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, 2001

                                       OR

___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

          For the transition period from ___________ to ______________


                         Commission File Number: 0-8354


                            nSTOR TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its Charter)


                 Delaware                                   95-2094565
                 --------                                   ----------
       (State of other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                   Identification No.)


                               10140 Mesa Rim Road
                           San Diego, California 92121
                           ---------------------------
                    (Address of principal executive offices)

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


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


         Number of shares outstanding of the Registrant's Common Stock,
            par value $.05 per share, as of July 31, 2001: 35,719,022


<PAGE> 2


                    nSTOR TECHNOLOGIES, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS





PART I.        FINANCIAL INFORMATION
                                                                            Page
                                                                          Number
                                                                          ------
  Item 1.      Financial Statements

        Consolidated Balance Sheets as of June 30,
          2001 (Unaudited) and December 31, 2000 ..........................    3
        Consolidated Statements of Operations
          (Unaudited) for the three and six months
          ended June 30, 2001 and 2000 ....................................    4
        Consolidated Statement of Stockholders'
          Deficit (Unaudited) for the six months
          ended June 30, 2001 .............................................    5
        Consolidated Statements of Cash Flows
          (Unaudited) for the six months ended
          June 30, 2001 and 2000 ..........................................  6-7
        Notes to Consolidated Financial Statements
          (Unaudited) ..................................................... 8-13


  Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations ................13-18


  Item 3.  Quantitative and Qualitative Disclosures about
           Market Risk ....................................................   18


Part II.  OTHER INFORMATION ...............................................18-20


SIGNATURE .................................................................   21


<PAGE> 3


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                            nSTOR TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (dollars in thousands)
                                                           June 30,
                                                              2001      Dec. 31,
         ASSETS                                           (unaudited)     2000
         ------                                           -----------   --------
Current assets:
  Cash and cash equivalents ........................       $   151       $    37
  Accounts receivable, net of $300 and $402 in
    allowance for doubtful accounts.................         3,241         4,395
  Inventories ......................................         4,715         5,174
  Prepaid expenses and other .......................           993         1,278
                                                           -------       -------
     Total current assets ..........................         9,100        10,884

Property and equipment, net of $5,077 and
  $4,583 in accumulated depreciation ...............         1,841         2,384
Goodwill, net of $601 and $400 in
   accumulated amortization ........................         2,196         2,397
Other assets .......................................            45            57
                                                           -------       -------
                                                           $13,182       $15,722
         LIABILITIES                                       =======       =======
         -----------
Current liabilities:
  Bank line of credit ..............................       $ 3,122       $ 4,086
  Other borrowings .................................         1,250          --
  Deferred revenue .................................         1,913         2,400
  Accounts payable and other .......................         9,596         9,504
                                                           -------       -------
     Total current liabilities .....................        15,881        15,990

Long-term debt .....................................          --           7,258
                                                           -------       -------
     Total liabilities .............................        15,881        23,248
                                                           -------       -------
         STOCKHOLDERS' DEFICIT
        ---------------------
Preferred stock, $.01 par; 1,000,000 shares authorized,
 in order of preference:
  Convertible (except for Series G) preferred stock
   (aggregate liquidation value $1,000 per share)
   issued and  outstanding  at June 30, 2001 and
   December 31, 2000,  respectively  - Series  H,
   5,100  and 0  shares;  Series F, 0 and 722
   shares; Series I, 9,092 and 0 shares; Series D,
   2,000 shares; Series E, 3,500 shares; and Series
   G, 0 and 2,000 shares ...........................              -            -
Common stock, $.05 par; 75,000,000 shares authorized;
 35,719,022 and 35,478,489 shares issued and outstanding
 at June 30, 2001 and December 31, 2000, respectively         1,785        1,773
Additional paid-in capital .........................         84,298       71,529
Deficit ............................................        (88,782)    (80,828)
                                                            -------      -------
     Total stockholders' deficit ...................         (2,699)     (7,526)
                                                            -------      -------
                                                            $13,182      $15,722
                                                            =======      =======

          See accompanying notes to consolidated financial statements.


<PAGE> 4


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

<TABLE>
<CAPTION>

                                                   Three Months             Six Months
                                                  Ended June 30,          Ended June 30,
                                               --------------------    --------------------
                                                  2001      2000         2001        2000
                                                   (unaudited)             (unaudited)
                                               --------    --------    --------    --------
<S>                                            <C>         <C>         <C>         <C>
Sales ......................................   $  3,953    $ 10,865    $ 10,171    $ 23,405
Cost of sales ..............................      3,050       7,569       7,555      16,538
                                               --------    --------    --------    --------
     Gross profit ..........................        903       3,296       2,616       6,867
                                               --------    --------    --------    --------
Operating expenses:
  Selling, general and administrative ......      2,808       4,186       6,116       8,683
  Research and development .................        892         894       1,971       1,510
  Depreciation and amortization ............        368       1,146         851       2,262
                                               --------    --------    --------    --------
     Total operating expenses ..............      4,068       6,226       8,938      12,455
                                               --------    --------    --------    --------
     Operating loss ........................     (3,165)     (2,930)     (6,322)     (5,588)

Gain on sale of assets of Borg
  Adaptive Technologies (Note 5) ...........       --          --          --         5,575
Other (expense) income, net ................        (25)        350          13         381
Interest expense ...........................       (328)       (316)       (654)       (614)
                                               --------    --------    --------    --------
Net loss before preferred dividends
  and extraordinary loss ...................     (3,518)     (2,896)     (6,963)       (246)

Extraordinary loss from debt
  extinguishment (net of tax of $0) ........       (362)       --          (362)       --
                                               --------    --------    --------    --------
Net Loss ...................................     (3,880)     (2,896)     (7,325)       (246)

