flows

     Operating Activities

  Net cash  used by  operating  activities  amounted  to $6.5  million  and $7.3
million for the six months ended June 30, 2000 and 1999, respectively.  The most
significant use of cash was our loss from  operations  (before changes in assets
and liabilities) of $3.5 million and $3.4 million, respectively. During 2000 and
1999,  we used  cash of $2.8  million  and  $.5  million,  respectively,  in the
reduction of accounts payable and other liabilities.  Another significant use of
cash during 2000 was an increase in  inventories  in the amount of $1.5  million
(principally due to our investment in new products which have recently commenced
shipments) which was substantially offset by cash provided by net collections of
accounts  receivable  of $1.1  million.  During 1999,  cash was also used in the
increase of accounts  receivable in the amount of $2.7 million,  principally due
to the significant increase in our June 1999 sales.

     Investing Activities

  Net cash provided by investing  activities was approximately  $6.2 million for
the six months  ended June 30, 2000,  principally  due to $7 million in net cash
proceeds from the Borg Sale.  During 1999, cash used by investing  activities of
$1.5 million was  principally  for the  acquisition of Andataco in the amount of
$1.3 million.

        Financing Activities

  Net cash used in financing  activities  for the six months ended June 30, 2000
was $.2 million  which  consisted of the repayment of $1.7 million of borrowings
from Mr. Levy,  principally offset by $1.2 million in proceeds from the exercise
of stock options and warrants. Net cash provided by financing activities for the
six months ended June 30, 1999 amounted to $8.9 million and primarily  consisted
<PAGE>

of net borrowings of $4.3 million from private investors, including $1.5 million
from a company  controlled  by Mr. Levy which was  satisfied  by the issuance of
convertible preferred stock, $1.6 million in proceeds from the exercise of stock
options and  warrants,  $1 million  from the  issuance of common  stock,  and $2
million from the issuance of convertible preferred stock.

Borrowings

  In  connection  with the  acquisition  of Andataco,  we issued $5.1 million in
promissory  notes due in July 2004. In addition,  our asset based revolving Bank
Line of Credit (see Note 4 to Consolidated  Financial  Statements)  provides for
borrowings  based on the lesser of $10 million or (i) 85% of  eligible  accounts
receivable, as defined, plus (ii) the lesser of $1.75 million or 23% of eligible
inventory,  as defined.  This facility provides for certain financial covenants,
including tangible net worth requirements.

  During  2000,  we have not been in  compliance  with the minimum  tangible net
worth covenant of the Bank Line of Credit, and, as a result, such line of credit
is in technical  default.  Effective  March 29, 2000, the lender agreed to waive
the default  related to the first quarter of 2000.  Effective April 14, 2000, we
agreed  with the  lender  to amend  certain  terms  of the Bank  Line of  Credit
including  an  increase in the  interest  rate and new minimum net worth and net
income covenants on a consolidated  basis. All other  significant  provisions of
the Bank Line of Credit are  expected to remain the same.  We are  currently  in
discussions with the lender to finalize this amendment.

Financing Activities With Private Investors

  From late 1997  through June 30,  2000,  we obtained net cash  proceeds of $27
million from private  investors,  consisting of sales of  convertible  preferred
stock and common  stock,  net  borrowings  and the exercise of stock options and
warrants to purchase shares of our common stock.  Of these amounts,  Mr. Levy or
companies  controlled  by Mr.  Levy  advanced  or  invested a net amount of $7.4
million.

  On January 10, 2000, we completed the Borg Sale and received net cash proceeds
of  approximately $7 million,  net of  approximately  $.5 million of transaction
costs, of which $1.6 million was used to repay  short-term  notes payable to Mr.
Levy. We do not  anticipate  that future  revenues will be materially  adversely
affected as a result of this transaction.

  Effective  April 12,  2000,  Mr.  Levy  agreed  to  commit to us a $2  million
revolving  line of  credit  facility  (subsequently  increased  to $2.5  million
effective  July 31, 2000) which matures on April 30, 2001,  as revised.  At June
30,  2000,  net  advances  under this  facility  amounted to $550,000  ($650,000
advanced and $100,000  repaid) and bears interest at 10% per annum. On August 1,
2000, we borrowed an additional $500,000 under this commitment.

