**EXHIBIT 99.1**

 

CAUTIONARY STATEMENTS

 

The Private SecuritiesLitigation Reform Act of 1995 provides a “safe harbor” for forward-lookingstatements to encourage companies to provide prospective information withoutfear of litigation so long as those statements are identified asforward-looking and are accompanied by meaningful cautionary statementsidentifying important factors that could cause actual results to differmaterially from those projected in the statement. Ciprico Inc. desires to takeadvantage of these “safe harbor” provisions and is filing thisExhibit 99.1 in order to do so. Accordingly, we hereby identify thefollowing important factors which could cause our actual results to differmaterially from any such results which may be projected, forecast, estimated orbudgeted by us in forward-looking statements made by us from time to time inreports, registration statements and other written communications, or in oralforward-looking statements made from time to time by our officers and agents.

 

WE HAVE INCURRED LOSSES AND MAYNOT BE ABLE TO ACHIEVE AND MAINTAIN PROFITABILITY.

 

We experienced losses of $6.5million, $7.6 million and $309,000 for the years ended September 30, 2002, 2001and 2000, respectively.  There can be noassurance that we will be profitable on a quarterly or annual basis. If we areunable to generate net income from operations, our business will be adverselyaffected and our stock price will likely decline.

 

We incurred a significantincrease in research and development expenses during fiscal 2001 resultingprimarily from an increased focus on software development activities and theseexpenses increased in fiscal 2002. While we expect our operating expenses to decrease, we do not believe ourrevenues and gross profit margins will be sufficient to achieve profitabilityfor fiscal 2003.  Our revenues will haveto significantly increase in order for us to support our current and expectedlevel of operating expenses. We may not be able to achieve profitability.

 

WE MAY HAVE DIFFICULTY PREDICTINGRESULTS WHICH WOULD LIKELY RESULT IN A DECLINE IN OUR STOCK PRICE.

 

Our quarterly revenues andoperating results have varied significantly in the past and are likely to varysignificantly in the future due to a number of factors, any of which may causeour stock price to fluctuate. The primary factors that may affect our quarterlyfinancial performance include the following:

 
| • |   | the timing  of customer orders, which are often concentrated toward the end of a quarter,  particularly large orders from our significant customers and whether any  orders are cancelled;                        |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                              |
| • |   | general  economic trends and other factors, such as the impact of the economic  downturn experienced during fiscal 2001 and 2002, and the adverse impacts of  the September 11, 2001 attack on the United States; |
|   |   |                                                                                                                                                                                                              |
| • |   | market  acceptance of new products and product enhancements such as our TALON and  FibreSTORE 2210 products;                                                                                                      |
|   |   |                                                                                                                                                                                                              |
| • |   | mix of  product sales within a quarter;                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                              |
| • |   | our ability  to develop, introduce, ship and support new products and product  enhancements;                                                                                                                      |

 

----

 
| • |   | our  traditionally long sales cycle, which can take up to 9 months or more;                                                                                                                               |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                      |
| • |   | our ability  to attain and maintain production volumes and quality levels for our  products; and the level of competition;                                                                                |
|   |   |                                                                                                                                                                                                      |
| • |   | announcements  and new product introductions by our competitors and deferrals of customer  orders in anticipation of new products, services or product enhancements  introduced by us or our competitors; |
|   |   |                                                                                                                                                                                                      |
| • |   | decreases  over time in the prices at which we can sell our products; and                                                                                                                                 |
|   |   |                                                                                                                                                                                                      |
| • |   | our ability  to obtain sufficient supplies of components, including limited sourced  components, at reasonable prices, or at all;                                                                         |

 

Sales for any future quarterare not predictable and have a significant degree of uncertainty. We generallyoperate with limited order backlog because our products are typically shippedshortly after orders are received. Further, we do not generally enter intolong-term purchase contracts with customers. As a result, sales in any quarterare generally dependent on orders booked and shipped in that quarter. Also, asa result of the economic downturn during 2002 and 2001, customers have deferredpurchasing decisions and sales cycles have been lengthened. Due to theunpredictable timing of customer orders, we may ship products representing asignificant portion of our net sales for a quarter during the last month ofthat quarter.

 

Any significant deferral ofthese sales could have a material adverse effect on the results of operationsin any particular quarter. Our expense levels are based, in part, on ourexpectations as to future sales.  Inaddition, our research and development expenses have fluctuated quarter toquarter based on timing of prototype costs associated with new productdevelopment.  There is no assurance thatwe will experience sales growth with respect to new product introductions infuture periods. As a result, if sales levels are below expectations, net incomemay be disproportionately affected.

