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 September 30, 1997

                                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.) 


                        100 Century Blvd.
                    West Palm Beach, FL  33417
             (Address of principal executive office)

                          (561) 640-3103
                 (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 September 30, 1997: 18,670,477

<PAGE>


PART 1.   FINANCIAL INFORMATION



Item 1.   Financial Statements



          The condensed financial statements included herein have
been prepared by the registrant, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. 
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations; however, the registrant believes that
the disclosures are adequate to make the information presented not
misleading.  It is suggested that these condensed financial
statements be read in conjunction with the financial statements and
the notes thereto included in the registrant's annual report on
Form 10-K for the fiscal year ended October 31, 1996 and its
transition report on Form 10-Q for the two months ended December
31, 1996.

          The condensed financial statements for the interim
periods included herein, which are unaudited, include, in the
opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial
position and results of operations of the registrant for the
periods presented.  The results of operations for interim periods
should not be considered indicative of results to be expected for
the full year.  Certain 1996 amounts have been reclassified to
conform to the 1997 presentation.




<PAGE>                              2


nSTOR TECHNOLOGIES, INC.    
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) (Note 2)

                                                  Sept. 30,    Dec. 31,
             ASSETS  (Note 5)                        1997        1996
             ----------------                     ---------   ---------
Current assets:
  Cash and cash equivalents:
    Unrestricted                                   $   116     $ 4,619
    Restricted                                       1,004          -
  Accounts receivable, net of $47
    and $257 allowance                               4,808       5,016
  Inventories (Note 3)                               7,055       4,117
  Prepaid expenses and other                           196         129
  Deferred tax asset (Note 6)                          238         182
                                                   -------     -------
     Total current assets                           13,417      14,063
                                             

Property and equipment, net of $341
  and $90 accumulated depreciation                   1,757       1,003
Goodwill and other intangible assets,
  net of $312 and $60 accumulated
  amortization   (Note 2)                            4,947       5,282
                                                   -------     -------
                                                   $20,121     $20,348
                                                   =======     =======
              LIABILITIES
              -----------
Current liabilities:
  Borrowings  (Note 5)                             $ 3,752     $    -
  Accounts payable                                   4,159       4,380
  Accrued expenses and other                         1,260       2,635
                                                   -------     -------
     Total current liabilities                       9,171       7,015
                                                   
Convertible notes due 2000 (including
  $204 and $197 of accrued interest)                   545         516
                                                   -------     -------
     Total liabilities                               9,716       7,531
                                                   -------     -------

Commitments and contingencies


         STOCKHOLDERS' EQUITY 
         --------------------

Preferred stock, $.01 par; shares                                    
  authorized 1,000,000; outstanding none                -           -
Common stock, $.05 par; shares authorized
  24,000,000; outstanding 18,670,477                   934         934
Additional paid-in capital                          30,393      30,393
Deficit                                            (20,922)    (18,510)
                                                   -------     -------
     Total stockholders' equity                     10,405      12,817
                                                   -------     -------
                                                   $20,121     $20,348
                                                   =======     =======

_______
See accompanying notes to consolidated financial statements.

<PAGE>                              3

nSTOR TECHNOLOGIES, INC.    
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data) (Note 2)





                                      Three Months          Nine Months
                                     Ended Sept. 30,       Ended Sept. 30,
                                  --------------------   --------------------
                                    1997       1996        1997        1996
                                  ---------  ---------   ---------  ---------

Sales                              $ 5,950    $ 3,094     $20,527    $ 4,413
Cost of sales                        4,278      1,835      14,127      2,851
                                   -------    -------     -------    -------
     Gross profit                    1,672      1,259       6,400      1,562
                                   -------    -------     -------    -------

Operating expenses:
  Research and development             672        435       2,096        564
  Selling, general and   
    administrative                   2,187        755       6,708        923
                                   -------    -------     -------    -------
     Total operating expenses        2,859      1,190       8,804      1,487
                                   -------    -------     -------    -------

     Income (loss) from operations  (1,187)        69      (2,404)        75
                
Gain from sale of IMNET Systems,
  Inc. stock  (Note 4)                  -         807          -      11,955
Interest income, net of
  investment expenses                   33        117         103        187
Interest expense                       (66)       (18)       (111)       (54)
                                   -------    -------     -------    -------