Preferred stock dividends ..................       (444)       (192)       (629)       (403)
                                               --------    --------    --------    --------
Net loss applicable to common stock ........   ($ 4,324)   ($ 3,088)   ($ 7,954)   ($   649)
                                               ========    ========    ========    ========

Basic and diluted net loss per common share:

Loss before extraordinary loss .............   ($   .11)   ($   .10)   ($   .21)   ($   .02)
  Extraordinary loss .......................   (    .01)           -   (    .01)          -
                                               --------    --------    --------    --------
Net loss per common share                      ($   .12)   ($   .10)   ($   .22)   ($   .02)
                                               ========    ========    ========    ========

Weighted average number of common shares
  used in per share computation, basic
  and diluted .............................   35,597,434  31,651,435  35,538,290  30,603,864
                                              ==========  ==========  ==========  ==========

</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE> 5


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

                                                                  Preferred       Addi-
                                        Common Stock                Stock         tional
                                   ----------------------     -----------------   Paid-In
                                     Shares       Amount      Shares    Amount    Capital      Deficit        Total
                                   ----------     -------     ------    -------   -------     ---------     ---------
<S>                                <C>            <C>         <C>       <C>       <C>         <C>           <C>
Balances, December
 31, 2000 ......................   35,478,489     $ 1,773     8,222     $   -     $71,529     ($80,828)     ($ 7,526)

Issuance of Convertible
  Preferred Stock:
   Series I in exchange for
    Series G ...................                                 57         -          57                         57
   Series I and Series H in
    satisfaction of borrowings,
    net of issuance costs ......                             11,885         -      11,870                     11,870
   Series I for cash ...........                                250         -         250                        250

Conversion of Series F
   Convertible Preferred
    Stock ......................      240,533          12      (722)        -         (12)                         -

Common stock warrants issued
   in connection with borrowings                                                      604                        604

Preferred stock dividends ......                                                                  (629)         (629)

Net loss for the six
 months ended June 30, 2001 ....                                                                (7,325)       (7,325)
                                   ----------     -------    ------     -------   -------     --------      --------
Balances, June 30,
 2001 (unaudited) ..............   35,719,022     $ 1,785    19,692     $   -     $84,298     ($88,782)     ($ 2,699)
                                   ==========     =======    ======     =======   =======     ========      =========
</TABLE>


          See accompanying notes to consolidated financial statements.


<PAGE> 6


                            nSTOR TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                                                Six Months
                                                              Ended June 30,
                                                           --------------------
                                                               2001        2000
                                                          (unaudited)(unaudited)
                                                           ---------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ...............................................   ($7,325)   ($  246)
  Adjustments to reconcile net loss to net
    cash used by operating activities:
      Gain on sale of assets of Borg Adaptive
       Technologies ......................................      --       (5,575)
      Depreciation .......................................       650        981
      Extraordinary loss from debt extinguishment ........       362       --
      Amortization of intangible assets ..................       201      1,281
      Amortization of deferred financing costs and other .       242         31
      Changes in assets and liabilities, net of
        effects from acquisition:
          Decrease in accounts receivable ................     1,154      1,089
          Decrease (increase) in inventories .............       796     (1,450)
          Decrease in prepaid expenses and other .........       264        153
          Decrease in deferred revenue, accounts
            payable and other ............................    (1,024)    (2,790)
                                                             -------    -------
Net cash used by operating activities ....................    (4,680)    (6,526)
                                                             -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from sale of assets of Borg Adaptive
    Technologies .........................................      --        7,013
  Additions to property and equipment ....................       (73)      (565)
  Cash paid for acquisition ..............................      --         (293)
                                                             -------    -------
Net cash (used) provided by investing activities .........       (73)     6,155
                                                             -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (repayments) borrowings on bank line of credit .....      (964)       140
  Additions to other borrowings ..........................     5,641        650
  Repayment on other borrowings ..........................      --       (1,685)
  Issuance of preferred stock ............................       250       --
  Proceeds from exercise of stock options
    and warrants .........................................      --        1,178
  Issuance of common stock, net of transaction costs .....      --           15
  Cash paid for preferred stock dividends ................       (60)      (497)
                                                             -------    -------
Net cash provided (used) by financing activities .........     4,867       (199)
                                                             -------    -------
Net increase (decrease) in unrestricted cash
  and cash equivalents during the period .................       114       (570)

Unrestricted cash and cash equivalents at the
  beginning of the period ................................        37        650
                                                             -------    -------
Unrestricted cash and cash equivalents at the
  end of the period ......................................   $   151    $    80
                                                             =======    =======

          See accompanying notes to consolidated financial statements.


<PAGE> 7


                            nSTOR TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (concluded)

                                                                Six Months
                                                              Ended June 30,
                                                         -----------------------
                                                            2001        2000
                                                         (unaudited) (unaudited)
                                                         ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during period for interest ..............     $     348     $   539
                                                          =========     =======

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

  NON-CASH INVESTING ACTIVITIES:
    Acquisition:
      Fair value of assets acquired .................     $    --       $ 2,969
      Liabilities assumed or incurred ...............          --           (76)
      Common stock issued ...........................          --        (2,600)
                                                          ---------     -------
          Cash paid .................................     $    --       $   293
                                                          =========     =======

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

    Issuance of preferred stock in satisfaction
      of borrowings .................................     $  11,870     $  --
                                                          =========     =======


          See accompanying notes to consolidated financial statements.


<PAGE> 8


                            nSTOR TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001
                                  (UNAUDITED)


(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.

        Basis of Presentation

In the opinion of management,  the unaudited  consolidated  financial statements
furnished  herein  include  all   adjustments,   consisting  only  of  recurring
adjustments  necessary for a fair  presentation of the results of operations for
the interim  periods  presented.  These interim  results of  operations  are not
necessarily  indicative  of  results  for  the  entire  year.  The  consolidated
financial  statements  contained  herein should be read in conjunction  with the
consolidated  financial  statements and related notes contained in the Company's
Form 10-K for the year ended December 31, 2000.

