<PAGE>1
           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, 1998



     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.) 

450 Technology Park
Lake Mary, FL 32746
(Address of principal executive office)

(407) 829-3500
     (Registrant's telephone number)

     100 Century Blvd.
     West Palm Beach, FL  33417
     (Former name, former address and former fiscal year, if
changed since last report)

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, 1998: 18,834,546


<PAGE> 2

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 year ended
December 31, 1997.

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.  


<PAGE> 3
nSTOR TECHNOLOGIES, INC.    
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)


                                            Jun. 30,   Dec. 31,
       ASSETS  (Note 3)                      1998        1997
       ----------------                    ---------   ---------
Current assets:
  Cash and cash equivalents:
    Unrestricted                            $    20     $    61
    Restricted                                1,024       1,024
  Accounts receivable  (Note 2)               3,445       3,863
  Inventories (Note 2)                        3,182       3,577
  Deferred loan costs                           314         -
  Prepaid expenses and other                    339         262
                                            -------     -------
     Total current assets                     8,324       8,787
                                             
Property and equipment, net  (Note 2)         2,092       2,060
Goodwill and other intangible assets,
  net (Note 2)                                6,197       5,915
                                            -------     -------
                                            $16,613     $16,762
                                            =======     =======
              LIABILITIES
              -----------
Current liabilities:
  Borrowings  (Note 3)                      $ 3,424     $ 3,445
  Accounts payable and other                  3,892       6,568
  Royalty liability                             208         208
                                            -------     -------
     Total current liabilities                7,524      10,221
                                                   
Long-term debt (Note 3)                       5,573       1,504
                                            -------     -------
     Total liabilities                       13,097      11,725
                                            -------     -------
Commitments and contingencies

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

Preferred stock, $.01 par; shares                                 
  authorized 1,000,000; outstanding 3,500
  shares of 8% Cumulative Convertible
  Preferred Stock, Series B (Note 6)            -           -
Common stock, $.05 par; shares authorized
  40,000,000; outstanding 18,670,477            934         934
Additional paid-in capital                   35,014      30,499
Deficit                                     (32,432)    (26,396)
                                            -------     -------
     Total stockholders' equity               3,516       5,037
                                            -------     -------
                                            $16,613     $16,762
                                            =======     =======
_______
See accompanying notes to consolidated financial statements.

<PAGE> 4
nSTOR TECHNOLOGIES, INC.    
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)



                                  Three Months            Six Months
                                 Ended June 30,         Ended June 30,
                             ----------------------  ----------------------
                                1998        1997        1998        1997
                             ----------  ----------  ----------  ----------

Sales                         $ 5,738     $ 5,574     $ 9,344     $14,577
Cost of sales                   4,727       3,957       7,685       9,849
                              -------     -------     -------     -------
     Gross profit               1,011       1,617       1,659       4,728
                              -------     -------     -------     -------

Operating expenses:
  Selling, general and
    administrative              2,500       2,169       4,693       4,147
  Research and development
    nStor                         432         762         933       1,424
    Borg Adaptive Technologies
      (Note 5)                    149          -          216         -
                              -------     -------     -------     -------
  Total research and
    development                   581         762       1,149       1,424
  
  Depreciation and
    amortization                  349         194         630         374
                              -------     -------     -------     -------
Total operating expenses        3,430       3,125       6,472       5,945
                              -------     -------     -------     -------

Loss from operations           (2,419)     (1,508)     (4,813)     (1,217)     
                
Interest income                    24          39          40          70
Interest expense                 (319)        (27)       (481)        (45)
                              -------     -------     -------     -------

Net loss                     (  2,714)   (  1,496)   (  5,254)   (  1,192)

Preferred stock dividends
  (Note 6)                       (782)        -          (782)        -
                              -------     -------     -------     -------
Net loss applicable to
  common stock               ($ 3,496)    ($1,496)   ($ 6,036)   ($ 1,192)
                              =======     =======     =======     =======


Loss per common share        ($   .19)   ($   .08)   ($   .32)   ($   .06)
                              =======     =======     =======     =======

                                            
Average number of common
  shares outstanding        18,670,477  18,670,477   18,670,477  18,670,477
                            ==========  ==========   ==========  ==========  
 

_______
See accompanying notes to consolidated financial statements.

<PAGE> 5
nSTOR TECHNOLOGIES, INC.    
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)





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

Balances, December
  31, 1997         18,670,477  $934     -       -    $30,499 ($26,396) $ 5,037


Net loss for the
  six months ended
  June 30, 1998          -       -                      -     ( 5,254) ( 5,254)

Issuance of 
  Convertible
  Preferred Stock,
  Series B through
  Reg D offering, 
  less $255 of
  issuance cost                       3,500    -       3,245             3,245

Preferred stock
  dividend                                               722     (782)     (60)

Common stock
  warrants
  issued in
  connection with: 
  
    Long term debt                                       400               400
    Acquisition                                          148               148
                                                       

                   ----------  ----  ------  ------  -------  -------  -------
Balances, June    
  30, 1998         18,670,477  $934   3,500     -    $35,014 ($32,432) $ 3,516
                   ==========  ====   =====  ======  =======  =======  =======
  