Net income (loss)                 ($ 1,220)   $   975    ($ 2,412)   $12,163
                                   =======    =======     =======    =======


Earnings (loss) per common share  ($   .07)   $   .06    ($   .13)   $   .69
                                   =======    =======     =======    =======
                                            
Average number of common shares
  used in computing earnings   
  (loss) per common share        18,670,477 17,603,882  18,670,477 17,601,613
                                 ========== ==========  ========== ==========







_______
See accompanying notes to consolidated financial statements.

<PAGE>                             4

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





                                        Addi-
                       Common Stock    tional
                    -----------------  Paid-In
                      Shares   Amount  Capital  Deficit   Total
                    ---------- ------  -------  -------  -------

Balances, December
  31, 1996          18,670,477  $934   $30,393 ($18,510) $12,817


Net loss for the
  nine months     
  ended September
  30, 1997                 -      -        -     (2,412)  (2,412)
                    ----------  ----   -------  -------  -------
Balances, September
  30, 1997          18,670,477  $934   $30,393 ($20,922) $10,405
                    ==========  ====   =======  =======  =======
  


















 


_______
See accompanying notes to consolidated financial statements.
<PAGE>                          5

nSTOR TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Note 2)
                                                           Nine Months 
                                                         Ended Sept. 30,
                                                       -------------------
                                                         1997       1996
                                                       --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income  (loss)                                  ($  2,412)  $ 12,163
  Adjustments to reconcile net income (loss)
    to net cash used by operating activities:
      Gain from sale of IMNET Systems, Inc. stock            -     (11,955)
      Depreciation and amortization                         503         28
      Changes in assets and liabilities net 
        of effects from acquisition:
          Decrease (increase) in accounts receivable        208     (1,411)
          Increase in inventories                        (2,938)      (410) 
          Increase in prepaid expenses and other           (123)       (53) 
          (Decrease) increase in accounts payable,
            accrued expenses and other liabilities       (1,400)     1,328
                                                       --------   --------
Net cash used by operating activities                    (6,162)      (310)
                                                       --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from sale of IMNET Systems, Inc. stock        -      11,955
  Payment for acquisition                                    -        (592)
  Additions to property and equipment                    (1,090)      (219)
                                                       --------   --------
Net cash (used) provided by investing activities         (1,090)    11,144
                                                       --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings                               11,283         -
  Repayment of borrowings                                (7,530)        -
  Increase in restricted cash and cash equivalents       (1,004)        -
  Proceeds from exercise of stock warrants                  -           60
                                                       --------   --------
Net cash provided by financing activities                 2,749         60
                                                       --------   --------
Net (decrease) increase in unrestricted cash and
  cash equivalents during the period                     (4,503)    10,894

Unrestricted cash and cash equivalents at the
  beginning of the period                                 4,619          7
                                                       --------   --------
Unrestricted cash and cash equivalents at the
  end of the period                                    $    116   $ 10,901
                                                       ========   ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during period for:
    Interest                                           $     64   $     -
                                                       ========   ========
    Income taxes                                       $    239   $     -
                                                       ========   ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
  ACTIVITIES:
    Acquisition (Note 2):
      Inventories                                      $    -     $   (895)
      Property and equipment                                -         (152)
      Intellectual property                                 -         (233)
      Accrued expenses                                      -          588
      Minority interest                                     -          100
                                                       --------   --------
          Cash paid                                    $    -    ($    592)
                                                       ========   ========
________
See accompanying notes to consolidated financial statements.
<PAGE>                             6

nSTOR TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Business

As a result of two acquisitions completed during the year ended
December 31, 1996 (see Note 2 to Consolidated Financial
Statements), nStor Technologies, Inc. (the "Company") is currently 
engaged in the development, manufacture and marketing of a full
range of multi-platform storage solutions including advanced
external RAID (Redundant Array of Independent Disks) subsystems,
tape backup solutions, UNIX-based memory products, storage
management hardware and software, digital media management
products, and enterprise resource planning manufacturing software.

