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, 1997

                                OR

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

For the transition period from ________________________________

     
                 Commission File Number:  0-8354


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


          Delaware                                95-2094565

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


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

                          (561) 640-3103
                 (Registrant's telephone number)


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


  Number of shares outstanding of the Registrant's Common Stock, 
   par value $.05 per share, as of June 30, 1997: 18,670,477



<PAGE>


PART 1.   FINANCIAL INFORMATION



Item 1.   Financial Statements



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

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


<PAGE>



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


                                                   Jun. 30,    Dec. 31,
             ASSETS  (Note 5)                        1997        1996
             ----------------                     ---------   ---------
Current assets:
  Cash and cash equivalents:
    Unrestricted                                   $   497     $ 4,619
    Restricted                                       1,000          -
  Accounts receivable, net of $44
    and $257 allowance                               4,440       5,016
  Inventories (Note 3)                               7,319       4,117
  Prepaid expenses and other                           185         129
                                                   -------     -------
     Total current assets                           13,441      13,881
                                             
Deferred tax asset (Note 6)                            200         182
Property and equipment, net of $263
  and $90 accumulated depreciation                   1,401       1,003
Goodwill and other intangible assets,
  net of $261 and $60 accumulated
  amortization   (Note 2)                            5,081       5,282
                                                   -------     -------
                                                   $20,123     $20,348
                                                   =======     =======
              LIABILITIES
              -----------
Current liabilities:
  Borrowings  (Note 5)                             $ 2,050     $    -
  Accounts payable                                   4,158       4,380
  Accrued expenses and other                         1,755       2,635
                                                   -------     -------
     Total current liabilities                       7,963       7,015
                                                   
Convertible notes due 2000 (including
  $202 and $197 of accrued interest)                   535         516
                                                   -------     -------
     Total liabilities                               8,498       7,531
                                                   -------     -------

Commitments and contingencies (Note 7)


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

Preferred stock, $.01 par; shares                                    
  authorized 1,000,000; outstanding none                -           -
Common stock, $.05 par; shares authorized
  24,000,000; outstanding 18,670,477                   934         934
Additional paid-in capital                          30,393      30,393
Deficit                                            (19,702)    (18,510)
                                                   -------     -------
     Total stockholders' equity                     11,625      12,817
                                                   -------     -------
                                                   $20,123     $20,348
                                                   =======     =======

_______
See accompanying notes to consolidated financial statements.

<PAGE>                                      1

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





                                      Three Months           Six Months
                                     Ended June 30,        Ended June 30,
                                  --------------------   --------------------
                                    1997       1996        1997        1996
                                  ---------  ---------   ---------  ---------

Sales                              $ 5,574    $ 1,319     $14,577    $ 1,319
Cost of sales                        3,957      1,016       9,849      1,016
                                   -------    -------     -------    -------
     Gross profit                    1,617        303       4,728        303
                                   -------    -------     -------    -------

Operating expenses:
  Research and development             762        129       1,424        129
  Selling, general and   
    administrative                   2,363        168       4,521        168
                                   -------    -------     -------    -------
     Total operating expenses        3,125        297       5,945        297
                                   -------    -------     -------    -------

     Income (loss) from operations  (1,508)         6      (1,217)         6
                
Gain from sale of IMNET Systems,
  Inc. stock  (Note 4)                  -       1,508          -      11,148
Interest income, net of
  investment expenses                   39        129          70         70
Interest expense                       (27)       (18)        (45)       (36)
                                   -------    -------     -------    -------

Net income (loss)                 ($ 1,496)   $ 1,625    ($ 1,192)   $11,188
                                   =======    =======     =======    =======


Earnings (loss) per common share  ($   .08)   $   .09    ($   .06)   $   .64
                                   =======    =======     =======    =======
                                            
Average number of common shares
  used in computing earnings   
  (loss) per common share        18,670,477 17,600,477  18,670,477 17,600,477
                                 ========== ==========  ========== ==========







_______
See accompanying notes to consolidated financial statements.

<PAGE>                                2

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





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

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


Net loss for the
  six months ended
  June 30, 1997           -       -        -     (1,192)  (1,192)
                    ----------  ----   -------  -------  -------
Balances, June    
  30, 1997          18,670,477  $934   $30,393 ($19,702) $11,625
                    ==========  ====   =======  =======  =======
  