_______
See accompanying notes to consolidated financial statements.

<PAGE>6
nSTOR TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                            Six Months 
                                                          Ended June 30, 
                                                       -------------------
                                                         1998       1997
                                                       --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss)                                          ($ 5,254)   ($1,192)
  Adjustments to reconcile net (loss)
    to net cash used by operating activities:
      Depreciation and amortization                        630        374
      Provision for uncollectible accounts
        receivable                                         225        -
      Amortization of deferred loan costs                   86        -
      Changes in assets and liabilities net 
        of effects from acquisition:
          Decrease in accounts receivable                  193        576
          Decrease (increase) in inventories               395     (3,202)
          (Increase) in prepaid expenses and other         (77)       (74)
          (Decrease) in accounts payable and other
            current liabilities                         (2,736)    (1,083)
                                                       --------   --------
Net cash used by operating activities                   (6,538)    (4,601)
                                                       --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                     (417)      (571)
  Cash paid for acquisition                               (379)        - 
                                                       --------   --------
Net cash used by investing activities                     (796)      (571)
                                                       --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings                              20,619      2,767
  Repayment of borrowings                              (16,571)      (717)
  Increase in restricted cash and cash equivalents         -       (1,000)
  Issuance of preferred stock, net of issuance
    costs of $255                                        3,245        -
                                                       --------   --------
Net cash provided by financing activities                7,293      1,050
                                                       --------   --------
Net (decrease) in unrestricted cash and
  cash equivalents during the period                       (41)    (4,122)

Unrestricted cash and cash equivalents at the
  beginning of the period                                   61      4,619
                                                      ---------  ---------
Unrestricted cash and cash equivalents at the
  end of the period                                    $    20    $   497
                                                      =========  =========

_______
See accompanying notes to consolidated financial statements.

<PAGE> 7
nSTOR TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, (continued)
(in thousands)
                                                            


                                                            Six Months 
                                                          Ended June 30, 
                                                       -------------------
                                                         1998       1997
                                                       --------   --------
SUPPLEMENTAL DISCLOSURE OF 
CASH FLOW INFORMATION:


Acquisition (Note 5):

  Fair value of assets acquired                        $   527    $   -    
  Warrant issued to seller                                (148)       -   
                                                       --------   --------
    Cash paid                                          $   379    $   -   
                                                       ========   ========


NON-CASH FINANCING ACTIVITIES:


Preferred stock dividend (Note 6) 
  Amortization of conversion discount                 $   722     $   -   
                                                      ========    ========


Deferred loan costs (Note 7)
  Deferred loan costs, arising from
    issuance of warrants under
    subordinated loans                                $   314     $   - 
                                                      ========    ========
  

_______
See accompanying notes to consolidated financial statements.

<PAGE> 8
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.

     Business

The Company is principally engaged as a manufacturer and supplier of
information storage solutions, including external RAID (Redundant
Array of Independent Disks) subsystems and data storage enclosures,    
storage management hardware and software as well as digital media
products.

     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.

     Revenue Recognition

Sales revenue is recognized upon shipment provided that there are
no significant post-sale obligations and the collectibility is
reasonably assured.  During the periods presented in the
accompanying consolidated Statements of Operations, there were no
significant post-sales obligations except for normal warranty 
costs.

     Warranty Costs

Warranty costs are provided on the basis of estimated net future
costs related to products sold.

     Research and Development Costs

Research and development costs are expensed as incurred.

     Reclassifications

Certain prior years' amounts have been reclassified to conform to
the current year's presentations.  These reclassifications had no
impact on operating results previously reported.

<PAGE> 9

     Loss Per Common Share

The effect of potentially dilutive common share equivalents is
anti-dilutive
due to the net loss and therefore is not reflected on the Statement of
Operations.



(2)  BALANCE SHEET COMPONENTS (in thousands)

Substantially all assets are pledged as collateral for
indebtedness.  See Note 3 to Consolidated Financial Statements.
                                    
                                        June 30,    Dec.31,
                                          1998       1997 
                                         ------     ------
Accounts Receivable

     Trade receivables                   $3,563     $4,218
     Less allowance for   
       doubtful accounts                   (260)      (500)
                                         ------     ------
                                          3,303      3,718
     Other receivables                      142        145
                                         ------     ------
                                         $3,445     $3,863
                                         ======     ======

Inventories

     Raw materials                       $2,797     $3,299
     Work-in-process                        298         -
     Finished goods                          87        278
                                         ------     ------
                                         $3,182     $3,577        
                                         ======     ======

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 inventory to
estimated net realizable value.

<PAGE> 10

2) BALANCE SHEET COMPONENTS (in thousands), cont.


                                        June 30,    Dec.31,
                                          1998       1997 
                                         ------     ------
Property and Equipment
 
     Computer equipment                  $1,150     $  809
     Computer software                      944        907
     Furniture, fixtures
       and office equipment                 285        286
     Leasehold improvements                 332        283
     Other                                  243        232
                                         ------     ------
                                          2,954      2,517
     Less accumulated depreciation         (862)      (457)
                                         ------     ------
                                         $2,092     $2,060  
                                         ======     ======

Property and equipment are stated at cost.  Depreciation is
provided under the straight-line method over the estimated useful
lives, principally three to five years. 

