<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
                                   (Mark One)

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                                   SECURITIES
                              EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
                                       OR

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

                                     1-11578
                            (Commission file number)

                                   DISC, INC.
             (Exact name of registrant as specified in its charter)

              California                                77-0129625
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)               Identification Number)

          372 Turquoise Street                            95035
          Milpitas, California                          (Zip Code)
 (Address of principal executive offices)

       Registrant's telephone number, including area code: (408) 934-7000


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 [ ]

The number of shares outstanding of the registrant's common stock as of October
31, 2001 was 4,814,013.

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                                   DISC, INC.
                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                                                 September 30, 2001    December 31, 2000
                                                                 ------------------    -----------------
                                                                     (Unaudited)           (Restated)
<S>                                                              <C>                   <C>
ASSETS
Current assets:

     Cash                                                          $       776,000      $       128,000
     Accounts receivable                                                 3,485,000            1,784,000
     Inventories                                                         2,922,000            1,465,000
     Prepaids and deposits                                                 378,000               76,000
                                                                   ---------------      ---------------
                  Total current assets                                   7,561,000            3,453,000

Property and equipment, net                                                690,000              432,000
Other intangibles                                                        5,074,000                   --
                                                                   ---------------      ---------------
                                                                   $    13,325,000      $     3,885,000
                                                                   ===============      ===============
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                              $     2,466,000      $     1,159,000
     Borrowings under credit line, current portion                       2,042,000                   --
     Accrued expenses and other liabilities                              2,029,000              630,000
                                                                   ---------------      ---------------
                  Total current liabilities                              6,537,000            1,789,000
Other liabilities, long-term                                               123,000                   --
Line of credit, net of current portion                                   1,552,000                   --
                                                                   ---------------      ---------------
                                                                         8,212,000            1,789,000
                                                                   ---------------      ---------------

Shareholders' equity:
     Convertible Preferred Stock; no par value:
     10,000,000 shares authorized; 5,433,689
     and 5,141,573 shares issued and outstanding                        25,543,000           19,277,000
     Common Stock; no par value: 40,000,000 shares authorized;
     4,814,013 and 3,841,053 shares issued and outstanding              14,149,000           13,775,000
     Accumulated deficit                                               (34,491,000)         (30,956,000)
     Accumulated other comprehensive income                                (88,000)                  --
                                                                   ---------------      ---------------
Total shareholders' equity                                               5,113,000            2,096,000
                                                                   ---------------      ---------------
                                                                   $    13,325,000      $     3,885,000
                                                                   ===============      ===============
</TABLE>

See the accompanying condensed notes to these consolidated financial statements.


<PAGE>



                                   DISC, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                 Three Months ended September 30,       Nine Months ended September 30,
                                                 --------------------------------      --------------------------------
                                                    2001                2000               2001               2000
                                                 -------------      -------------      -------------      -------------
                                                                     (Restated)         (Restated)        (Restated)
<S>                                              <C>                <C>                <C>                <C>
Net sales                                        $   3,739,000      $   1,838,000      $   7,813,000      $   4,910,000
                                                 -------------      -------------      -------------      -------------
Costs and expenses:
     Cost of sales                                   2,818,000          1,450,000          6,310,000          4,148,000
     Research and development                          551,000            280,000          1,339,000            838,000
     Marketing and sales                             1,008,000            726,000          2,588,000          1,919,000
     General and administrative                        392,000            250,000            982,000            772,000
                                                 -------------      -------------      -------------      -------------
                                                     4,769,000          2,706,000         11,219,000          7,677,000
                                                 -------------      -------------      -------------      -------------
Loss from operations                                (1,030,000)          (868,000)        (3,406,000)        (2,767,000)
Interest income (expense), net                         (76,000)           (27,000)          (129,000)           (82,000)
                                                 -------------      -------------      -------------      -------------
Net loss                                            (1,106,000)          (895,000)        (3,535,000)        (2,849,000)
Deemed preferred stock dividend                       (607,000)          (247,000)        (1,426,000)        (1,251,000)
                                                 -------------      -------------      -------------      -------------
Net loss attributable to common
     shareholders                                $  (1,713,000)     $  (1,142,000)     $  (4,961,000)     $  (4,100,000)
                                                 =============      =============      =============      =============