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

The accompanying  consolidated  financial statements have been prepared assuming
that the  Company  will  continue  as a going  concern.  This  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business. The Company incurred net losses of $21.9 million, $18.7 million and
$10.4  million  for  the  years  ended   December  31,  2000,   1999  and  1998,
respectively,  and $7.3  million  for the six  months  ended June 30,  2001.  In
addition,  the Company has negative working capital and a stockholders'  deficit
at June 30, 2001. These matters, among others, raise substantial doubt about the
Company's ability to continue as a going concern.

During most of 2000, the Company's  management  team  formulated and implemented
its current product strategy centered around its NexStor 2U line of SAN (Storage
Area Network)  ready storage  solutions.  This strategy  included the transition
from the Company's  older  technology  legacy  products to the newer  technology
solutions, which the Company began shipping in the third quarter of 2000. During
the second half of the year and the first half of 2001,  the decline in revenues
of the  Company's  older  products  exceeded  the increase in sales of its newer
technology solutions, which contributed to the Company's operating losses.

However,  the Company has recently  experienced  growth in its indirect customer
channel base (original  equipment  manufacturers  (OEMs),  value added resellers
(VARs) and system  integrators).  Since late 2000,  the Company has entered into
various  agreements  with  domestic  and  international  OEMs,  VARs and  system
integrators.  In 2000,  indirect  sales  represented  a small  percentage of the
Company's total sales revenues.  In an effort to capitalize on this growth trend
and simultaneously reduce operating costs, the Company has shifted its sales and
marketing  strategy  to  place  an  emphasis  on the  Company's  indirect  sales
function. As part of this strategy,  since January 2001, the Company has reduced
its direct sales personnel and related costs,  and has begun to focus its direct
sales team to certain designated  markets.  The Company's  operating results are
expected to be positively  affected by an increase in indirect  sales;  however,
there is no assurance that an increase will occur.


<PAGE> 9


Historically, the Company has been successful in securing significant amounts of
equity and debt financing to support its operating deficits. Since late 1997 and
through July 31, 2001,  the Company  obtained net cash proceeds of $38.2 million
from private investors, including $6.5 million since December 31, 2000. Of these
amounts,  $13.6 million was received from H. Irwin Levy, the Company's  Chairman
of the Board and a principal  stockholder,  or companies  controlled by Mr. Levy
(collectively,  Mr.  Levy).  Additional  cash of  approximately  $7 million  was
obtained during January 2000 when the Company sold  substantially all the assets
of its wholly-owned subsidiary, Borg Adaptive Technologies,  Inc. (see Note 5 to
Consolidated Financial Statements).

Effective  April 12, 2001,  holders of all the Company's  non-bank notes payable
totaling $11.9 million  (including  $110,000 in accrued  interest) on that date,
exchanged  their notes for  convertible  preferred  stock with a stated value of
$11.9 million (see Note 3 to Consolidated Financial Statements). Accordingly, as
of that date, the Company's stockholder's equity increased by $11.9 million.

The Company is currently  exploring various  alternatives for raising additional
debt or equity capital to finance its short-term and long-term  plans as well as
operating  deficits expected to be incurred until it begins to generate positive
operating cash flows.  Due to the financial  history of the Company,  as well as
conditions in the technology-related  financial markets and other uncertainties,
many of which are outside the Company's control,  there can be no assurance that
such  required  additional  funds  will be  available  on  terms  acceptable  to
management,  if at all,  or that the Company  will be able to generate  positive
cash flows from operations in the future.  In June 2001, the Company received an
offer,  as amended,  from a private  investor to  purchase  an  approximate  49%
interest in the Company for an aggregate  investment of $16.4 million (including
a $3 million loan) (see Note 7 to Consolidated Financial Statements).

        Business

The Company is a  manufacturer  and  supplier of highly  integrated,  enterprise
class storage solutions for computing operations that support multiple operating
platforms,  including  Windows NT, Windows 2000,  Solaris,  Linux,  SGI and MAC.
Designed  for  storage  intensive  environments  such as the  Internet  or other
mission-critical  applications,  the  Company's  products  are  offered in Fibre
Channel,   Fibre-to-SCSI   (Small   Computer   System   Interface),   and   SCSI
architectures.  The Company also manufactures  storage  management  software and
complements  its  product  offerings  with  Storage  Area  Network   (SAN)-ready
solutions.

        Use of Estimates

The  preparation  of  consolidated   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 consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the  reporting  period.  Actual  results  could  differ  materially  from  those
estimates.

        Net Income (Loss) Per Common Share (EPS)

Basic EPS is calculated  by dividing the net income  (loss)  available to common
stock by the weighted  average number of shares  outstanding  during the period.
Diluted EPS includes the effect of potentially dilutive  securities.  During the
six months  ended June 30, 2001 and 2000,  the effect of  including  potentially
dilutive securities would have been anti-dilutive and were accordingly  excluded
from the calculation of dilutive earnings per share.


<PAGE> 10


As of July 31, 2001,  outstanding  potentially  dilutive securities consisted of
(in thousands):

Convertible preferred stock ................................              22,877
Stock options ..............................................               3,077
Warrants ...................................................               3,304
                                                                          ------
Total ......................................................              29,258
                                                                          ======

        New Accounting Pronouncements

In July 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards No. 141 (SFAS 141),  Business  Combinations,
which  eliminates  the pooling  method of accounting  for business  combinations
initiated  after June 30, 2001. In addition,  SFAS 141 addresses the  accounting
for  intangible  assets and goodwill  acquired in a business  combination.  This
portion of SFAS 141 is effective for business combinations  completed after June
30, 2001.  The Company  does not expect SFAS 141 will have a material  impact on
the Company's financial position or results of operations.