Goodwill and Other Intangible Assets

     Goodwill                            $6,038      $6,038
     Intellectual assets                    811         347
     Other                                   43          -
                                         ------      ------
                                          6,892       6,385
     Less accumulated amortization         (695)       (470)
                                         ------      ------
                                         $6,197      $5,915 
                                         ======      ======

The goodwill, representing the excess purchase price over the
fair value of assets acquired, is carried at cost and amortized on a
straight line basis over fifteen years, the estimated useful life. 
Intellectual assets consisting of trademarks and proprietary
technology are carried at cost and are being amortized on a
straight-line basis over ten to fifteen years, the estimated useful
life.


<PAGE> 11

(3)  BORROWINGS

    Current

The Company's short-term borrowings consisted of:
     
(In thousands)
                                                June 30,    Dec.31,
                                                  1998       1997 
                                                 ------     ------

 Asset based revolving bank credit facility       
 (the "Revolver" - repaid August 4, 1998)        $2,824     $3,245             
 Loan from director                                 400        -
                             
 Other                                              200        200
                                                 ------     ------
 Total short-term borrowings                     $3,424     $3,445
                                                 ======     ======


The Revolver bore interest, payable monthly, based on LIBOR plus 3%
(8.65% at June 30, 1998), was guaranteed by the Company and matured
on July 31, 1998, as extended.  Advances under the Revolver were
collateralized by substantially all assets of the Company,
including approximately $1.0 million reflected as Restricted Cash at
June 30, 1998.  The loan agreement provided for certain
restrictions on the payment of dividends, the incurrence of
additional indebtedness and capital expenditures, and required 
minimum working capital, tangible net worth and other financial
covenants.  The Company had not consistently been in compliance
with certain financial covenants which resulted in amendments to
the Revolver in December 1997 and February 1998.  Among other
modifications, the amendments waived compliance with the financial
covenants and reduced the original maximum loan amount from $7.0
million to $3.0 million as of June 30, 1998, with gradual reductions
to $2.4 million thereafter until maturity on July 31, 1998.  



On August 3, 1998, the Company secured a new revolving line of credit
with another financial institution (the "new Revolver"). The credit
facility consists of loans against the Company's eligible accounts
receivable for an amount equal to the lesser of $5.0 million or 80% of
the Company's eligible accounts receivable as defined, less certain
reserves.  The new Revolver bears interest, payable monthly, based on
prime plus 2%, is guaranteed by the Company and matures on August 3,
2000.  The Company pays a facility fee equal to 1% per annum on the
total facility of $5.0 million.  Advances under the new Revolver are
collateralized by substantially all assets of the Company, including
$.5 million in cash collateral.  The loan agreement provides for
certain covenants with respect to the maintenance of a specific
current ratio, net worth and limitation of operating losses as well as
restrictions on the incurrence of additional debt and capital
expenditures.  

Proceeds of $1.5 million from the new Revolver were used to repay and
replace the Company's previous Revolver, which expired on July 31,
1998.    

<PAGE> 12

(3) 
BORROWINGS, cont.

     Long Term Debt

The Company's long term debt consisted of:
     
(In thousands)
                                                June 30,    Dec.31,
                                                  1998       1997 
                                                 ------     ------

 Subordinated loans                              $5,000     $  950
 
 Convertible notes                                  573        554
                                                 ------     ------
 Total long-term borrowings                      $5,573     $1,504
                                                 ======     ======

     Subordinated Loans

At December 31, 1997, the Company's long-term debt included $950,000
due from H. Irwin Levy, a director and principal stockholder of the
Company, under a Promissory Note which provided that the Company could
borrow up to $1.0 million (the "Director Loan").  During the six
months ended June 30, 1998, Mr. Levy advanced an additional net amount
of $1,450,000 (consisting of $3,315,000 advanced, less $1,865,000
repaid).  Of this amount, $400,000 was repaid on July 10, 1998 and is
included in current borrowings.  In connection with the remaining
$1,050,000, on March 5, 1998 an Amended and Restated Loan Agreement
was executed, increasing the Director Loan to $2.0 million.  In March
1998, three private investors loaned the Company an aggregate of an
additional $3.0 million (together with the $2.0 million Director Loan,
hereinafter referred to as the Subordinated Loans). The Subordinated
Loans bear interest at 10% per annum, payable monthly, mature on
September 5, 1999, are subordinated to the new Revolver and are
collateralized by substantially all of the Company's assets.  Amounts
advanced by Mr. Levy in excess of his portion of the Subordinated
Loans are pursuant to an unsecured line of credit for up to $1.0
million through December 31, 1998 which bears interest at 10% per
annum.   

In connection with the Director Loan, the Company issued warrants to
Mr. Levy to purchase 65,000 shares of the Company's common stock at an
exercise price of $2.35 per share, exercisable on the dates of grant,
and expiring on September 16, 2000.  In connection with the
Subordinated Loans, warrants were issued to purchase an aggregate of
1,666,668 shares of the Company's common stock (including 666,666 to
Mr. Levy) at an exercise price of $1.50 per share, exercisable on the
date of grant, and expiring on March 5, 2001. 

During the second quarter of 1998, Mr. Levy sold participation
interests in $750,000 of his Subordinated Loans to unrelated private
investors (including
249,999 warrants).  

Convertible Notes 

The Convertible Notes have a face amount of $400,000, have been
discounted based on an effective interest rate of 12%, include
accrued interest of $210,000 and $206,000 at June 30, 1998 and
December 31, 1997, respectively, mature in 2000 and are convertible
into 160,000 shares of common stock of the Company (based on one
common share for each $2.50 of  face amount).