Net loss per share attributable to common
     shareholders - basic and diluted            $       (0.38)     $       (0.30)     $       (1.22)     $       (1.08)
                                                 =============      =============      =============      =============

Weighted average common shares and equivalents
     for basic and diluted net per share
     calculation                                     4,548,000          3,816,000          4,080,000          3,796,000
                                                 =============      =============      =============      =============
</TABLE>

See the accompanying condensed notes to these consolidated financial statements.

<PAGE>


                                   DISC, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  Nine Months ended September 30,
                                                                  --------------------------------
                                                                      2001              2000
                                                                  ------------      ------------
<S>                                                               <C>               <C>
Cash flows from operating activities:

     Net loss                                                     $ (3,535,000)     $ (2,849,000)
     Adjustments to reconcile net loss to cash
         used in operating activities:
         Depreciation expense                                          253,000           199,000
     Changes in assets and liabilities:
         Accounts receivable                                        (1,313,000)          316,000
         Inventories                                                  (165,000)         (222,000)
         Prepaid and deposits                                           32,000             4,000
         Accounts payable                                               23,000          (279,000)
         Accrued expenses and other liabilities                        534,000            76,000
                                                                  ------------      ------------
                  Net cash used in operating activities             (4,171,000)       (2,755,000)
                                                                  ------------      ------------
Cash flows used in investing activities:

     Purchase of property and equipment                               (184,000)         (184,000)
     Acquisition of NSM Storage GmbH, net                             (342,000)               --
                                                                  ------------      ------------
                  Net cash used in investing activities               (526,000)         (184,000)
                                                                  ------------      ------------
Cash flows from financing activities:

     Borrowings (repayments) under line of credit                      677,000          (432,000)
     Proceeds from issuance of Common Stock                              8,000            81,000
     Proceeds from issuance of Preferred Stock                       4,650,000         2,770,000
                                                                  ------------      ------------
                  Net cash provided by financing activities          5,335,000         2,419,000
                                                                  ------------      ------------
Effect of exchange rate change on cash                                  10,000                --
                                                                  ------------      ------------
Net increase (decrease) in cash                                        648,000          (520,000)
Cash at beginning of period                                            128,000         1,126,000
                                                                  ------------      ------------
Cash at end of period                                             $    776,000      $    606,000
                                                                  ============      ============
Non-cash financing activities:
     Issuance of Common Stock in NSM Storage GmbH acquisition     $  1,979,000                --
                                                                  ============      ============
</TABLE>


See the accompanying condensed notes to these consolidated financial statements.

<PAGE>



                                   DISC, INC.
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY

BASIS OF PRESENTATION

We have prepared the unaudited interim consolidated financial statements
pursuant to the rules and regulations of the Securities and Exchange Commission.
We have condensed or omitted certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles pursuant to these rules and regulations. In our
opinion, the consolidated financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the financial position, operating results and cash flows for the periods
presented. These consolidated financial statements should be read in conjunction
with the financial statements and accompanying notes for the years ended
December 31, 2000 and 1999 included in our Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results that may be expected for the fiscal year, which ends December 31,
2001, or for any other period.

During the first nine months of 2001, we received $4,650,000 of equity financing
from our largest investor. Our investor also agreed to provide up to an
additional $300,000 of equity financing to us, if needed. We believe that this
committed investment, together with current cash reserves, cash to be generated
from operations and borrowings from our factoring agreement with a financial
institution, which allows us to sell the lesser of $1,500,000 or 85% of eligible
accounts receivable, will be sufficient to meet our operating requirements at
least through the end of 2001, although we anticipate that we will continue to
incur net losses for the foreseeable future. The ability to sustain our
operations for a significant period after December 31, 2001 will depend on our
ability to significantly increase sales or raise significant additional equity
or debt financing.