 

Fluctuating operating resultsmay have an adverse effect on the price of our common stock.

 

AN ECONOMIC DOWNTURN IN MARKETSIN WHICH WE ARE CONCENTRATED COULD MATERIALLY AND ADVERSELY AFFECT REVENUES ANDOPERATING RESULTS.

 

Our revenues have been derivedprimarily from sales to customers in the broadcast and entertainment andmilitary and government markets.  We arenot able to predict with any certainty the demand for our products in each ofour primary markets.  Sales in thebroadcast and entertainment market as a percentage of net sales were 48% inboth fiscal 2002 and 2001.  We generallysell to OEM’s or integrators who are dependent on capital spending levels attelevision stations and movie studios. Demand from customers in this market can be dependent, in part, onoverall levels of advertising revenues and general economic conditions.  During the fourth quarters of each of fiscal2002 and 2001, we experienced a significant reduction in demand from our keycustomers in this market due primarily to the impacts of the general economicslowdown.  Our ability to predict thedemand levels in this segment is limited given the general economicuncertainties.

 

Sales in the military andgovernment market as a percentage of net sales were 47% and 39% in fiscal 2002and 2001, respectively.  Demand for ourproducts in this market have been historically cyclical and fluctuate based ontiming of defense spending and technology upgrades within programs thatcurrently specify our products. There can be no assurances that we willexperience growth in this market segment during fiscal 2003.

 

2

----

 

Historically, a materialpercentage of our net sales in each year have been derived from a limitednumber of customers. For fiscal 2002 and 2001, our top five customers accountedfor approximately 55% and 51%, respectively, of our net sales. For fiscal 2002,sales to Grass Valley Group, Pinnacle Systems, a department of the U.S. Navy,and Northrop Grumman accounted for 17%, 12%, 11% and 10% of net sales,respectively.  For fiscal 2001, sales totwo customers, a division of Leitch Technology Corporation and a department ofthe U.S. Navy accounted for 16% and 14% of net sales, respectively.

 

We expect that a highpercentage of our sales for the foreseeable future will continue to come from arelatively small number of customers. There can be no assurance that ordersfrom existing customers will continue at their historical levels, or that wewill be able to obtain orders from new customers. An economic downturn in oneof our primary markets, or the loss of one or more customers, particularly asignificant customer, could result in a material decrease in revenues, therebyadversely affecting our business.

 

WE HAVE LIMITED PRODUCTOFFERINGS AND DEPEND ON THE WIDESPREAD MARKET ACCEPTANCE OF OUR EXISTING ANDNEW PRODUCTS

 

We derive a substantial portionof our revenue from a limited number of existing products. Specifically, duringfiscal 2002 and 2001 we derived approximately 38% and 31%, respectively, of ourrevenue from our NETarray product, introduced in late 2000 and approximately23% and 29%, respectively,  of ourrevenue from our 7000 product, introduced in 1997.  For fiscal 2003, we expect revenues from our NETarray and 7000products will be offset by revenues from our new FibreSTORE 2210 productexpected for release by the end of calendar 2002.

 

During fiscal 2002, we releasedour new TALON product, which accounted for approximately 3% of ourrevenue.  We expect the TALON andFibreSTORE 2210 products will account for a substantial and growing portion ofour total revenue for the foreseeable future. However, the demand for, andmarket acceptance of these products is uncertain. Historically, our storageproduct offerings consist of a limited number of product lines.  As such, the widespread market acceptance ofnew products in our markets is critical to our future success.

 

Factors that may affect themarket acceptance of our products, some of which are beyond our control,include the following:

 
| • |   | growth of  storage networking product markets;                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                          |
| • |   | performance,  quality, price and total cost of ownership of our existing products;                                            |
|   |   |                                                                                                                          |
| • |   | continued  development of technologies that allow our storage products to function over  WANs and over IP-based networks; and |
|   |   |                                                                                                                          |
| • |   | availability,  price, quality and performance of competing products and technologies;                                         |

 

OUR INDUSTRIES ARE SUBJECT TORAPID TECHNOLOGICAL CHANGE AND INTENSE COMPETITION AND WE MUST KEEP PACE WITHTHE CHANGES TO SUCCESSFULLY COMPETE.

 

The markets for our productsare characterized by rapidly changing technology, evolving industry standardsand the frequent introduction of new products and enhancements. Our futuresuccess depends in large part on our ability to enhance our existing productsand to introduce new products on a timely basis to meet changes in customerpreferences and evolving industry standards. We cannot be certain that we willbe successful in developing, manufacturing and marketing new products orproduct enhancements that respond to such changes

 

3

----

 

in a timely manner and achievemarket acceptance. We also cannot be certain that we will be able to developthe underlying core technologies necessary to create new products andenhancements.