<PAGE> 13

(4)  INCOME TAXES

As of December 31, 1997, there were unused net operating loss
carryforwards (the "NOL's") for regular federal income tax purposes
of approximately $8.4 million principally expiring in 2012, for
which no financial statement benefit had been recognized.  In
addition, the Company has research and development tax credit
carryforwards of approximately $637,000 which expire from 2002
through 2012 and in conjunction with the Alternative Minimum Tax
("AMT") rules, the Company has available AMT credit carryforwards
of approximately $238,000, at December 31, 1997, which may be used
indefinitely to reduce regular federal income taxes.

(5) ACQUISITIONS

Effective April 23, 1998, the Company acquired all the outstanding
common stock of  Borg Adaptive Technologies, Inc., a privately 
owned company headquartered in Boulder, Colorado, and the developer of
Adaptive RAID, a patented next-generation RAID technology.  The 
purchase price consisted of $379,000 in cash, including acquisition
costs, and warrants to purchase 400,000 shares of the Company's common
stock at $1.38 per share exercisable on May 1, 1998 and expiring on
December 26, 2000, valued at $148,000.  In accordance with the
purchase agreement, the sellers (currently 
employees of the Company) of Borg Adaptive Technologies, Inc. shall
receive a royalty payment equal to 5% of the gross sales, as defined,
of a certain product for as long as the product is sold.  The Company
is not obligated to continue development or sale of the product if
sales of such product are not sufficiently profitable, as determined
by the Company in its sole discretion. 

Pursuant to piggyback registration rights granted in the warrants, on
June 24, 1998, the Company registered with the Securities and Exchange
Commission on Form S-3 Registration Statement the shares of common
stock issuable to the sellers of Borg Adaptive Technologies, Inc. upon
exercise of their warrants.

The acquisition was accounted for under the purchase method of
accounting with assets acquired (principally intellectual assets)
recorded at estimated fair values as of the effective acquisition date
and the operating results of the acquired business included in the
Company's consolidated financial statements effective April 23, 1998.  
  

(6) 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B

Effective April 14, 1998, the Company received $3.5 million in cash
(including $1.0 million from Mr. Levy) less $.3 million in issuance
costs from a private placement of 8% Cumulative Convertible Preferred
Stock, Series B (the "Convertible Preferred Stock").  The Convertible
Preferred Stock is convertible into common stock, on various dates
through April 2000, at a conversion price equal to the lesser of $1.44
per share or 77% of the market price at the date of conversion.  At
closing, the Company issued warrants to purchase 280,000 shares of
the Company's common stock (including 80,000 to Mr. Levy),
exercisable at any time through April 2001 at an exercise price of
$1.50 per share.  The Company has accrued $60,000 in preferred stock
dividends for the three and six month periods ended June 30,1998. 


<PAGE> 14
(6) 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B, cont.

In March 1997, the Securities and Exchange Commission Staff (the 
"Staff") announced its position on accounting for preferred stock
which is convertible into common stock at a discount from market
rate at the date of issuance.  The Staff's position is that a 
preferred stock dividend should be recorded for the difference
between the conversion price and the quoted market price of common
stock at the date of issuance.  To comply with this position, the
Company has recorded $722,000 as an additional preferred stock
dividend on its 
Statement of Operations for the three and six month periods ended June
30, 1998.

In July 1998, $100,000 of Convertible Preferred Stock was converted
into 164,065 shares of the Company's common stock.


(7) DEFERRED LOAN COSTS

In connection with the Subordinated Loans (see Note 3 to the
Consolidated Financial Statements), the Company issued 1,666,668
warrants valued at $400,000, which are being amortized on a pro-rata
basis over the life of the loans through September 5, 1999.  The
amortization of these loan costs resulted in $86,000 in additional
interest expense on the Statement of Operations for the three and six
month periods ended June 30, 1998.

(8) SUBSEQUENT EVENTS

On July 7, 1998, the Company borrowed $1.0 million from a private
investor under an 8% Convertible Subordinated Debenture (the
"Debenture"), which matured on August 7, 1998, and has been extended
through September 18, 1998.  The Debenture is convertible into shares
of preferred stock with an 8% dividend rate, which in turn will be
convertible into shares of the Company's common stock based on a fixed
conversion rate.   

   

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

Overview

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.

<PAGE> 15
Risks and uncertainties inherent in forward looking statements
include, but are not limited to, the Company's 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 the Company's 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 the Company.  The Company's ability
to manage its inventories 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 the Company or persons acting on its behalf are expressly
qualified in their entirety by cautionary statements in this Form
10-Q and in other reports filed by the 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. 

The Company is principally engaged as a manufacturer and supplier of
information storage solutions, including external RAID subsystems and
data storage enclosures, storage management hardware and software as
well as digital media products.

Effective June 30, 1998, the Company completed a workforce reduction
to align operating expenses with the current sales expectations for
the balance of the year, as well as, eliminate  inefficient and
redundant positions.  All costs associated with the expense reduction
(approximately $64,000) have been accrued as of June 30, 1998 and
primarily consist of severance costs associated with the workforce
reduction.

On July 1, 1998, the Company announced that it will strategically
focus on its core strengths in storage technology.  As a result, the 
Company is executing an orderly transition to phase out of all
non-storage related businesses, including its memory division and
its Integrated Systems Division.