  On May 9, 2000, we entered into an agreement with a private  investment  group
granting us a one-year $15 million equity line or equity draw down facility. The
agreement  does not  obligate  us to draw any of the  funds.  Once per draw down
period, we may request a draw of up to $5 million, subject to a formula based on
average stock price and average  trading  volume,  setting the maximum amount of
any request for any given draw.  The amount of money that the  investment  group
will  provide  to us and the  number of shares we will  issue to the  investment
group in return  for that money is  settled  on a weekly  basis  during a 22 day
trading  period  following the draw request based on a formula as defined in the
stock purchase  agreement.  The  investment  group receives a 7% discount to the
<PAGE>

market price for the 22 day period and we receive the settled amount of the draw
down less a 4% fee payable to the placement  agent.  During June 2000, we issued
36,657 shares of common stock and received $98,000 pursuant to this agreement.

  We  believe  that  amounts  expected  to be  available  under the Bank Line of
Credit,  Mr. Levy's commitment and our equity line will be sufficient to satisfy
our working capital needs during 2000, as presently  contemplated.  If we do not
finalize  the  amendment  to our Bank Line of Credit,  there can be no assurance
that we will be able to find a  replacement  lender with  acceptable  terms.  In
addition,  there can be no assurance that we may not require  additional capital
beyond our current forecasted needs nor that any such additional  required funds
would be available on terms  acceptable  to us, if at all, at such time or times
as required by us.

                              Effect of Inflation

  Inflation has not had an impact on our operations and we do not expect that it
will have a material impact in 2000.

                               Year 2000 Issue

  As many computer systems,  software programs and other equipment with embedded
chips or processors  (collectively  referred to as Information Systems) use only
two digits rather than four to define the applicable year, they may be unable to
process  accurately  certain  data,  during or after the year 2000. As a result,
business and governmental  entities are at risk for possible  miscalculations or
systems  failures  causing  disruptions  in their business  operations.  This is
commonly  known as the Year 2000 (Y2K)  issue.  The Y2K issue  concerns not only
Information  Systems  used  solely  within a  company  but also  concerns  third
parties,  such as customers,  vendors and creditors,  using Information  Systems
that may interact with or affect a company's operations.

  We have not experienced any material  disruption in our business or operations
as a result  of Y2K  issues.  However,  there is no  assurance  that we will not
experience interruptions in the future.

Item 3.  QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  We maintain a floating  interest rate Bank Line of Credit.  Therefore,  we are
subject to a certain amount of risk arising from increases to the prime rate.


<PAGE>

Part II  -  OTHER INFORMATION

Item 1.  Legal Proceedings

               Not applicable

Item 2.  Recent Sales of Unregistered Securities and Use of Proceeds

          Effective April 26, 2000, we issued 296,296 shares of our common stock
        in connection with the satisfaction of $1 million of borrowings.

          Effective  June 22, 2000,  we issued 36,657 shares of our common stock
        in connection with our equity line of credit.

          All of the foregoing  issuances  were exempt from  registration  under
section 4(2) of the Act.

Item 3.  Defaults Upon Senior Securities

               Not applicable

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

        On June 5, 2000, the Company held its Annual Meeting of Stockholders. At
the meeting, the shareholders approved all matters considered with the following
vote distribution:

Item                                     Affirmative     Negative    Withheld

Election of Board of Directors

  Roger H. Felberbaum                    31,378,466            -        36,577
  Bernard R. Green                       31,378,162            -        36,881
  Larry Hemmerich                        31,330,719            -        84,324
  H. Irwin Levy                          31,377,762            -        37,281
  Michael L. Wise                        31,377,466            -        37,577

Reappoint BDO Seidman, LLP as
  independent auditors for
  fiscal 2000                            31,339,725       24,534        50,784

Item 5.  Other Information

               Not applicable

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

   (a)   Exhibits:

      (27)  Financial Data Schedule

   (b)   Reports on Form 8-K:

      We were not required to file Form 8-K during the quarter for which this
      report is filed.

<PAGE>



                                  SIGNATURE

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

                           nSTOR TECHNOLOGIES, INC.
                                 (Registrant)

                              /S/ Jack Jaiven

August 11, 2000              ---------------------------
                             Jack Jaiven
                             Principal Financial and
                             Accounting Officer