_______
See accompanying notes to consolidated financial statements.

<PAGE>                           5     

nSTOR TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Note 2)
                                                            Six Months 
                                                          Ended June 30, 
                                                       -------------------
                                                         1997       1996
                                                       --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income  (loss)                                  ($ 1,192)   $11,188
  Adjustments to reconcile net income (loss)
    to net cash used by operating activities:
      Gain from sale of IMNET Systems, Inc.
        stock                                               -     (11,148)
      Depreciation and amortization                        374          9
      Changes in assets and liabilities net 
        of effects from acquisition:
          Decrease (increase) in accounts receivable       576     (1,238)
          Increase in inventories                       (3,202)        (3)
          Increase in prepaid expenses and other           (74)       (13)
          (Decrease) increase in accounts payable,
            accrued expenses and other liabilities      (1,083)       995
                                                       --------   --------
Net cash used by operating activities                   (4,601)      (210)
                                                       --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from sale of IMNET Systems, Inc. stock       -      11,148
  Payment for acquisition                                   -        (592) 
  Additions to property and equipment                     (571)      (156)
                                                       --------   --------
Net cash (used) provided by investing activities          (571)    10,400
                                                       --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings                               2,767         -
  Repayment of borrowings                                 (717)        -
  Increase in restricted cash and cash equivalents      (1,000)        -
                                                       --------   --------
Net cash provided by financing activities                1,050         -
                                                       --------   --------
Net (decrease) increase in unrestricted cash and
  cash equivalents during the period                    (4,122)    10,190

Unrestricted cash and cash equivalents at the
  beginning of the period                                4,619          7
                                                      ---------  ---------
Unrestricted cash and cash equivalents at the
  end of the period                                    $   497    $10,197
                                                      =========  =========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
  ACTIVITIES:
    Acquisition (Note 2):
      Inventories                                      $    -     $  (895)
      Property and equipment                                -        (218)
      Intellectual property                                 -        (335)
      Accrued expenses                                      -         756
      Minority interest                                     -         100
                                                       --------  --------
          Cash paid                                    $    -     $  (592)
                                                       ========  ======== 
_______
See accompanying notes to consolidated financial statements.

<PAGE>                         6

nSTOR TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Business

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

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

     Fiscal Year

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

     Use of Estimates

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


<PAGE>                            7



(2)  ACQUISITIONS


Effective June 3, 1996, nStor Corporation, Inc. ("nStor"), a newly-formed
subsidiary of the Company, which was 80% owned at the time,
acquired certain net assets of Seagate Peripherals, Inc.
("Seagate") located in Lake Mary, Florida.  The purchase price
consisted of  $592,000 in cash, including acquisition costs, and a
royalty to Seagate payable based upon 5% of nStor's sales of
certain products during the 15 month period beginning October 1,
1996.  Effective October 31, 1996, the Company acquired the
remaining 20% of nStor from R. Daniel Smith, president of nStor and
currently a director and officer of the Company, in exchange for
one million shares of the Company's common stock, valued at
$600,000 (net of applicable discount).

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

The acquisitions have been accounted for under the purchase method
of accounting, with assets acquired and liabilities assumed
recorded at estimated fair values as of the effective acquisition
dates, and the operating results of the acquired businesses
included in the Company's consolidated financial statements from
those dates.  The financial statements reflect the preliminary
allocation of the purchase price since the final allocation has not
been determined as of June 30, 1997.

The excess of the purchase price of both acquisitions over the fair
value of net assets acquired (goodwill) was $4.9 million and is
being amortized on a straight-line basis over periods not exceeding
15 years.  nStor also recorded $.4 million as intellectual assets
related to the nStor acquisition, consisting of trademarks and
proprietary technology, which are being amortized on a straight-line basis over
15 years.  For the three and six months ended June
30, 1997, amortization of intangible assets approximated $101,000
and $201,000, respectively.


(3)  INVENTORIES

Inventories are summarized as follows (in thousands):

<PAGE>                           8


                                June 30,    Dec. 31,
                                  1997        1996  
                                --------    --------
     Raw materials              $ 6,678     $ 3,577
     Work-in-process                275          88
     Finished goods                 366         452
                                -------     -------
                                $ 7,319     $ 4,117
                                =======     =======

Substantially all inventory is pledged as collateral for indebtedness (Note 5).