Three Months Ended June 30, 1998 vs. June 30, 1997


Sales

Net sales for the three months ended June 30, 1998 were $5.7 million
compared to $5.6 million for the three months ended June 30, 1997,
an increase of .1 million or 2.9%.  

During the three months ended June 30, 1998 the Company continued to
expand its sales distribution channels through the addition of new
distributors and value - added resellers. 

<PAGE> 16
Cost of Sales / Gross Margins     

Gross margins decreased to 17.6% in the second quarter of 1998,
compared to 29% in the second quarter of 1997.  The Company's gross
margins are dependent, in part, on product mix, which fluctuates
from time to time.  The decrease is primarily attributable to
increased sales level of products with overall lower margins, an
additional inventory valuation reserve for discontinued products and
cash flow difficulties from the first quarter of 1998 which
extended into early second quarter 1998, limiting the Company's
ability purchase product on a cost effective basis.
   

Operating Expenses

Selling, General & Administrative  

Selling, general and administrative expenses were $2.5
million and $2.2 million in the second quarters of 1998 and 1997,
respectively, an increase of  $.3 million or 15%.  This increase
primarily represents an additional provision for an uncollectible
receivable
resulting from the termination of a distributor agreement, accrued
severance costs associated with a workforce reduction and the
additional cost of certain sales management and their related
overhead.
 
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, accounting and facilities costs
allocated to those personnel.
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 an increase in sales revenue.

Research and Development

Research and development expenses were $.6 million and
$.8 million in the second quarters of 1998 and 1997, respectively,
a decrease of $.2 million or 23.8%.  The overall decrease was mainly
due to the reorganization and absorption of previously acquired
engineering activities into the existing research and development staff, 
partially offset by increased engineering staffing and related overhead 
from the most recent acquisition of Borg Adaptive Technologies, Inc ("Borg").
        
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 result in generating
revenues.  Management anticipates an increase in these expenses for
the remainder of fiscal 1998 primarily brought about by the Borg
acquisition, which will require certain additional development and
integration into the Company's existing product line.

<PAGE> 17
Depreciation and Amortization

Depreciation and amortization increased $.2 million over the second
quarter of 1997 due to the capitalization of completed software
development, leasehold improvements and test equipment placed in
service by March 31, 1998.

Interest Expense

Interest expense for the three months ended June 30, 1998 increased
$.2 million over the same period of the prior year as a result of the
increase in borrowings and the amortization of loan costs arising from
the Subordinated Loans.  (see Notes 3 & 7 to the Consolidated
Financial Statements) 

Preferred Stock Dividends

In March 1997, the Securities and Exchange Commission Staff (the 
"Staff") announced its position on accounting for preferred stock
which is convertible into common stock at a discount from market
rate at the date of issuance.  The Staff's position is that a 
preferred stock dividend should be recorded for the difference
between the conversion price and the quoted market price of common
stock at the date of issuance.  To comply with this position, the
Company has recorded $722,000 as an additional preferred stock
dividend on its 
Statement of Operations for the three and six month period ended June
30, 1998.  The Company has also recorded the 8% dividend for the
Convertible Preferred Stock in the amount of $60,000 for the three and
six month periods ended June 30, 1998.

In July 1998, $100,000 of Convertible Preferred Stock was converted
into 164,065 shares of the Company's common stock.

Future operating results attributable to common stockholders will
reflect the 8% preferred stock dividend.  In addition, approximately
$.3 million is expected to be recorded in the third quarter of 1998 as
an additional preferred stock dividend to reflect the final
amortization of the aforementioned conversion discount.


Six Months Ended June 30, 1998 vs. June 30, 1997

Sales

Net sales for the six months ended June 30, 1998 were $9.3 million
compared to $14.6 million for the six months ended June 30, 1997,
a decrease of $5.3 million or 36%.  The decrease in net sales is
primarily attributable to the first quarter of 1998 with net sales
of $3.6 million compared to $9.0 million in the first quarter of
1997, a reduction of $5.4 million.  The reduction in net sales was
principally due to the following:  (i) entering 1997 with a
significantly higher backlog of sales orders than were in place
entering 1998; (ii) delay in customer deliveries and in some cases,
missed sales orders caused by the Company's inability to meet
customer production schedules brought about by cash flow
difficulties; and (iii) lost sales opportunities while reorganizing
and training the Company's sales force.  

<PAGE> 18 
During the three months ended June 30, 1998 the Company continued to
expand its sales distribution channels through the addition of new
distributors and value - added resellers. 

Cost of Sales / Gross Margins

Gross margins decreased to 17.8% in the first six months of 1998,
compared to 32.4% in the first six months of 1997.  The Company's
gross margins are dependent, in part, on product mix, which
fluctuates from time to time.  The decrease is primarily attributable
to a decreased sales level of products with overall higher margins, an
increase in an inventory valuation reserve for discontinued products
and
cash flow difficulties for the first quarter of 1998, which limited
the Company's ability to purchase products in the most cost efficient
manner.