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.

FOREIGN CURRENCY TRANSLATION

The functional currency of the Company's foreign subsidiaries is the local
currency. Accordingly, the assets and liabilities of the Company's foreign
subsidiaries are translated into U.S. Dollar using exchange rates in effect at
the balance sheet date. Income and expense items are translated at average
exchange rates for the period. Foreign currency translation adjustments are
included in other comprehensive income as a separate component of stockholders'
equity. Foreign currency transaction gains or losses are recorded in operating
expenses and were not significant for the nine months ended September 30, 2001.

NOTE 2 -- INVENTORIES

The components of inventory were as follows:

<TABLE>
<CAPTION>
                                                September 30,     December 31,
                                                    2001             2000
                                                ------------     ------------
<S>                                             <C>              <C>
Purchased component parts and subassemblies     $  1,846,000     $    812,000
Work-in-process                                      559,000          574,000
Finished goods                                       517,000           79,000
                                                ------------     ------------
                                                $  2,922,000     $  1,465,000
                                                ============     ============
</TABLE>


NOTE 3 -- ACQUISITION OF NSM STORAGE GmbH AND SUBSIDIARIES

<PAGE>


On July 30, 2001, we acquired all of the outstanding shares of NSM Storage GmbH,
a German limited liability company, which was subsequently renamed to DISC GmbH.
We acquired DISC GmbH to expand our product offerings and increase our customer
base in Europe. As consideration for the acquired business, we issued 965,210
shares of our common stock and paid $10,000 in cash. This transaction has been
accounted for under the purchase method of accounting pursuant to the recently
issued Financial Accounting Standard ("FAS") No. 141. Following is a table of
total consideration paid and the preliminary allocation of consideration paid.

Consideration paid:
<TABLE>
<CAPTION>
                                           Fair Value
                                          ------------
<S>                                       <C>
Value of securities issued                $  1,979,000
Cash consideration                              10,000
Direct transaction costs and expenses          471,000
                                          ------------
Total consideration paid                  $  2,460,000
                                          ============
</TABLE>

Consideration paid allocation:
<TABLE>
<CAPTION>
                                                                                   Annual Amount
                                                                                   Amortization
                                                                                   ------------
<S>                                                          <C>                   <C>
Tangible net assets                                          $ (2,614,000)              N/A
Purchase price in excess of acquired net tangible assets        5,074,000               N/A
                                                             ------------
Total                                                        $  2,460,000
                                                             ============
</TABLE>

The Company's allocation of the aggregate consideration paid is based on
management's preliminary analysis and estimates of the fair values of the
tangible assets and intangible assets. The book values of tangible assets and
liabilities acquired are assumed to approximate fair values. The allocation of
the purchase price has not yet been finalized. Our quarterly results include the
operations of DISC GmbH for the two months beginning August 1, 2001.

Had the acquisition of DISC GmbH occurred on January 1, 2001, pro forma combined
revenues would have been $4,372,000 and $10,168,000 for the three and nine
months ended September 30, 2001. Pro forma net loss attributable to common
shareholders would have been $1,666,000 or ($0.37) per share and $5,940,000 or
($1.46) per share for the three and nine months ended September 30, 2001.

NOTE 4 -- RESTATEMENT

Under EITF Nos. 98-5 and 00-27 and related standards, if a company issues
convertible preferred stock with a beneficial conversion feature, then the value
of the beneficial conversion feature is accounted for as a deemed dividend. A
beneficial conversion feature is computed as the intrinsic value of the spread
between the quoted market price of common stock and the conversion price
multiplied by the number of common shares into which the preferred stock
converts. As described in Note 5, the Company has funded its operations through
the sales, in private placements, of preferred stock and warrants to its
principal investor. Management believes that these equity transactions were made
in the best interests of the Company. In determining whether there was a
beneficial conversion feature, management utilized an estimated fair value of
common stock which was lower than its quoted market price. Management believed
that the negotiated price of the stock was representative of the market price of
the stock in a private placement of that size. Management concluded that there
was no beneficial conversion feature associated with the issuance of convertible
preferred stock and warrants, and the Company did not record a deemed dividend.