Prior to the first acquisition in June 1996, the Company's only
assets were securities issued by IMNET Systems, Inc. ("IMNET")
which the Company had acquired in October 1992 in exchange for
substantially all of the Company's operating assets.  During the
period in which the Company owned the IMNET securities, the
Company's only activities consisted of monitoring its investment in
IMNET and evaluating potential business opportunities.  During
fiscal 1996, the Company sold 100% of the IMNET securities (see
Note 4 to Consolidated Financial Statements).

     Fiscal Year

In November 1996, the Company changed its fiscal year from October
31 to December 31, effective with the calendar year beginning
January 1, 1997.  Certain amounts in the financial statements
presented for the previous fiscal 1996 periods have been restated
to conform to the new fiscal 1996 presentation.

     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.

<PAGE>                     7


(2)  ACQUISITIONS



Effective June 3, 1996, nStor Corporation, Inc. ("nStor"), a newly-formed
subsidiary of the Company, which was 80% owned at the time,
acquired certain net assets from Seagate Peripherals, Inc.
("Seagate") located in Lake Mary, Florida.  The purchase price
consisted of  $592,000 in cash, including acquisition costs, and a
royalty to Seagate payable based upon 5% of nStor's sales of
certain products during the 15 month period ending December 31,
1997.  Effective October 31, 1996, the Company acquired the
remaining 20% of nStor from R. Daniel Smith, president of nStor and
currently a director and officer of the Company, in exchange for
one million shares of the Company's common stock, valued at
$600,000 (net of applicable discount).

Effective December 1, 1996, nStor acquired substantially all the
net assets of Parity Systems, Inc. ("Parity") located in Los Gatos,
California.  The purchase price consisted of $2.8 million in cash
and a warrant (exercisable at any time through December 1999) to
purchase 500,000 shares of the Company's common stock at $2.10 per
share, valued at $470,000.  The transaction closed on December 30,
1996, on which date the Company repaid the approximately $3 million
outstanding balance of Parity's bank line of credit. 

The acquisitions have been accounted for under the purchase method
of accounting, with assets acquired and liabilities assumed
recorded at estimated fair values as of the effective acquisition
dates, and the operating results of the acquired businesses
included in the Company's consolidated financial statements from
those dates.  

The excess of the purchase price of both acquisitions over the fair
value of net assets acquired (goodwill) was $4.9 million, as
adjusted, and is being amortized on a straight-line basis.  nStor
also recorded $.4 million, as adjusted, as intellectual assets
related to the nStor acquisition, consisting of trademarks and
proprietary technology, which are being amortized on a straight-line basis
over 15 years.  For the three and nine months ended
September 30, 1997, amortization of intangible assets approximated
$55,000 and $256,000, respectively.

<PAGE>                             8



(3)  INVENTORIES


Inventories are summarized as follows (in thousands):


                                Sept.30,    Dec. 31,
                                  1997        1996  
                                --------    --------
     Raw materials              $ 5,509     $ 3,577
     Work-in-process              1,043          88
     Finished goods                 503         452
                                -------     -------
                                $ 7,055     $ 4,117
                                =======     =======

Substantially all inventory is pledged as collateral for indebted-ness (Note 5).



(4)  GAIN ON SALE OF IMNET


During the nine months ended September 30, 1996, the Company sold 
all of its shares of IMNET (see Note 1 to Consolidated Financial
Statements) and recognized gains of $.8 million and $12 million
during the three and nine months ended September 30, 1996,
respectively, representing the net cash proceeds received.


(5)  BORROWINGS


Borrowings consist of an asset based revolving bank credit facility
(the "Revolver"), under which nStor may borrow up to $7 million,
and a promissory note issued by a director of the Company, H. Irwin
Levy ("Director Loan"), under which the Company may borrow up to $1
million.