(4)  GAIN ON SALE OF IMNET

During the six months ended June 30, 1996, the Company sold a
substantial portion of its shares of IMNET (see Note 1 to
Consolidated Financial Statements) and recognized gains of
$1,508,000 and $11,148,000 during the three and six months ended
June 30, 1996, respectively, representing the net cash proceeds
received.

(5)  BORROWINGS

Borrowings consist of an asset based revolving bank credit facility
(the "Revolver"), under which nStor may borrow up to $7 million. 
Advances under the Revolver are limited to 75% of eligible accounts
receivable, as defined, plus the lesser of (i) $1 million or (ii)
40% of certain inventories.  The Revolver bears interest, payable
monthly, which is indexed to LIBOR (London Interbank Offered Rate)
plus a percentage (which may be adjusted quarterly depending on a
specific operating ratio) ranging from 2-3/8% to 3% (8.7% at June
30, 1997), is guaranteed by the Company and matures on May 29,
1998.  The Company pays a commitment fee on the unused portion of
the Revolver at one-eighth of one percent (1/8 of 1%) per annum. 
Advances under the Revolver are collateralized by substantially all
assets of the Company including, but not limited to, $1 million in
cash, inventories, accounts receivable, property and equipment and
intangible assets.  Among other convenants, the loan agreement
provides certain restrictions on the payment of dividends, the
incurrence of additional indebtedness and capital expenditures, and
requires minimum working capital, tangible net worth and other
financial covenants.  Outstanding principal under the Revolver at
June 30, 1997 was $2,050,000, which substantially approximated the
maximum availability on that date.


(6)  INCOME TAXES

As of December 31, 1996, the Company's tax year end, there were
unused net operating loss carryforwards ("NOL's") for regular
federal income tax purposes of approximately $4.2 million,

<PAGE>                          9

principally expiring from 2003 until 2006, and research and
development tax credit carryforwards of approximately $550,000,
expiring from 2002 through 2005.  No financial statement benefit
has been recognized on these carryforwards.  During the six months
ended June 30, 1996, no income tax expense was recorded on income
before income taxes due to utilization of NOL's.  In conjunction
with the Alternative Minimum Tax ("AMT") rules, the Company also
has available AMT credit carryforwards of approximately $182,000,
at December 31, 1996, which may be used indefinitely to reduce
regular federal income taxes.


(7)  CONTINGENCIES

See Part II, Item 1, for a discussion of the Company's Legal
Proceedings.


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

 
Overview

The Company completed two acquisitions during the year ended
December 31, 1996 - the nStor acquisition, effective June 3, 1996,
and the Parity acquisition, effective December 1, 1996 (see Note 2
to Consolidated Financial Statements).  Allocations have been made
to reflect the estimated fair values, as of the effective
acquisition dates, of the net assets acquired which has resulted in
asset bases which differ from those of the previous owners. 
Accordingly, comparative financial data of the acquired entities
for periods prior to the effective dates of the acquisitions are
not presented in this section since they would be neither
comparable nor informative.  In addition, certain components of net
income in 1997 are not comparable to those of 1996 because
operating results for the six months ended June 30, 1996 include
only one month of nStor's operations and do not include operations
associated with Parity.

Results of Operations

For the three and six months ended June 30, 1997, the Company
incurred   net losses of $1.5 million and $1.2 million,
respectively.  The losses were principally attributable to a
decline in sales during the second quarter as compared to the first
quarter (see "Sales" below) and, to a lesser extent, increased
costs associated with gearing up the Company's infrastructure to
support anticipated future growth (see "Operating Expenses" below). 
The Company reported  net income of $1.6 million and $11.2 million,
respectively, for the corresponding three and six month periods in
1996.  The 1996 results included gains of approximately $1.5

<PAGE>                            10



million and $11.1 million, respectively, from the sale of a
substantial portion of the Company's investment in IMNET (see Note
4 to Consolidated Financial Statements). 