Operating Expenses

Selling, General & Administrative  

Selling, general and administrative expenses were 
$4.7 million and $4.2 million in the first six months of 1998 and
1997, respectively, an increase of $.5 million or 13.2%. 
The provision for uncollectible accounts receivable increased by $.2
million compared to the first six months of 1997 resulting from the
termination of a
distributor agreement. The remaining increase of
$.3 million was principally due to accrued severance cost associated
with a workforce reduction and additional cost of certain sales
management
and their related overhead over the comparable period in 1997.

Research and Development

Research and development expenses were $1.1 million and
$1.4 million in the first six months of 1998 and 1997, respectively,
a decrease of $.3 or 19.3%. The overall decrease was mainly due to the
reorganization and absorption of the previously acquired engineering
activities into the existing research and development staff, partially
offset by the increased engineering staffing and related overhead from
the recent Borg acquisition.

Depreciation and Amortization

Depreciation and amortization increased $.3 million over the first six
months of 1997 due to the capitalization of completed software
development, leasehold improvements and test equipment placed in
service by March 31, 1998.

Interest Expense

Interest expense for the six months ended June 30, 1998 increased $.4
million over the same period of the prior year as a result of the
increase in borrowings and the amortization of loan costs arising from
the Subordinated Loans.  (See Note 3 & 7 to the Consolidated Financial
Statements). 

<PAGE> 19
Preferred Stock Dividends

In March 1997, the Securities and Exchange Commission Staff (the 
"Staff") announced its position on accounting for preferred stock
which is convertible into common stock at a discount from market
rate at the date of issuance.  The Staff's position is that a 
preferred stock dividend should be recorded for the difference
between the conversion price and the quoted market price of common
stock at the date of issuance.  To comply with this position, the
Company has recorded $722,000 as an additional preferred stock
dividend on its 
Statement of Operations for the three and six month period ended June
30, 1998.  The Company has also recorded the 8% dividend for the
Convertible Preferred Stock in the amount of $60,000 for the three and
six month periods ended June 30, 1998.

In July 1998, $100,000 0f Convertible Preferred Stock was converted
into 164,065 shares of the Company's common stock.

Future operating results attributable to common stockholders will
reflect the 8% preferred stock dividend.  In addition, approximately
$.3 million is expected to be recorded in the third quarter of 1998 as
an additional preferred stock dividend to reflect the final
amortization of the aforementioned conversion discount.


Liquidity and Capital Resources

Net cash used by operating activities amounted to $6.5 million and
$4.6 million for the six months ended June 30, 1998 and 1997,
respectively.  The most significant uses of cash for the 1998
period were the $4.3 million loss from operations (before
depreciation, amortization and provision for bad debts)and the
reduction of accounts payable and other liabilities of $2.7 million,
partially offset by a reduction in accounts receivable and inventories
of approximately $.6 million.  The most significant uses of cash for
the 1997 comparable period were an increase in inventories of $3.2
million, a decrease in accounts payable and other liabilities of $1.1
million and the loss from operations of $.8 (before depreciation and
amortization) 

Net cash used by investing activities was approximately $.8 million
and $.6 million for the six months ended June 30, 1998 and 1997,
respectively.  In 1998, the use of cash was attributable to
investments in 
property and equipment and the acquisition of Borg, while in 1997, the
use of cash was attributable to an investment in property and
equipment.

Net cash provided by financing activities for the six months
ended June 30, 1998 was $7.3 million and  primarily consisted of net
borrowings of $4.1 million under the Subordinated Loans (see Note 3 to
Consolidated Financial Statements), $3.2 in net proceeds from the
issuance of the Convertible Preferred Stock (See the following
discussion
and Note 6 to Consolidated Financial Statements)and a net short-term
loan of $.4 million by H. Irwin Levy, less net reductions of $.4
million under the Revolver.

<PAGE> 20
In May 1997, the Company obtained an asset based revolving bank
credit facility (the "Revolver") under which the Company could
borrow up to $7.0 million.  In the months that followed, the Company
was not in compliance with certain financial covenants of the Revolver
resulting in amendments to the Revolver in December 1997 and
February 1998, in which the bank waived compliance with those
covenants and the maximum borrowings were reduced to $3.0 million
as of June 30, 1998, with gradual reductions to $2.4 million
thereafter until maturity on July 31, 1998.  The Revolver bore
interest, payable monthly, at LIBOR plus 3%, was guaranteed by the
Company and was collateralized by
substantially all assets of the Company, including approximately
$1.0 million reflected as Restricted Cash at June 30, 1998.  The
outstanding balance under the Revolver at June 30, 1998 was 
$2.8 million and there was $.2 million of additional availability at
that time.

On August 3, 1998, the Company secured a new revolving line of credit
with another financial institution (the "new Revolver"). The new
Revolver consists of loans against the Company's eligible accounts
receivable for an amount equal to the lesser of $5.0 million or 80% of
the Company's eligible accounts receivable as defined, less certain
reserves.  The new Revolver bears interest, payable monthly, based on
prime plus 2%, is guaranteed by the Company and matures on August 3,
2000.  The Company pays a facility fee equal to 1% per annum on the
total facility of $5.0 million.  Advances under the new Revolver are
collateralized by substantially all assets of the Company, including
$.5 million in cash collateral.  The loan agreement provides for
certain covenants with respect to the maintenance of a specific
current ratio, net worth and limitation of operating losses as well as
restrictions on the incurrence of additional debt and capital
expenditures.  

Proceeds of $1.5 million from the new Revolver were used to repay and
replace the Company's previous Revolver, which expired on July 31,
1998.    