Recently, the Company became aware that the SEC has insisted that the quoted
market price be used in calculating a beneficial conversion feature. As the
result of the SEC's position, the Company has restated its financial statements
to reflect a deemed dividend as a charge to accumulated deficit and earnings per
share. The restatement did not affect the Company's assets, liabilities,
revenues or expenses as originally reported. In the restatement, the deemed
dividend is added to net loss to determine net loss attributable to common
shareholders.

In addition to the restatement to use the quoted market price to measure the
beneficial conversion feature, the Company restated to report a cumulative
effect of accounting change as of October 1, 2000, representing the effect of
the change in accounting method from use of the stated conversion price to use
of the accounting conversion price in applying the intrinsic value method for
determining the beneficial conversion feature for all convertible preferred


<PAGE>
stock issuances as required by EITF 00-27. The EITF required that the effect of
adopting the accounting conversion price be recorded in the fourth quarter of
2000. Refer to our Form 10K/A for the year ended December 31, 2000, Form 10Q/A
for the three month period ended March 31, 2001 and Form 10Q/A for the three
month and six month periods ended June 30, 2001, for a further discussion of the
impact of the restatement.

NOTE 5 -- RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2001, the Company sold and MK GVD
Fund, the principal shareholder, purchased 71,038, 70,988 and 90,090 shares of
convertible preferred stock, Series BB, CC and EE, respectively, and warrants
under a formula set out in a March 1996 agreement for aggregate proceeds of
$1,300,000, $1,150,000 and $1,000,000, respectively. The warrants allow the
holder to purchase 177,595, 117,469 and 225,225 shares of common stock for an
exercise price of $2.29, $2.03 and $1.39 per share, respectively. Under the
agreement the number of shares of preferred stock was determined based on 85% of
the average closing price of the Company's Common Stock for the five trading
days ended three days prior to the issuance date, but not to exceed $2.50 per
share as converted into common stock.

The fair value of the warrants was determined using a Black Scholes option
pricing model with the following assumptions: volatility of 142%; risk free
interest rate of 5.08%; expected life: 5 years and no dividend yield. The fair
value of the warrants is recorded in shareholders equity.

In addition, in August 2001, we received $1,200,000 from MK GVD Fund in exchange
for 60,000 shares of our Series DD preferred stock and warrants to purchase
150,000 shares of our common stock at an exercise price of $2.50 per share. The
sales of the convertible debentures, preferred stock and warrants were deemed to
be exempt from registration under the Securities Act of 1933, as amended, in
reliance on Section 4 (2) of the Securities Act, as transactions by an issuer
not involving a public offering.

MK GVD Fund has also agreed to provide up to an additional $300,000 to us, if
needed.

NOTE 6 -- COMPREHENSIVE INCOME (LOSS)

A summary of comprehensive loss for the periods presented is as follow:

<TABLE>
<CAPTION>
                                           Three Months ended September 30,    Nine Months ended September 30,
                                           --------------------------------    -------------------------------
                                               2001              2000              2001              2000
                                           ------------      ------------      ------------      ------------
<S>                                        <C>               <C>               <C>               <C>
     Net loss                              $ (1,106,000)     $   (895,000)     $ (3,535,000)     $ (2,849,000)
     Foreign currency translation loss          (88,000)               --           (88,000)               --
                                           ------------      ------------      ------------      ------------
Total comprehensive loss                   $ (1,194,000)     $   (895,000)     $ (3,623,000)     $ (2,849,000)
                                           ============      ============      ============      ============
</TABLE>

