EXHIBIT 99A

 

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 this Exhibit 99in order to do so. Accordingly, we hereby identify the following importantfactors which could cause our actual results to differ materially from any suchresults which may be projected, forecast, estimated or budgeted by us inforward-looking statements made by us from time to time in reports,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 $7.6million and $309,000 for the years ended September 30, 2001 and 2000,respectively.  For the fourth quarterending September 30, 2001 we incurred a loss of $5.7 million.  There can be no assurance that we will beprofitable on a quarterly or annual basis. If we are unable to generate netincome from operations, our business will be adversely affected and our stockprice 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 are expected to increase in the future.  While we expect selling, general and administrative expenses todecrease, we do not believe our revenues and gross profit margins will besufficient to achieve profitability during fiscal 2002.  Our revenues will have to significantlyincrease in order for us to support our current and expected level of operatingexpenses. We may not be able to achieve profitability.

 

WE MAY HAVE DIFFICULTYPREDICTING RESULTS WHICH WOULD LIKELY RESULT IN A DECLINE IN OUR STOCK PRICE.

 

During the fourth quarter offiscal 2001 we recorded revenues of $5.0 million, which was significantly lowerthan each of the previous quarters of fiscal 2001 and 2000.  Our quarterly revenues and operating resultshave varied significantly in the past and are likely to vary significantly inthe future due to a number of factors, any of which may cause our stock priceto fluctuate. The primary factors that may affect our quarterly financialperformance 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;                              |
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| • | general  economic trends and other factors, such as the impact of the economic  downturn experienced during the fourth quarter of fiscal 2001 and the adverse  impacts of the September 11 attack on the United States; |
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| • | market  acceptance of new products and product enhancements such as our NETarray  product;                                                                                                                              |
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| • | mix of  product sales within a quarter;                                                                                                                                                                                 |
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| • | our ability  to develop, introduce, ship and support new products and product  enhancements;                                                                                                                            |
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| • | our  traditionally long sales cycle, which can take up to 9 months or more;                                                                                                                                             |
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| • | our ability  to attain and maintain production volumes and quality levels for our  products; and the level of competition;                                                                                              |
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| • | 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;               |
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| • | decreases  over time in the prices at which we can sell our  products; and                                                                                                                                         |
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| • | our ability  to obtain sufficient supplies of components, including limited sourced  components, at reasonable prices, or at all;                                                                                       |

 

Sales for any future quarter are not predictable and have a significantdegree of uncertainty. We generally operate with limited order backlog,because our products are typically shipped shortly after orders are received.Further, we do not generally enter into long-term purchase contracts withcustomers. As a result, sales in any quarter are generally dependent on ordersbooked and shipped in that quarter. Also, as a result of the economic downturnduring 2001, customers have deferred purchasing decisions and sales cycles havebeen lengthened. Due to the unpredictable timing of customer orders, we mayship products representing a significant portion of our net sales for a quarterduring the last month of that 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 product development.  There is no assurance that we willexperience sales growth with respect to new product introductions in futureperiods. As a result, if sales levels are below expectations, net income may bedisproportionately 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% and47% in fiscal 2001 and 2000, respectively. We generally sell to OEM’s or integrators who are dependent on capitalspending levels at television stations and movie studios.  Demand from customers in this market can bedependent, in part, on overall levels of advertising revenues and generaleconomic conditions.  During the fourthquarter of fiscal 2001, we experienced a significant reduction in demand fromour key customers in this market due primarily to the impacts of the generaleconomic slowdown.  We do not expectdemand in this market segment to improve until the second half of fiscal 2002.

 

Sales in the military and government market as a percentage of netsales were 39% and 35% in fiscal 2001 and 2000, respectively.  Demand for our products in this market havebeen historically cyclical and fluctuate based on timing of defensespending and technology upgrades within programs that currently specify ourproducts. There can be no assurances that we will experience growth in thismarket segment during fiscal 2002.

 

Historically, a materialpercentage of our net sales in each year have been derived from a limitednumber of customers. For fiscal 2001 and 2000 our top five customers accountedfor approximately 48% and 46%, respectively, of our net sales. For fiscal 2001,sales to two customers, a division of Leitch Technology Corporation and adepartment of the U.S. Navy accounted for 16% and 14% of net sales,respectively.  During fiscal 2000 and1999, Silicon Graphics, Inc. accounted for 25% and 8% of net sales,respectively. During fiscal 2000 and 1999, the U.S. Navy accounted for 27% and13% 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 2001 we derived approximately 31% of our revenue from our NETarrayproduct, introduced in late 2000 and approximately 28% of our revenue from our7000 product, introduced in 1997.  Weexpect that revenue from our NETarray products will account for a substantialand growing portion of our total revenue for the foreseeable future.

 

Our FibreSTORE 2210 and Talonproducts are scheduled for release during the second half of 2002.   The demand for, and market acceptance ofthese products is uncertain. Historically our storage product offerings consistof a limited number of product lines. As such, the widespread market acceptance of new products in our marketsis 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;                                                                                |
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| • | performance,  quality, price and total cost of ownership of our existing products;                                            |
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| • | continued  development of technologies that allow our storage products to function over  WANs and over IP-based networks; and |
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| • | availability,  price, quality and performance of competing products and technologies;                                         |

 

 

OUR INDUSTRIES ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE ANDINTENSE COMPETITION AND WE MUST KEEP PACE WITH THE CHANGES TO SUCCESSFULLYCOMPETE

 

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 in a timely manner andachieve market acceptance. We also cannot be certain that we will be able todevelop the 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;                                             |
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| • | issue stock  that would dilute our current shareholders' percentage ownership;  |
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| • | incur  amortization expense related to goodwill and other intangible assets; or |
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| • | incur debt  or assume liabilities.                                              |

 

These purchases also involvenumerous risks, including:

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

 

We cannot assure you that we will be able to successfully integrate anybusinesses, products, technologies or personnel related to organizations thatwe might acquire or merge with in the future.

 

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 that oursuccess 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 successwill depend also in part upon our ability to attract and retain highly skilledand qualified 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 our productswhich would have a material adverse impact on our business and results ofoperation.

 

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

 

International operationsaccounted for approximately 15% and 26% of our revenues in fiscal 2001 and2000, respectively.  International salesdecreased $3.9 million or 45% during fiscal 2001 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 and service office inNewbury, England.

 

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

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

 

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.