In September 1997, H. Irwin Levy agreed to loan up to $1.0 million
to the Company (the "Director Loan").  The Director Loan was
subordinated to the Revolver and was collateralized by
substantially all assets of the Company and as of December 31, 1997
had an outstanding principal balance of $950,000.  During the six
months ended June 30, 1998, Mr. Levy advanced an additional net amount
of $1,450,000 (consisting of $3,315,000 advanced, less $1,865,000
repaid).  Of this amount, $400,000 was repaid on July 10, 1998 and is
included in current borrowings.  In connection with the remaining
$1,050,000, on March 5, 1998 an Amended and Restated Loan Agreement
was executed, increasing the Director Loan to $2.0 million.  In March
1998, three private investors loaned the Company an aggregate of an
additional $3.0 million (together with the $2.0 million Director Loan,
hereinafter referred to as the Subordinated Loans).  The Subordinated
Loans bear interest at 10% per annum, payable monthly, mature on
September 5, 1999, are subordinated to the new Revolver and are
collateralized by substantially all of the Company's assets.  Amounts
advanced by Mr. Levy in excess of his portion of the Subordinated
Loans are pursuant to an unsecured revolving line of credit for up to
$1.0 million through December 31, 1998 which bears interest at 10% per
annum.   

In April 1998, the Company received $3.5 million in cash (including
$1.0 million from Mr. Levy) less issuance costs of $.3 million  from a
private placement of 8% Convertible Preferred Stock (see Note 6 to
Consolidated Financial
Statements).

<PAGE> 21
On July 7, 1998, the Company borrowed $1.0 million from a private
investor under an 8% Convertible Subordinated Debenture (the
"Debenture"), which matured on August 7, 1998, and has been extended
through September 18, 1998.  The Debenture is convertible into shares
of preferred stock with an 8% dividend rate, which in turn will be
convertible into shares of the Company's common stock based on a fixed
conversion rate.   

Management believes that proceeds already received from the
Subordinated Loans, Convertible Preferred Stock and the Debenture,
together with amounts expected to be available under the new Revolver
and Mr. Levy's unsecured line of credit will be sufficient to satisfy
the Company's working capital needs for the remainder of 1998, as
presently contemplated.  There can be no assurance, however, that the
Company may not require additional capital beyond its current
forecasted needs nor that any such additional required funds would be
available on terms acceptable to the Company, if at all, at such time
or times required by the Company.


Effect of Inflation

Inflation has not had an impact on the Company's operations and the
Company does not expect that it will have a material impact in
1998.

Other

Year 2000 issues pertain to the inability of certain computerized
information systems to properly recognize date-sensitive information
as the year 2000 approaches.  Systems that do not recognize such
information could generate erroneous data or cause systems to fail.
The Company is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations,
and has preliminarily determined that any costs, problems or
uncertainties
associated with the potential consequences of Year 2000 issues are
not expected to have a material impact on its future operations or
financial condition.


Part II  -  OTHER INFORMATION 


Item 1.  Legal Proceedings 

In June 1996, a Complaint was filed in the Supreme Court of the
State of New York, County of Nassau, against the Company and its
Chairman.  The plaintiffs claim to have contractual and proprietary
interests in the prospect of a transaction to purchase certain net
assets acquired by the Company and seek compensatory damages plus
punitive damages.

In August 1996, a Complaint was filed in the same Court making
similar allegations against a subsidiary, R. Daniel Smith, the
subsidiary's president at that time and Intelligent Manufacturing
Systems, Inc., a
company for which Mr. Smith was the Chief Executive Officer and
sole shareholder.  In this action, the plaintiffs seek compensatory
damages plus punitive damages for alleged breach of contract.  

<PAGE> 22
Both cases are currently in discovery. Counsel for the Company
believes that the Company has good defenses to both claims and that
it will not incur any material liability.  The Company is unaware
of any facts that would support any of the plaintiffs' claims and,
accordingly, the Company believes that the claims are without
merit.    

In June 1998, a Complaint was filed in the Supreme Court of the State
of New York by AIBC Investment Services Corp. ("the Plaintiff"), which
claims that the Company, its wholly-owned subsidiary and Mr. Smith
(the "Defendants") breached an agreement wherein the Plaintiff was
allegedly engaged as placement agent in connection with raising funds
for the Defendants.  The Plaintiff seeks damages in the amount of not
less than $262,500 plus interest, warrants to purchase the Company's
common stock at a price to be determined and punitive damages.  The
case is in the initial stages of discovery and the Company believes
that the claims are without merit.

From time to time, the Company is subject to legal proceedings and
other claims arising in the ordinary course of business.  In the
opinion of management, the Company is not a party to any litigation
the outcome of which would have a material adverse effect on its
business or operations.

Item 2.  Changes in Securities and Use of Proceeds.

     Effective April 14, 1998, the Company issued and sold in a
private placement to certain accredited investors a total of 3,500
shares of Series A Preferred Stock at a purchase price of $1,000 per
share, resulting in gross proceeds to the Company of $3.5 million. 
The shares of Series A Preferred Stock were convertible into shares of
the Company's common stock at the lesser of a fixed conversion price
or a percentage of the market value of the common stock.  In
connection with the sale of the Series A Preferred Stock, the Company
issued warrants to purchase 280,000 shares of the Company's common
stock (including 80,000 warrants to Mr. Levy), exercisable at any time
through April 2001 at an exercise price of $1.50 per share.
     