From the date the Company disposed of substantially all of its
operating assets in October 1992 in exchange for shares in IMNET
until the acquisition of nStor in June 1996, the Company's only
activities consisted of monitoring its investment in IMNET and
evaluating potential business opportunities.  Accordingly,
operating results for the three and six months ended June 30, 1996
principally consisted of the aforementioned gain on the sale of
IMNET, administrative expenses prior to the nStor acquisition and
nStor's operations for June 1996.

     Sales

Net sales amounted to $5.6 million and $14.6 million for the three
and six months ended June 30, 1997, respectively.  Sales for the
second quarter were adversely affected by an unexpected two month
delay in completing the development of the Company's new CR8e RAID
subsystem, which was originally anticipated for shipment to
customers in April 1997, and by manufacturing disruptions
associated with the transfer of Parity's production from California
to Florida.  Net sales for the three and six month periods ended
June 30, 1996 amounted to $1.3 million which consisted of the
initial month of sales following the nStor acquisition effective
June 3, 1996.  Future sales are expected to be positively affected
during the remainder of fiscal 1997 due to the availability of the
CR8e subsystems, a redesigned and improved line of products
acquired from Parity, offered under the Parity+ trade name
commencing in the third quarter of 1997, and several other new
products scheduled for release during 1997.     Increased sales
activity is also anticipated from a July 1997 agreement with
Silicon Graphics, Inc. ("SGI"), which has positioned the Company as
the only third-party memory manufacturer, to date, to be granted 
memory licenses issued by SGI to manufacture its proprietary memory
products; expected completion of agreements with several new OEM's
(original equipment manufacturers) and a software supplier; and,
the expansion of the Company's enterprise resource planning
manufacturing software services.

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

<PAGE>                                 11



     Cost of Sales/Gross Margin

Gross margins for the three and six months ended June 30, 1997
amounted to 29% and 32%, respectively.  Gross margins for the
current year's second quarter decreased to 29% as compared to 35%
during the current year's first quarter principally due to
increased manufacturing overhead costs allocated to a reduced level
of sales.  During the one month period ending June 30, 1996,
following the nStor acquisition, gross margins amounted to 23%.  
The Company's gross margins are dependent, in part, on product mix
which is anticipated to fluctuate from time to time.  The Company
has been able to increase its gross margins over those achieved by
its predecessors due to a greater emphasis on selling higher margin
enhanced storage devices and certain cost efficiencies.  The
Company also expects to be able to gradually increase gross margins
on the Parity product line during 1997 as operating efficiencies
are realized and the Company's component servicing capabilities
allow the Parity product line to be manufactured at a lower cost. 
Operating efficiencies are expected to be achieved as a result of
closing the former Parity manufacturing facility in California
during the second quarter of 1997, resulting in the consolidation
of direct labor, purchasing and other functions at the Company's
Florida facility.

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

     Operating Expenses
 
The Company's operating expenses for the three and six months ended
June 30, 1997 amounted to $3.1 million and $5.9 million,
respectively, consisting of $.8 million and $1.4 million,
respectively, in research, development and other engineering costs,
and $2.3 million and $4.5 million, respectively, in selling,
general and administrative expenses.

Research and development costs increased by 15% during the current
second quarter as compared to the current first quarter, primarily
attributable to redesigning, standardizing and obtaining agency
certification for the Parity product line acquired in late December
1996.  Research and development costs are expensed as incurred and 
may fluctuate considerably from time to time depending on a variety
of factors.  These costs are substantially incurred in advance of
related revenues, or in certain situations, may not ultimately
result in generating revenues.  The Company does not anticipate

<PAGE>                                12


significant increases in research and development during the
remainder of the fiscal year.  

Selling, general and administrative expenses increased by 10%
during the current second quarter as compared to the current first
quarter primarily as a result of increased personnel costs and fees
incurred in connection with listing the Company's common stock on
the American Stock Exchange.  Selling and marketing costs primarily
consist of salaries, commissions and related benefits, expenses in
connection with tradeshows, conferences and seminars, and
facilities and other miscellaneous costs allocated to those
personnel.  General and administrative costs primarily consist of
general corporate expenses, executive officers, finance and
accounting salaries and related benefits, professional fees such as
legal and accounting, facilities costs allocated to those
personnel, and amortization and depreciation of certain property,
equipment and intangibles, including goodwill. The Company does not
expect selling, general and administrative expenses to
significantly increase during the remainder of the year, except to
the extent that sales commissions may increase due to expected
increases in sales revenue.  
 