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142 (SFAS 142), Goodwill and Intangible Assets, which revises the accounting for
purchased  goodwill  and  intangible  assets.   Under  SFAS  142,  goodwill  and
intangible  assets with indefinite lives will no longer be amortized and will be
tested for impairment annually. SFAS 142 is effective for fiscal years beginning
after December 15, 2001, with earlier adoption  permitted.  The Company does not
expect SFAS 142 will have a material impact on the Company's  financial position
or results of operations.



(2) GOODWILL

Goodwill,  representing the excess of the cost of an acquired  business over the
fair value of net assets  acquired,  is carried at cost and amortized  under the
straight line method over seven years.  Management periodically reviews goodwill
to determine if an impairment has occurred.  Among various considerations,  this
process  includes  evaluating  recoverability  based  upon cash flow  forecasts.
During the fourth quarter of 2000, the Company recorded a write-down of goodwill
of $12  million,  which was  determined  to have been  impaired  because  of the
Company's  projected  inability to generate  sufficient  future operating income
from the assets acquired in a 1999  acquisition.  At June 30, 2001,  unamortized
goodwill of $2.2  million was not  considered  to be impaired.  Amortization  of
goodwill  amounted to $.2 million and $1.3 million for the six months ended June
30, 2001 and 2000, respectively.



(3) BORROWINGS

        Revolving Credit Facility (Bank Line of Credit)

The Company's Bank Line of Credit currently provides for borrowings based on the
lesser of $10 million or: (i) 85% of eligible accounts  receivable,  as defined,
plus (ii) the lesser of $1.25 million or 20% of eligible inventory,  as defined,
bears  interest at prime  (6.75% at June 30,  2001) plus 1.5%,  is  scheduled to
mature in April 2002 and is collateralized by substantially all of the Company's
assets.  The Bank Line of Credit also provides for certain financial  covenants,
including minimum net worth and net income requirements.

Since the fourth  quarter of 2000,  the Company has not been in compliance  with
the minimum net worth and net income  requirements  and is in technical  default
under the compliance provisions of the Bank Line of Credit.


<PAGE> 11


The lender and the Company are negotiating the terms of a forbearance  agreement
which, among other items,  would provide that the maximum  availability would be
reduced to $5 million  and the lender  would  forbear  from  exercising  certain
rights and remedies with respect to this default through August 31, 2001, during
which period the interest rate would be increased by 2% per annum.  There can be
no guarantee  that the Company will be successful in its  negotiations  with the
lender.  If the Company is not successful in its  negotiations  with the lender,
the Company will need to seek  replacement  financing which may not be available
given the Company's  history of losses,  existing  negative  working capital and
stockholders' deficit.

As of June 30, 2001, the outstanding balance of the Bank Line of Credit was $3.1
million and an additional $148,000 was available based on eligible collateral.

        Other Borrowings/Extraordinary Loss on Debt Extinguishment

At June 30, 2001, the Company's short-term borrowings consisted of $1.25 million
with  interest at 10% per annum,  including  $.8 million  due to Mr.  Levy.  The
borrowings  mature on August 31, 2001,  as extended.  In  connection  with these
notes,  the Company  issued  warrants to purchase an aggregate of 625,000 shares
(including  400,000  warrants  to Mr.  Levy) of the  Company's  common  stock at
exercise prices ranging from $.45 to $.75 per share, exercisable at issuance and
expiring on June 30, 2004.  The warrants were valued based on the  Black-Scholes
option-pricing  model as of the date of issuance at an aggregate of $208,000 and
were recorded as a discount to the notes.

At December 31, 2000,  the Company's  aggregate  long-term debt was $7.3 million
(including  $1.7 million due to Mr.  Levy).  Subsequent  to December and through
March 31, 2001, the Company borrowed an additional $4.5 million  (including $1.9
million from Mr. Levy), of which $3.8 million was convertible into the Company's
common stock at $1.00 per share.  In connection  with certain of this debt,  the
Company issued warrants to purchase an aggregate of 1,137,500 shares  (including
512,500  warrants to Mr. Levy) of the  Company's  common stock,  principally  at
$1.20 per share, exercisable at issuance and expiring,  principally on March 31,
2004. The warrants were valued based on the Black-Scholes  option-pricing  model
as of the dates of issuance at an aggregate  of $396,000 and were  recorded as a
discount to the notes.  Effective April 12, 2001, holders of the Company's notes
payable  totaling  $11.9  million on that date  (including  $110,000  in accrued
interest)  exchanged  their  notes  (the  Exchange)  for  Series H and  Series I
Convertible  Preferred Stock (see Note 4 to Consolidated  Financial  Statements)
with a stated value of $11.9 million  (including $3.6 million held by Mr. Levy).
Accordingly,  as of that  date,  the  Company  recorded  a  $362,000  loss  from
extinguishment of debt representing the unamortized discount on the notes.

As of June 30,  2001,  approximately  $242,000  of  discount  was  amortized  to
interest expense.



(4) PREFERRED STOCK

At June 30, 2001, the Company had four classes of preferred  stock (Series D, E,
H and I) with an aggregate  stated value of $19.7 million.  Series D Convertible
Preferred Stock,  with an aggregate stated value of $2 million at June 30, 2001,
accrues  dividends at 8% per annum,  payable  quarterly,  is  convertible by the
holder at any time into an aggregate of 2,000,000 shares of the Company's common
stock,  based  on a  conversion  price  of $1 per  share,  and has an  automatic
conversion  feature  in which  each  share  not  converted  by  October  2001 is
automatically converted into common stock. Series E Convertible Preferred Stock,
with an aggregate  stated value of $3.5 million  (including $1.5 million held by
Mr. Levy) at June 30, 2001, accrued dividends at 9% through June 7, 2001 and 10%
thereafter, payable quarterly, and is convertible by the holder at any time into
an aggregate of 1,166,666  shares  (including  500,000 shares as to Mr. Levy) of
the Company's  common stock,  based on a conversion  price of $3 per share.  The
Series H and I Convertible  Preferred  Stock,  with an aggregate stated value of
$14.2 million,  issued in April 2001, accrue dividends at 10% per annum, payable
quarterly, and are convertible by the holder into shares of the Company's common
stock based on a conversion price of $.72 per share.