 

Additionally, changes intechnology and consumer preferences could potentially render our currentproducts noncompetitive or obsolete. If we are unable, for technological orother reasons, to develop new products or enhance existing products in a timelymanner in response to technological and market changes, our business, resultsof operations and financial condition would be harmed.

 

The markets for our productsare competitive and are likely to become even more competitive. Increasedcompetition could result in pricing pressures, reduced sales, reduced margins,reduced profits, reduced market share or the failure of our products to achieveor maintain market acceptance. Our products face competition from multiplesources, including the ability of some of our customers to design solutions tothe problems targeted by our products. Many of our competitors and potentialcompetitors have greater name recognition, access to larger customer bases orsubstantially greater resources than we have. As a result, they may be able torespond more quickly than we can to new or changing opportunities,technologies, standards or customer requirements. For all of the foregoingreasons, we may not be able to compete successfully against our current andfuture competitors.

 

WE DEPEND ON A LIMITED NUMBEROF SUPPLIERS FOR CERTAIN COMPONENTS.

 

We depend upon a limited numberof suppliers for several components used in the manufacture of our products,such as disk drives, certain controllers and other components. In the future,we may experience shortages of or difficulties in acquiring these components.If we are unable to buy these components, then we will not be able tomanufacture our products on a timely basis.

 

We purchase certain rawmaterials and components based on forecasted order levels.  Forecasting orders is difficult as mostshipments occur near the end of each quarter. Some of our OEM customers provideus with a forecast of expected order delivery dates, but generally customersplace orders for immediate delivery, not in advance of need.  Lead times for materials and components thatwe order vary significantly and depend on factors such as specific supplierrequirements, contract terms and current market demand for such components. Asa result, our component requirement forecasts may not be accurate. If weoverestimate our component requirements, then we may have excess inventory,which would increase our costs. If we underestimate our component requirements,then we may have inadequate inventory, which could interrupt our manufacturingand delay delivery of our products to our customers. Either of theseoccurrences would negatively impact our business and operating results.

 

WE MAY ENGAGE IN FUTUREACQUISITIONS THAT MAY DILUTE OUR SHAREHOLDERS AND CAUSE US TO INCUR DEBT ORASSUME CONTINGENT LIABILITIES.

 

As part of our strategy, weexpect to review opportunities to buy other businesses or technologies thatwould complement our current products and services, expand the breadth of ourmarkets, enhance our technical capabilities, or otherwise offer growthopportunities.  In the event of anyfuture purchases, we could:

 
| • |   | spend  significant amounts of cash;                                                 |
|--------|--------|-------------------------------------------------------------------------------------|
|   |   |                                                                                |
| • |   | issue stock  that would dilute our current shareholders’ percentage ownership; |
|   |   |                                                                                |
| • |   | incur  amortization expense related to goodwill and other intangible assets; or     |

 

4

----

 
| • |   | incur debt  or assume liabilities. |
|--------|--------|------------------------------------|

 

These purchases also involvenumerous risks, including:

 
| • |   | problems  integrating the purchased operations, technologies, personnel or products;                                                                                       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                       |
| • |   | unanticipated  costs;                                                                                                                                                      |
|   |   |                                                                                                                                                                       |
| • |   | adverse  effects on existing business relationships with suppliers or customers;                                                                                           |
|   |   |                                                                                                                                                                       |
| • |   | risks  associated with entering markets in which we have no or limited prior  experience;                                                                                  |
|   |   |                                                                                                                                                                       |
| • |   | potential  loss of key employees of acquired or merged organizations; and                                                                                                  |
|   |   |                                                                                                                                                                       |
| • |   | the growth  rates of any acquired company may be less than those projected by analysts or  anticipated by markets, which could have an adverse effect on our stock  price. |

 

We cannot assure you that we willbe able to successfully integrate any businesses, products, technologies orpersonnel related to organizations that we might acquire or merge with in thefuture.

 

UNDETECTED SOFTWARE OR HARDWAREERRORS COULD INCREASE OUR COSTS AND DELAY PRODUCT INTRODUCTION

 

Storage products frequentlycontain undetected software or hardware errors when first introduced or as newversions are released. Our products are complex and errors may be found fromtime to time in our products, including new or enhanced products. In addition,our products are combined with products from other vendors. As a result, whenproblems occur, it may be difficult to identify the source of the problem.These problems may cause us to incur significant warranty and repair costs,divert the attention of our engineering personnel from our product developmentefforts and cause significant customer relations problems. Moreover, theoccurrence of hardware and software errors, whether caused by our or anothervendor’s products, could delay or prevent the development of the markets inwhich we compete.