Advances under the Revolver are limited to 75% of eligible accounts
receivable, as defined.   The Revolver bears interest, payable
monthly, which is indexed to LIBOR (London Interbank Offered Rate)
plus a percentage (which may be adjusted quarterly depending on a
specific operating ratio) ranging from 2-3/8% to 3% (8.7% at
September 30, 1997), is guaranteed by the Company and matures on
May 29, 1998.  The Company pays a commitment fee on the unused
portion of the Revolver at one-eighth of one percent (1/8 of 1%)
per annum.  Advances under the Revolver are collateralized by
substantially all assets of the Company.  The loan agreement
provides certain restrictions on the payment of dividends, the

<PAGE>                             9

incurrence of additional indebtedness and capital expenditures, and
requires minimum working capital, tangible net worth and other
financial covenants.  The outstanding principal balance under the
Revolver at September 30, 1997 was $2,852,000, and there was no
additional availability on that date. 

The Director Loan bears interest, payable monthly, at prime plus
one and one-half percent (1.5%) per annum (10% at September 30,
1997), matures in March 1998, is subordinated to the Revolver and
is collateralized by substantially all assets of the Company.  In
connection with the Director Loan, on October 1, 1997 the Company
issued a warrant to Mr. Levy to purchase 50,000 shares of common
stock of the Company at a purchase price of $2.35 per share, 
exercisable on the date of grant, expiring on September 16, 2000. 
In addition, from December 15, 1997 through March 15, 1998, the
Company is obligated to issue to Mr. Levy warrants to purchase up
to 5,000 shares, for every thirty day period the outstanding
principal balance is not repaid in full, at $2.35 per share.  The
outstanding balance under the Director Loan at September 30, 1997
was $900,000.  


(6)  INCOME TAXES


As of December 31, 1996, the Company's tax year end, there were
unused net operating loss carryforwards ("NOL's") for regular
federal income tax purposes of $1.3 million, principally expiring
in 2006, and research and development tax credit carryforwards of 
$530,000, expiring from 2002 through 2006.  No financial statement
benefit has been recognized on these carryforwards.  During the
nine months ended September 30, 1996, no income tax expense was
recorded on income before income taxes due to utilization of the
NOL's.  In conjunction with the Alternative Minimum Tax ("AMT")
rules, the Company also has available AMT credit carryforwards of
approximately $238,000, at December 31, 1996, which may be used
indefinitely to reduce regular federal income taxes.




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

 
Overview

The Company completed two acquisitions during the year ended
December 31, 1996 - the nStor acquisition, effective June 3, 1996,
and the Parity acquisition, effective December 1, 1996 (see Note 2
to Consolidated Financial Statements).  Allocations have been made
to reflect the estimated fair values, as of the effective

<PAGE>                                   10

acquisition dates, of the net assets acquired which has resulted in
asset bases which differ from those of the previous owners. 
Accordingly, comparative financial data of the acquired entities
for periods prior to the effective dates of the acquisitions are
not presented since they would be neither comparable nor
informative.  In addition, certain components of net income in 1997
are not comparable to those of 1996 because operating results for
the nine months ended September 30, 1996 include only four months
of nStor's operations and do not include operations associated with
Parity.


Results of Operations

For the three and nine months ended September 30, 1997, the Company
incurred net losses of $1.2 million and $2.4 million, respectively. 
These losses reflect sales revenues which were below expectations
(see "Sales" below) as well as increased costs associated with
gearing up the Company's infrastructure to support anticipated
future growth (see "Operating Expenses" below).  The Company
reported  net income of $1 million and $12.2 million, respectively,
for the corresponding three and nine month periods in 1996.  The
1996 results included gains of approximately $.8 million and $12
million, respectively, from the sale of the Company's investment in
IMNET (see Note 4 to Consolidated Financial Statements). 

From the date the Company disposed of substantially all of its
operating assets in October 1992 in exchange for shares in IMNET
until the nStor acquisition in June 1996, the Company's only
activities consisted of monitoring its investment in IMNET and
evaluating potential business opportunities.  Accordingly,
operating results for 1996 consisted of the aforementioned gain on
the sale of IMNET and only four months of nStor operations. 