<PAGE> 12


At December 31, 2000, the Company had two additional classes of preferred stock.
The Company's  Series F Convertible  Preferred  Stock,  with an aggregate stated
value of $.8 million at December 31, 2000,  was  converted  into an aggregate of
240,533  shares of common stock  during the six months ended June 30, 2001.  The
Series G Preferred Stock,  with an aggregate stated value of $2 million (held by
Mr. Levy),  accrued dividends at 10%, payable  quarterly,  and was redeemable at
the Company's option.  Attached to the Series G Preferred Stock was a warrant to
purchase  500,000  shares of the  Company's  common  stock at $1.50  per  share,
exercisable  from July 1, 2001  through  December  31, 2003 (the  Warrant).  The
Warrant  provided  that if any  portion  of the  Series G  Preferred  Stock  was
redeemed by the Company prior to June 30, 2001, a corresponding pro-rata portion
of the Warrant would be cancelled.  Effective April 12, 2001, Mr. Levy exchanged
the Series G Preferred Stock and the Warrant for Series I Convertible  Preferred
Stock  with a  stated  value  of $2.1  million  (including  $57,000  of  accrued
dividends).



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

On January 10, 2000,  the Company sold  substantially  all of the assets of Borg
Adaptive  Technologies,  Inc., a  wholly-owned  subsidiary of the Company,  to a
wholly-owned  subsidiary  of QLogic  Corporation,  for $7 million cash (the Borg
Sale). The net book value of assets sold totaled $.6 million and included all of
the  intellectual  property  rights  relating  to the  Company's  Adaptive  RAID
(Redundant Array of Independent Disks) technology,  including software,  patents
and trademarks, and certain tangible assets, including test and office equipment
and  tenant  improvements,  subject  to the right of the  Company  to the use of
intellectual  property for its own use. In  connection  with the Borg Sale,  the
Company  recorded  transaction  costs of $.5 million and a gain of $5.6 million,
which is net of compensation expense of $.8 million resulting from modifications
to certain stock options and warrants.



(6) INCOME TAXES

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

As of December 31, 2000, there were unused net operating loss carryforwards (the
NOL's) for regular federal income tax purposes of approximately  $41 million and
for California  tax purposes of  approximately  $8.3 million  expiring from 2012
through 2020 and 2001 through 2005,  respectively.  In addition, the Company has
research and development tax credit carryforwards of approximately $1.2 million,
which  expire from 2002  through 2018 and in  conjunction  with the  Alternative
Minimum Tax (AMT) rules,  the Company has available AMT credit  carryforwards of
approximately $.8 million,  at December 31, 2000, which may be used indefinitely
to reduce regular federal income taxes.

The usage of  approximately  $7.2 million of the federal NOL  carryforwards  and
approximately $2 million of the California NOL carryforwards is limited annually
to  approximately  $.4 million due to an  acquisition,  which caused a change in
ownership for income tax purposes.


<PAGE> 13


At June 30, 2001 and  December 31, 2000,  a 100%  valuation  allowance  has been
provided on the Company's deferred tax assets because it is more likely than not
that loss carryforwards will not be realized based on recent operating results.



(7) OFFER FROM PRIVATE INVESTOR

On June 26,  2001,  the  Company  received  an offer from a private  investor to
purchase an approximate 45% equity  interest in the Company for $12 million.  On
July 27, 2001,  the offer was  increased to $16.4  million  (consisting  of a $3
million 8% loan and $13.4  million in  tradeable  securities  ) to  purchase  an
approximate 49% equity  interest in the Company.  The offer requires the Company
to cause all of its  preferred  stock  (except  Series H) to be  converted  into
common stock, as well as other  conditions.  On August 14, 2001, the Company and
the investor, Maurice Halperin, jointly commenced negotiations for modifying the
terms of the offer. Mr. Halperin agreed to extend the deadline for acceptance of
the offer during the period that the negotiations continue. To date, the Company
and Mr.  Halperin have not concluded  the terms of the proposed  investment.  As
part of the  negotiations,  on August  14,  2001,  a company  controlled  by Mr.
Halperin  provided  the Company  with  interim  financing  in the form of a $3.1
million, 8% loan. On August 15, 2001, the Board elected Mr. Halerpin as Chairman
of the Board,  replacing  current  Chairman,  H.  Irwin  Levy,  who became  Vice
Chairman and who will continue to serve as Chief Executive Officer.



(8) SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

The Company operates predominantly in one business segment,  information storage
solutions.  During  the six  months  ended  June 30,  2001,  no single  customer
accounted  for greater than 10% of the Company sales while during the six months
ended June 30, 2000, one customer accounted for 22% of the Company's sales.



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

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

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

Subsequent  written and oral  forward  looking  statements  attributable  to 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.


<PAGE> 14


Overview

We are a  manufacturer  and  supplier  of highly  integrated,  enterprise  class
storage  solutions  for computing  operations  that support  multiple  operating
platforms,  including  Windows NT, Windows 2000,  Solaris,  Linux,  SGI and MAC.
Designed  for  storage  intensive  environments  such as the  Internet  or other
mission-critical  applications,  our  products  are  offered  in Fibre  Channel,
Fibre-to-SCSI (Small Computer System Interface), and SCSI architectures. We also
manufacture  storage  management  software and complement our product  offerings
with SAN-ready  solutions.  We market products through a global network of Value
Added  Resellers  (VARs),   Original  Equipment  Manufacturers  (OEMs),  systems
integrators and a direct sales force in the United States.