 

THE LOSS OF KEY PERSONNEL ORTHE INABILITY TO HIRE AND RETAIN ADDITIONAL PERSONNEL WITH STORAGE NETWORKINGEXPERTISE COULD ADVERSELY IMPACT OUR BUSINESS AND RESULTS OF OPERATION.

 

Our future performance dependsin part upon the continued service and contributions of key management,engineering, sales and marketing personnel, many of whom would be difficult toreplace quickly.  We also believe thatour success depends to a significant extent on the ability of our management tooperate effectively, both individually and as a group. The loss of any one ofour key employees could adversely affect our sales or delay the development ormarketing of existing or future products.

 

We believe our future success willdepend also in part upon our ability to attract and retain highly skilled andqualified managerial, engineering, sales and marketing, and operationspersonnel. Competition for these personnel is intense. The inability to attractor retain qualified personnel in the future or delays in hiring requiredpersonnel, particularly engineers and sales personnel, could delay thedevelopment and introduction of and negatively impact our ability to sell ourproducts which would have a material adverse impact on our business and resultsof operation.

 

5

----

 

OUR INTERNATIONAL BUSINESSACTIVITIES ARE SUBJECT TO RISKS THAT COULD ADVERSELY IMPACT OUR RESULTS OFOPERATION.

 

International operationsaccounted for approximately 9% and 15% of our revenues in fiscal 2002 and 2001,respectively.  International salesdecreased $2.0 million or 42% during fiscal 2002 as compared with the previousyear.  As part of our restructuringefforts during fiscal 2001, we closed our sales offices in Tokyo and Singaporein response to a significant reduction in demand in our Asia-Pacificregion.  We currently maintain an international sales office in Newbury,England.

 

We believe our growth andprofitability is contingent, in part, upon the success of our products inEurope.  Our international operations,are subject to a number of risks, including:

 
| • |   | recruiting  sales and technical support personnel with the skills to support our  products;                              |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                     |
| • |   | increased  complexity and costs of managing international operations, including the need  to support multiple languages; |
|   |   |                                                                                                                     |
| • |   | protectionist  laws and business practices that favor local competition;                                                 |
|   |   |                                                                                                                     |
| • |   | export  restrictions on certain products, including the TALON, and possible changes  in such restrictions;               |
|   |   |                                                                                                                     |
| • |   | multiple,  conflicting and changing governmental laws and regulations;                                                   |
|   |   |                                                                                                                     |
| • |   | longer sales  cycles;                                                                                                    |
|   |   |                                                                                                                     |
| • |   | difficulties  in collecting accounts receivable and remitting funds to the United States;                                |
|   |   |                                                                                                                     |
| • |   | difficulties  enforcing our legal rights;                                                                                |
|   |   |                                                                                                                     |
| • |   | reduced or  limited protections of intellectual property rights; and                                                     |
|   |   |                                                                                                                     |
| • |   | political  and economic instability.                                                                                     |

 

Because our internationalrevenues are invoiced in U.S. dollars versus the foreign currencies, anincrease in the value of the U.S. dollar relative to the foreign currenciescould make our products more expensive and thus less competitive in ourinternational markets.

 

WE HAVE APPLIED FOR A LIMITEDNUMBER OF PATENTS AND WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY,WHICH WOULD NEGATIVELY AFFECT OUR ABILITY TO COMPETE.

 

Historically, we have notpursued patents on all our intellectual property and we continue to rely on acombination of patent, copyright, trademark and trade secret laws andrestrictions on disclosure to protect our intellectual property rights. We alsoenter into confidentiality agreements with substantially all our employees,consultants and corporate partners, and control access to and distribution ofour software, documentation and other proprietary information.

 

6

----

 

In conjunction with theacquisition of the SANStar technology in January 2001, we acquired the rightsto four patent applications, which are currently being prosecuted before theU.S. Patent Office.   There is noassurance these patent applications will be successfully prosecuted or, ifsuccessful, whether these patents will provide us with competitive advantagesor would not be challenged by third parties.

 

Although we believe that wepossess all required proprietary rights to the technology involved in ourproducts and that our products, trademarks and other intellectual propertyrights do not infringe upon the proprietary rights of third parties, we cannotassure you that others will not claim a proprietary interest in all or part ofour technology or assert claims of infringement. All such claims, regardless oftheir merits, could expose us to costly litigation and could substantially harmour operating results.

 

7

----