Operating expenses for the three and six months ended June 30, 1996
were approximately $.3 million and included only one month of
expenses related to the operations of nStor.

     Income Taxes

Income tax expense/benefit was not provided on the Company's
income/loss before income taxes during the three and six months
ended June 30, 1997 and 1996 due to utilization of the NOL's (see
Note 6 to Consolidated Financial Statements).


Liquidity and Capital Resources

Net cash used by operating activities increased to $4.6 million
during the six months ended June 30, 1997, as compared to $.2
million in 1996, principally attributable to an additional
investment in inventories of $3.2 million, and a decrease in
accounts payable, accrued expenses and other liabilities of $1.1
million.  During 1996, the primary use of cash resulted from an
increase in accounts receivable of $1.2 million which was
principally offset by an increase in accounts payable, accrued
expenses and other liabilities of $1 million.

Investing activities for 1997 used approximately $.6 million to
purchase additional fixed assets as compared to providing $10.4
million in 1996, primarily resulting from the sale of a substantial
portion of the Company's investment in IMNET (see Note 4 to
Consolidated Financial Statements). 

<PAGE>                            13



Net cash provided by financing activities approximated $1 million,
consisting of net borrowings under the Revolver (see below) of $2
million less $1 million of previously unrestricted cash required as
collateral under the Revolver.   Until May 1997, nStor's working
capital needs, including the approximately $5.8 million in cash
required for the Parity acquisition, were funded by cash flow from
operations and the Company's cash balances.  In May 1997, the
Company completed a revolving bank line of credit (the "Revolver")
to finance its expanding working capital needs (see Note 5 to
Consolidated Financial Statements).  Under the Revolver, the
Company may borrow up to $7 million based on 75% of eligible
accounts receivable, as defined, plus the lesser of  (i)  $1
million or  (ii) 40% of certain inventories.  As of June 30, 1997,
the outstanding balance under the Revolver was approximately $2
million which substantially approximated the maximum availability
on that date.  Management believes that cash flow generated from
operations and proceeds from the Revolver will be sufficient to
satisfy its working capital and capital expenditure needs for the
next twelve months as currently planned.  However, there can be no
assurance that additional capital will not be needed during that
period.


Effect of Inflation

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


Forward Looking Information:  Certain Cautionary Statements

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

<PAGE>                             14


Part II -  Other Information


Item 1 - Legal Proceedings

In June 1996, Jack Ehrenhuas, Mark Schindler, Eugene Stricker,
Amnon Damty, Ehud Mendelson and Susan Felton filed a Complaint in
the Supreme Court of the State of New York, County of Nassau,
against the Company and its Chairman, Michael Wise.  The plaintiffs
claim to have contractual and proprietary interests in the prospect
of a transaction to purchase certain net assets acquired by nStor
(see Note 2 to Consolidated Financial Statements) and seek
compensatory damages plus punitive damages.

In August 1996, the Nais Corporation, Mark Schindler, Eugene
Stricker, Amnon Damty, Ehud Mendelson and Susan Felton filed a
Complaint in the same Court making similar allegations against
nStor, its president, R. Daniel Smith, and Intelligent
Manufacturing Systems, Inc., a privately owned company for which R.
Daniel 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.

Both cases are in preliminary stages.  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.

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 6 - Exhibits and Reports on Form 8-K:


   (a)   Exhibits:

     (10)(i)   Demand Promissory Note dated May 29, 1997, between
               nStor Corportion, Inc. and First Union National
               Bank of Florida.

     (10)(ii)  Revolving Credit and Security Agreement, dated May
               29, 1997, between nStor Corporation, Inc. and First
               Union National Bank of Florida.

<PAGE>                                    15
     
     (27)      Financial Data Schedule



   (b)   Reports on Form 8-K:


     The Company filed Form 8-K during the quarter ended June 30,
     1997 as follows:

          (i)  A report on Form 8-K dated April 17, 1997 and filed
               April 18, 1997, reporting under Item 5 - Other
               Events, in which the Company announced the approval
               for listing its common stock on the American Stock
               Exchange.








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