In June 2001,  Thomas Makmann was appointed as our President and Chief Operating
Officer  replacing  Larry  Hemmerich who has agreed to remain as a consultant to
our company.  Mr.  Makmann,  who joined us in December 2000 as Vice President of
Business  Development  with the expectation that he would become Chief Operating
Officer, has over thirty (30) years of experience in top management positions in
various high-tech  start-ups and turnarounds in storage  hardware,  software and
video companies.

                              Results of Operations

For the three  months  ended June 30,  2001 and 2000,  we incurred a net loss of
$3.9  million  and $2.9  million,  respectively.  We incurred a net loss of $7.3
million  and $.2  million  for the six  months  ended  June 30,  2001 and  2000,
respectively. The 2000 six-month period included a $5.6 million gain on the Borg
sale  recognized  during the first  quarter of 2000 (see Note 5 to  Consolidated
Financial Statements).

Sales

Net sales for the three and six  months  ended  June 30,  2001  decreased  to $4
million and $10.2  million,  respectively,  from $10.9 million and $23.4 million
for the same periods in 2000,  respectively.  This significant decrease reflects
the transition from our older technology legacy products to our newer technology
solutions  centered around our new NexStor 2U (3.5 inch high) storage enclosures
and RAID  systems  as well as the  recent  economic  downturn  which has  caused
customer delays in purchasing  technology and other equipment.  We have recently
experienced  growth in our  indirect  customer  base and since late  2000,  have
entered into various  agreements with domestic and international  OEMs and VARs.
We plan to further expand our indirect business, which we believe will provide a
new  source  of  revenues.  In  order  to take  advantage  of the  opportunities
available  in the  indirect  business  channels,  we have  shifted our sales and
marketing strategy to provide greater technical,  marketing and sales support to
our indirect sales  function.  As part of this  strategy,  since January 2001 we
have reduced our direct sales  personnel  and related  costs,  and are currently
refocusing our direct sales team to designated markets as well as existing large
customers.

During the six months ended June 30, 2001, our sales revenues  consisted of $2.8
million in direct sales to end users,  $5.7  million in indirect  sales to OEMs,
value-added  resellers  (VARs) and other  channel  business  and $1.7 million in
service  revenues  representing  27%,  56% and 17%,  respectively  of our  sales
revenues.  During the year ended December 31, 2000, direct, indirect and service
revenues represented 75%, 14%, and 11% respectively, of our sales revenues.

Cost of Sales/Gross Margins

Gross  margins  decreased to 23% and 26% for the three and six months ended June
30, 2001, respectively, as compared to 30% and 29% for the same periods in 2000,
respectively.  The  decrease in gross margin  percentage  was  primarily  due to
economies  of scale  attributable  to the level of fixed  costs  inherent in our
operations,  coupled with significantly lower sales revenues.  Our gross margins
are dependent, in part, on product mix, which fluctuates from time to time.


<PAGE> 15


Operating Expenses

        Selling, General and Administrative

Selling,  general and administrative expenses decreased to $2.8 million and $6.1
million for the three and six months  ended June 30,  2001,  respectively,  from
$4.2 million and $8.7 million for the same periods in 2000,  representing a $1.4
million and $2.6  million  decline for each  period,  respectively.  Significant
components  of the six month  reduction  include (i) a $1.2 million  decrease in
selling and marketing  costs,  primarily as a result of reduced sales levels and
the January 2001  reduction  in our overall  workforce as part of the changes in
our sales and  marketing  efforts  discussed  under  "Sales",(ii)  a $.9 million
decrease in general and  administrative  costs, and (iii) a $.3 million decrease
in operational  costs incurred  during the first quarter of 2000 associated with
our Lake Mary operations prior to relocating those operations to San Diego.

        Research and Development

Research and development  expenses were $.9 million for both three month periods
ended June 30, 2001 and 2000.  For the six month periods ended June 30, 2001 and
2000,  research  and  development  expenses  increased  to $2 million  from $1.5
million as a result of the continuing  development of our NexStor  product line.
We believe that  considerable  investments in research and  development  will be
required to remain  competitive  and expect that these expenses will increase in
future periods.

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.

Depreciation and Amortization

Depreciation  and  amortization for the three and six months ended June 30, 2001
was $.4 million and $.9 million,  respectively,  as compared to $1.1 million and
$2.3  million  for  2000,   respectively.   The  decrease  was  due  to  reduced
amortization resulting from the fourth quarter 2000 write-down of $12 million of
goodwill  which was  determined to have been  impaired  because of our projected
inability  to  generate  sufficient  future  operating  income  from the  assets
acquired in a 1999 acquisition.

Interest Expense

Interest  expense was $.3 million during both three month periods ended June 30,
2001 and 2000. For the three months ended June 30, 2001, a $.2 million  increase
in  amortization  of loan  discounts  was offset by a $.2  million  decrease  in
interest expense due to lower average borrowings.  For the six months ended June
30, 2001, interest expense increased from $.6 million in 2000 to $.7 million, of
which $.2 million  represented an increase in the amortization of loan discounts
that was substantially offset by a decrease in interest expense of approximately
$.2 million due to lower average borrowings.  To the extent that we do not incur
significant  additional  debt  over  the  remainder  of the  year,  we  expect a
significant  reduction  in interest  expense  primarily as a result of the April
2001  exchange of $11.8  million in notes  payable for our Series H and Series I
Convertible Preferred Stock.