     Sales

Net sales for the three and nine months ended September 30, 1997
were $6 million and $20.5 million, respectively.   Sales levels
have been adversely affected during 1997 by delays in completing
the development of the Company's new CR8e RAID subsystem, a softer
market for the Company's products resulting in reduced sales volume
and sales prices for the Company's storage subsystems, and by
manufacturing disruptions associated with the transfer of Parity's
production from California to Florida.  Net sales for the three and
nine month periods ended September 30, 1996 (which excluded
operations associated with Parity) amounted to $3.1 million and
$4.4 million, respectively, with the latter period including only
four months of sales following the nStor acquisition, effective
June 3, 1996.  Future sales are expected to be positively affected
by the introduction and availability of certain new products and
expansion into the European market place.  Increased sales activity

<PAGE>                                11

is also anticipated from recent agreements with Silicon Graphics,
Inc. ("SGI"), which has positioned the Company as the only third-party
memory manufacturer, to date, to be granted all three memory
licenses issued by SGI to manufacture its proprietary memory
products; completion of  agreements with several new OEM's
(original equipment manufacturers) and a software supplier; and
expansion of the Company's enterprise resource planning
manufacturing software services. 

The foregoing statements regarding increases in nStor's future
sales are forward looking statements that may prove not to be
accurate.  Factors that could cause such statements not to be
accurate include, but are not limited to, increased competition for
the Company's products, unexpected delays in production, 
improvements in alternative technologies, a lack of market
acceptance for new products introduced by the Company and the
Company's failure to successfully market its products.


     Cost of Sales/Gross Margin

The Company's gross margins are dependent, in part, on product mix
which is anticipated to fluctuate from time to time.  Gross margins
for the three and nine months ended September 30, 1997 were 28% and
31%, respectively, as compared to 41% and 35% for the three and
nine months ended September 30, 1996.  The reduced gross margins
for the 1997 periods were primarily the result of lower sales
volume and sales prices for the Company's storage subsystems and
overall lower margins from the sale of the Company's memory
products.  The Company expects gross margins to improve in the near
future over the reported 1997 levels due to an expected increase in
sales revenues and certain product cost efficiencies.

The foregoing statements regarding future gross margins are forward
looking statements that may prove not to be accurate.  Factors that
could cause such statements not to be accurate include, but are not
limited to, increases in the cost of components or raw materials
used in the Company's products, increased labor costs, higher
production costs for new products developed by the Company,
decreases in the price of and demand for the Company's products,
and a shift in product sales to less profitable products.


     Operating Expenses
 
The Company's operating expenses for the three and nine months
ended September 30, 1997 amounted to $2.9 million and $8.8 million,
respectively, consisting of $.7 million and $2.1 million,
respectively, in research, development and other engineering costs,
and $2.2 million and $6.7 million, respectively, in selling,
general and administrative expenses.  Operating expenses for the
three and nine months ended September 30, 1996 (which excluded

<PAGE>                            12

operations associated with Parity) were $1.2 million and $1.5
million, respectively, with the nine month period including only
four months of operations following the nStor acquisition. 
Operating expenses for the quarter ended September 30, 1997 were
significantly greater than those reported for the comparable 1996
quarter, primarily due to the growth of the Company over the past
year, including additional operating costs brought about by the
Parity acquisition effective December 1, 1996 and additional
expenses associated with preparation for the Company's anticipated
future growth.   During 1997, significant costs were invested in
redesigning, standardizing and obtaining agency certification for
the Parity product line.   

Research and development costs are expensed as incurred and  may
fluctuate considerably from time to time depending on a variety of
factors.  These costs are substantially incurred in advance of
related revenues, or in certain situations, may not ultimately
result in generating revenues.  The Company does not anticipate
significant increases in research and development during the
remainder of the fiscal year.  

Selling and marketing costs primarily consist of salaries,
commissions and related benefits, expenses in connection with
tradeshows, conferences and seminars, facilities expenses and other
miscellaneous costs allocated to those personnel.  General and
administrative costs primarily consist of general corporate
expenses, executive officers, finance and accounting salaries and
related benefits, professional fees such as legal and accounting,
facilities costs allocated to those personnel, and amortization and
depreciation of certain property, equipment and intangibles,
including goodwill.   The most significant increase in selling,
general and administrative expenses for the quarter ended September
1997 when compared to the 1996 quarter was attributable to higher
salaries, wages, commissions and related fringe benefits.  The
Company does not expect selling, general and administrative
expenses to significantly increase in the near future, except to
the extent that sales commissions and other marketing costs may
increase due to expected increases in sales revenue.