     On June 1, 1998, the Company created a new class of Preferred
Stock designated Series B Preferred Stock, which is identical to the
Series A Preferred Stock originally issued with the single exception
that the Series B Preferred Stock may, under certain limited
circumstances, be redeemed by the Company for cash in the amount of
130% of the purchase price of the Series B Preferred Stock.  The
Series B Preferred Stock is convertible into common stock, at any time
through April 16, 2000, at a conversion price equal to the lesser of
$1.44 per share or 77% of the market price for the common stock on the
date of conversion.  On April 16, 2000, all outstanding shares of
Series B Preferred Stock will automatically convert to shares of
common stock at the same conversion price.

     On June 9, 1998, each holder of the Series A Preferred Stock
exchanged their shares of Series A Preferred Stock for an equal number
of shares of Series B Preferred Stock and, on June 12, 1998, the
Company filed a Certificate of Elimination with the Secretary of State
of Delaware to formally eliminate the Series A Preferred Stock.

     On July 7, 1998, the Company borrowed $1 million for a private,
accredited investor pursuant to an 8% Convertible Subordinated
Debenture (the "Debenture") which matures on September 18, 1998.  At
maturity, the debenture is convertible, at the Company's option, into
shares of a newly created Series A Preferred Stock, which preferred
stock will, in turn, be convertible into shares of the Company's
common stock at a fixed conversion rate.

<PAGE> 23
     The securities issued in connection with the Director Loan and
the Subordinated Loans, the Series A Preferred Stock, the Series B
Preferred Stock, the warrants issued in connection with the Series A
Preferred Stock, and the Debenture were all issued pursuant to the
exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended.

     The new Revolver provides that the Company may not, without the
prior written consent of its lender, declare or pay cash dividends on
any of its stock, other than its preferred stock. 

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

     On June 8, 1998, the Company held its annual meeting of
stockholders.  At that meeting, the stockholders:  elected seven
directors; amended the Company's Restated Certificate of Incorporation
to increase the authorized number of shares of commons stock from 24
million to 40 million; ratified the April 1998 approval of the Board
of Directors of the sale of 3,500 shares of Series A Preferred Stock
and the related issuance of warrants to acquire 280,000 shares of
common stock, including the issuance at below market prices of more
than 20% of the common stock outstanding, the issuance of more than 5%
of the common stock to all officers, directors and key employees, in
the aggregate, in any one year, and the issuance of more than 10% of
the common stock to all officers, directors and key employees, in the
aggregate, in a five year period; and ratified the Company's selection
of BDO Seidman as the Company's independent certified public
accountants.

     The seven directors who were elected at the annual meeting are
listed below, together with a tabulation of the votes coast with
respect to each matter voted upon:

Matter                   For       Against   Abstain   Not Voted
Election of Directors:

Michael L. Wise          15,061,655                         163,987
Bernard R. Green         15,063,655                         162,013
H. Irwin Levy            15,058,754                         166,888
Mark F. Levy             15,056,954                         168,688
Richard Reiss, Jr.       15,063,754                         163,888
R. Daniel Smith          15,063,754                         163,888
Joseph D. Weingard       15,063,754                         163,888

Amendment to Certificate 14,943,442     273,334    8,866
  of Incorporation

Ratification of Sale      9,602,891     193,655   64,355         5,364,641
  of Preferred Stock

Ratification of          15,190,205     27,494           7,843
  Selection of
  Accountants   

<PAGE> 24
Item 6.  Exhibits and Reports on Form 8-K.

     (a)  Exhibits

Exhibit 
Number         Description    

3.1            Certificate of Elimination of the Designation of the
               Series A Preferred Stock of the Company*

3.2            Certificate of Amendment to Restated Certificate of
               Incorporation of the Company*

4.1            Form of Share Exchange Agreement dated June 9, 1998
               between the Company and holders of the Series A Preferred 
               Stock whereby such holders exchanged their Series A Preferred 
               Stock for Series B Preferred Stock*

4.2            8% Convertible Subordinated Debenture dated June 7,
               1998 issued by the Company to Maurice Halperin, as amended on 
               August 7, 1998

10.1           Loan and Security Agreement dated August 3, 1998 by and
               among the Company, nStor Corporation, Inc. and Finova Capital
               Corporation

27             Financial Data Schedule

     *Incorporated by reference to the Exhibits to Amendment No. 1 to
the Company's Registration Statement on Form S-3 (File No. 333-52787)
filed with the Securities and Exchange Commission on June 22, 1998.

     (b)  Reports on Form 8-K.

          No reports on Form 8-K were filed during the quarter for
which this report is being filed. 



<PAGE> 25


                            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/ Larry J. Calise
August 12, 1998           _______________________________
                          Larry J. Calise, 
                          Principal Financial and
                          Accounting Officer


<PAGE> 26

     EXHIBIT INDEX


4.2            8% Convertible Subordinated Debenture dated June 7,
1998 issued by the Company to Maurice Halperin, as amended on August
7, 1998

10.1           Loan and Security Agreement dated August 3, 1998 by and
among the Company, nStor Corporation, Inc. and Finova Capital
Corporation

27             Financial Data Schedule



26