<PAGE> 16

Preferred Stock Dividends

During the three and six months ended June 30, 2001,  dividends on our preferred
stock increased to $.4 million and $.6 million,  respectively,  from $.2 million
and $.4 million, respectively in 2000. Preferred stock dividends, principally at
10% per annum, increased during 2001 primarily due to the issuance of $2 million
of preferred  stock on December 29, 2000 and $11.9 million of preferred stock in
April 2001 (see Note 4 to Consolidated Financial  Statements),  partially offset
by the conversion of $ 3 million of the Series C Convertible  Preferred Stock to
common stock in July 2000.

                         Liquidity and Capital Resources

The accompanying  consolidated  financial statements have been prepared assuming
that we will continue as a going concern.  This  contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.  We
incurred net losses of $21.9  million,  $18.7  million and $10.4 million for the
years ended December 31, 2000, 1999 and 1998, respectively, and $7.3 million for
the six months  ended June 30,  2001.  In  addition,  we have  negative  working
capital and a  stockholders'  deficit at June 30,  2001.  These  matters,  among
others,  raise  substantial  doubt  about our  ability  to  continue  as a going
concern.

During most of 2000, our management  team formulated and implemented our current
product  strategy  centered  around  our  NexStor 2U line of  SAN-ready  storage
solutions.  This  strategy  included the  transition  from our older  technology
legacy products to the newer  technology  solutions,  which we began shipping in
the third quarter of 2000. During the second half of the year and the first half
of 2001, the decline in revenues of our older products  exceeded the increase in
sales of our newer  technology  solutions,  which  contributed  to our operating
losses.

However,  we have recently  experienced  growth in our indirect customer channel
base (OEMs, VARs and system integrators).  Since late 2000, we have entered into
various  agreements  with  domestic  and  international  OEMs,  VARs and  system
integrators. In 2000, indirect sales represented a small percentage of our total
sales   revenues.   In  an  effort  to  capitalize  on  this  growth  trend  and
simultaneously  reduce  operating costs, we have shifted our sales and marketing
strategy to provide an emphasis on our indirect sales function.  As part of this
strategy,  since January  2001,  we have reduced our direct sales  personnel and
related  costs,  and have  begun to  focus  our  direct  sales  team to  certain
designated markets. Our operating results are expected to be positively affected
by an  increase  in  indirect  sales;  however,  there is no  assurance  that an
increase will occur.


Consolidated Statements of Cash Flows

        Operating Activities

Net cash used by operating  activities amounted to $4.7 million and $6.5 million
for the six  months  ended  June  30,  2001  and  2000,  respectively.  The most
significant use of cash was our loss from  operations  (before changes in assets
and liabilities) of $5.9 million and $3.5 million, respectively. During 2001 and
2000,  we  used  cash of $1  million  and  $2.8  million,  respectively,  in the
reduction of accounts payable and other liabilities.  Another significant use of
cash during 2000 was an increase in  inventories  in the amount of $1.5  million
(principally  due to our investment in new  products).  Cash was provided by net
collections of accounts receivable of $1.2 million and $1.1 million for 2001 and
2000, respectively.


<PAGE> 17


        Investing Activities

Net cash used by investing  activities  was $.1 million for the six months ended
June 30, 2001. Net cash provided by investing activities in 2000 of $6.2 million
was principally due to $7 million in net cash proceeds from the Borg Sale.

        Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2001
amounted to $4.9 million and  primarily  consisted of borrowings of $5.6 million
from private  investors  (including  $2.7 million from Mr. Levy),  of which $4.4
million was satisfied by the issuance of  convertible  preferred  stock in April
2001 and $.3 million from the issuance of convertible preferred stock, partially
offset by a net reduction of our Bank Line of Credit of $1 million.

Net cash used in financing activities for the six months ended June 30, 2000 was
$.2 million which,  principally  consisted of the net repayment of $1 million of
borrowings  from  Mr.  Levy  and  $.5  million  of  preferred  stock  dividends,
principally  offset by $1.2  million  in  proceeds  from the  exercise  of stock
options and warrants.

Borrowings

        Bank Line of Credit

Our Bank Line of Credit currently provides for borrowings based on the lesser of
$10 million or: (i) 85% of eligible accounts receivable,  as defined,  plus (ii)
the lesser of $1.25  million or 20% of eligible  inventory,  as  defined,  bears
interest at prime (6.75% at June 30, 2001) plus 1.5%,  is scheduled to mature in
April 2002 and is collateralized  by substantially  all of our assets.  The Bank
Line of Credit also provides for certain financial covenants,  including minimum
net worth and net income requirements.

Since  the  fourth  quarter  of 2000,  we have not been in  compliance  with the
minimum net worth and net income requirements and are in technical default under
the compliance provisions of the Bank Line of Credit.

We are  negotiating  the terms of a  forbearance  agreement  which,  among other
items,  would  provide  that the  maximum  availability  would be  reduced to $5
million and the lender would forbear from exercising certain rights and remedies
with respect to this default  through  August 31, 2001,  during which period the
interest rate would be increased by 2% per annum. There can be no guarantee that
we will  be  successful  in our  negotiations  with  the  lender.  If we are not
successful in our negotiations with the lender, we will need to seek replacement
financing  which may not be  available  given our  history of  losses,  existing
negative working capital and stockholders' deficit.

As of June 30, 2001, the outstanding balance of the Bank Line of Credit was $3.1
million and an additional $148,000 was available based on eligible collateral.

Financing Activities With Private Investors

Since late 1997  through July 31, 2001,  we have  obtained net cash  proceeds of
$38.2 million from private investors,  including $13.6 million from Mr. Levy. Of
this amount,  $6.5 million was received since December 31, 2000,  including $3.1
million from Mr. Levy.