     Income Taxes

Income tax expense was not provided on the Company's income before
income taxes during the three and nine months ended September 30, 
1996 due to utilization of the NOL's (see Note 6 to Consolidated
Financial Statements).

<PAGE>                               13



Liquidity and Capital Resources


Net cash used by operating activities amounted to $6.2 million and
$.3 million during the nine months ended September 30, 1997 and
1996, respectively.  The 1997 amount is principally attributable to
a $2.9 million increase in inventories, a $1.9 million net loss
(excluding depreciation and amortization) and a $1.4 million
reduction of accounts payable, accrued expenses and other
liabilities.  During 1996, net cash used by operating activities
resulted from an increase in accounts receivable of $1.4 million,
offset by an increase in accounts payable, accrued expenses and
other liabilities of $1.3 million.

Net cash used by investing activities approximated $1.1 million
during the nine months ended September 30, 1997 due to additions to
property and equipment.  During the corresponding period in 1996,
investing activities provided $11.1 million of net cash, including
$12 million from the sale of the Company's investment in IMNET (see
Note 4 to Consolidated Financial Statements). 

Net cash provided by financing activities for the nine months ended
September 1997 approximated $2.7 million, consisting of net
borrowings of $3.8 million less $1 million of previously
unrestricted cash required as collateral under the Revolver (see
Note 5 to Consolidated Financial Statements).  Until May 1997,
nStor's working capital needs, including the approximately $5.8
million in cash required for the Parity acquisition, were funded by
cash flow from operations and the Company's cash balances.  In May
1997, the Company entered into the Revolver to finance its
expanding working capital needs.  Under the Revolver, the Company
may borrow up to $7 million through May 29, 1998 based on 75% of
eligible accounts receivable, as defined.  As of September 30,
1997, the outstanding balance under the Revolver was approximately
$2.9 million and there was no additional availability on that date. 
During September 1997, the Company borrowed $900,000 under the
Director Loan pursuant to a promissory note under which the Company
may borrow up to a maximum of $1 million through March 1998 (see
Note 5 to Consolidated Financial Statements).  

Management believes that cash flow generated from operations,
amounts available under the Revolver and the Director Loan and
other potential financing sources will be sufficient to satisfy its
working capital and capital expenditure needs for the next twelve
months as currently planned.   However, there can be no assurance
that additional capital will not be needed during that period.

<PAGE>                            14



Effect of Inflation

Inflation has not had an impact on the Company's operations and is
not expected to have any material impact in 1997.


Forward Looking Information:  Certain Cautionary Statements

Certain statements contained in "Management's  Discussion and
Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-Q, that are not related to historical
results, are forward looking statements.  Actual results may differ
materially from those projected or implied in the forward looking
statements.  Further, certain forward looking statements are based
upon assumptions of future events which may not prove to be
accurate.  These forward looking statements involve risks and
uncertainties including but not limited to the Company's future
cash flows, sales, gross margins and operating expenses, the effect
of conditions in the technology industry and the economy in
general, legal proceedings, as well as certain other risks. 
Subsequent written and oral forward looking statements attributable
to the Company or persons acting on its behalf are expressly
qualified in their entirety by cautionary statements in this
paragraph and elsewhere described in this Form 10-Q and in other
reports filed by the Company with the Securities and Exchange
Commission.



Part II -  Other Information


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

   (a)   Exhibits:


     (10)(i)   Promissory Note from nStor Technologies, Inc. to H.
               Irwin Levy dated September 16, 1997 for $1 million.

     (10)(ii)  Letter Agreement between H. Irwin Levy and nStor
               Technologies, Inc. dated September 16, 1997
               regarding (10)(i) Note.

     (27)      Financial Data Schedule
     

   (b)   Reports on Form 8-K:

          The Company was not required to file Form 8-K during the
          quarter for which this report is filed.

<PAGE>                               15


                            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
November 13, 1997         _______________________________
                          Jack Jaiven, Vice President
                          and Principal Financial and
                          Accounting Officer

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