Effective April 12, 2001,  holders of our non-bank notes payable  totaling $11.9
million  (including  $110,000 in accrued  interest) on that date exchanged their
notes for Series H and Series I Convertible  Preferred Stock with a stated value
of $11.9  million,  including  $3.6  million  held by Mr.  Levy  (see  Note 3 to
Consolidated   Financial  Statements).   Accordingly,   as  of  that  date,  our
stockholder's equity increased by $11.9 million.


<PAGE> 18

We are currently  exploring various  alternatives for raising additional debt or
equity  capital  to  finance  our  short-term  and  long-term  plans  as well as
operating  deficits  expected to be incurred until we begin to generate positive
operating cash flows. Due to our financial history, as well as conditions in the
technology-related financial markets and other uncertainties,  many of which are
outside our control,  there can be no assurance  that such  required  additional
funds will be available on terms acceptable to management, if at all, or that we
will be able to generate  positive cash flows from operations in the future.  In
June 2001, we received an offer, as amended, from a private investor to purchase
an approximate 49% interest in our company for an aggregate  investment of $16.4
million  (including  a $3 million  loan) (see Note 7 to  Consolidated  Financial
Statements).

New Accounting Pronouncements

In July 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards No. 141 (SFAS 141),  Business  Combinations,
which  eliminates  the pooling  method of accounting  for business  combinations
initiated  after June 30, 2001. In addition,  SFAS 141 addresses the  accounting
for  intangible  assets and goodwill  acquired in a business  combination.  This
portion of SFAS 141 is effective for business combinations  completed after June
30, 2001. We do not expect SFAS 141 will have a material impact on our financial
position or results of operations.

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142 (SFAS 142), Goodwill and Intangible Assets, which revises the accounting for
purchased  goodwill  and  intangible  assets.   Under  SFAS  142,  goodwill  and
intangible  assets with indefinite lives will no longer be amortized and will be
tested for impairment annually. SFAS 142 is effective for fiscal years beginning
after December 15, 2001, with earlier adoption permitted.  We do not expect SFAS
142 will  have a  material  impact  on our  financial  position  or  results  of
operations.

                               Effect of Inflation

Inflation has not had an impact on our  operations  and we do not expect that it
will have a material impact in 2001.



Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We  maintain  a  floating  interest  rate  Bank  Line of  Credit  ($3.1  million
outstanding  balance at June 30, 2001).  Therefore,  we are subject to a certain
amount of risk arising from increases to the prime rate.

Part II  -  OTHER INFORMATION

Item 1.  Legal Proceedings

Not Applicable

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

Effective  April 12, 2001, we issued 6,785 shares and 5,100 shares of our Series
I and Series H  Convertible  Preferred  Stock,  respectively,  with an aggregate
stated  value of $11.9  million,  in  exchange  for $11.9  million  of our notes
payable.  In  addition,  we  exchanged  2,057  shares  of  Series I  Convertible
Preferred Stock, with a stated value of $2.1 million, for the Series G Preferred
Stock, with a stated value of $2 million plus $.1 million in accrued  dividends.
On April 24, 2001,  we issued an  additional  250 shares of Series I Convertible
Preferred  Stock with a stated value of $250,000 for $250,000 cash. The Series I
and Series H  Convertible  Preferred  Stock are  convertible  into shares of our
common  stock  based on a  conversion  price of $.72  per  share  (approximately
19,711,000 shares).


<PAGE> 19


In connection  with certain loans made to our company  during May and June 2001,
we issued  warrants to  purchase an  aggregate  of 625,000  shares,  exercisable
immediately  through June 2004 at exercise  prices ranging from $.45 to $.75 per
share.

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

Item 3.  Defaults Upon Senior Securities

Not applicable

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

Not applicable

Item 5.  Other Information

Not applicable

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

(a)     Exhibits:

10.1 Subordinated  Promissory  Note for  $100,000,  dated May 16, 2001,  between
     Registrant and H. Irwin Levy

10.2 Subordinated  Promissory  Note for  $250,000,  dated May 21, 2001,  between
     Registrant and H. Irwin Levy

10.3 Subordinated  Promissory  Note for  $375,000,  dated May 30, 2001,  between
     Registrant and H. Irwin Levy

10.4 Subordinated  Promissory  Note for  $75,000,  dated June 5,  2001,  between
     Registrant and H. Irwin Levy

10.5 Subordinated  Promissory  Note for  $450,000,  dated June 7, 2001,  between
     Registrant and The Charlotte Marden 1993 Trust

10.6 Subordinated  Promissory  Note for $300,000,  dated July 12, 2001,  between
     Registrant and H. Irwin Levy

10.7 Warrant to purchase  common  stock  issued to H. Irwin Levy,  dated May 16,
     2001

10.8 Warrant to purchase  common  stock  issued to H. Irwin Levy,  dated May 21,
     2001

10.9 Warrant to purchase  common  stock  issued to H. Irwin Levy,  dated May 30,
     2001


<PAGE> 20


10.10 Warrant to purchase common  stock  issued to H. Irwin Levy,  dated June 5,
      2001

10.11 Warrant to purchase common stock issued to The Charlotte Marden 1993 Trust
      dated June 7, 2001

10.12 Letter Agreement, dated June 29, 2001,  extending the maturity date (notes
      filed as exhibits 10.1,  10.2, 10.3 and 10.4) to August 31, 2001,  between
      Registrant and H. Irwin Levy

10.13 Letter Agreement, dated June 29, 2001, extending the maturity date of note
      filed as  exhibit 10.5 to August  31,  2001,  between  Registrant  and The
      Charlotte Marden 1993 Trust

(b)     Reports on Form 8-K:

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


<PAGE> 21


                                    SIGNATURE

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

                            nSTOR TECHNOLOGIES, INC.
                                  (Registrant)


                              /s/ Jack Jaiven
August 15, 2001       ---------------------------
                        Jack Jaiven
                        Principal Financial and
                        Accounting Officer