NOTE 7 -- RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and requires recognition of all
derivatives as assets or liabilities in the balance sheet and measurement of
those instruments at fair value. We adopted SFAS 133 as of January 1, 2001 and
it did not have a material effect on our financial condition or results of
operations.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations." This standard eliminates the pooling-of-interests method of
accounting for business combinations, except for qualifying business
combinations that were initiated prior to July 1, 2001, and applies to all
business combinations accounted for under the purchase method that are completed
after June 30, 2001. We have adopted SFAS 141 as of July 1, 2001.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 ("SFAS No. 142"), "Goodwill and Other
Intangible Assets." This standard eliminates the amortization of goodwill, and
requires goodwill to be reviewed at least annually for impairment, the useful
lives of previously recognized intangible assets to be reassessed and the
remaining amortization periods to be adjusted accordingly. This standard is
effective for fiscal years beginning after December 15, 2001. The implementation
of this standard is not expected to have a significant impact on the Company's
financial condition or results of operations in the current fiscal year.


<PAGE>


NOTE 8 -- OPERATING SEGMENTS

For purposes of segments reporting in accordance with SFAS No. 131, the Company
has determined that it operates in one industry segment.

The following is a summary of the Company's revenue attributed to the geographic
regions:

<TABLE>
<CAPTION>
                    Three Months ended September 30,       Nine Months ended September 30,
                    --------------------------------      --------------------------------
                         2001               2000               2001               2000
                    ------------       ------------       ------------       ------------
<S>                 <C>                <C>                <C>                <C>
North America       $  3,032,000       $  1,629,000       $  6,702,000       $  4,653,000
Europe                   625,000             68,000          1,027,000            116,000
Asia                      77,000             16,000             77,000             16,000
Others                     5,000            125,000              7,000            125,000
                    ------------       ------------       ------------       ------------
                    $  3,739,000       $  1,838,000       $  7,813,000       $  4,910,000
                    ============       ============       ============       ============
</TABLE>

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

RESULTS OF OPERATIONS

For the three and nine months ended September 30, 2001, the company had sales of
$3,739,000 and $7,813,000, respectively, compared to sales of $1,838,000 and
$4,910,000 for the three and nine months ended September 30, 2000. These
increases were primarily related to an increase in unit sales and our
acquisition of DISC GmbH and were aided by an increase in the sale of media and
service contracts. The general sales cycles for distribution of our products are
similar to those of most businesses selling products designed for use as part of
large systems, and range from three to six months for value added resellers and
small system integrators and from one to two years for original equipment
manufacturers, product integrators and large system integrators. Because our
products are part of large systems, the sales cycles for our products vary
significantly and are difficult to predict for any particular transaction. The
long and often unpredictable sales cycles for our products complicate
forecasting for operational planning and may cause net sales and operating
results to vary significantly from quarter to quarter.

Cost of sales, as a percentage of sales, decreased to 75% and 81% for the three
and nine months ended September 30, 2001, as compared to 79% and 84% for the
comparable 2000 periods, primarily due to the increase in net sales. Our
relatively low gross margins reflect our low levels of net sales, which have
resulted in unabsorbed manufacturing costs and high costs of materials due to
the inability to achieve purchasing economies of scale. We expect that, if
product sales increase significantly, costs of sales per unit of product will
decrease because fixed manufacturing costs will be distributed over the larger
sales volume, and material costs will decrease as the result of volume
purchases. However, even with product sales increases, cost of sales per unit of
product may not decrease significantly or at all because the magnitude of the
sales increase was not sufficient or because manufacturing, material and other
costs may independently increase.

For the three and nine months ended September 30, 2001, research and development
expenses were $551,000 and $1,339,000, respectively, compared to $280,000 and
$838,000 for the comparable period of 2000. The increase for the three month
period ended September 30, 2001 as compared to the comparable period of 2000,
was primarily due to an increase in headcount in connection with the acquisition
of DISC GmbH. In addition to the increase in headcount related to NSM, the
increase for the nine month period ended September 30, 2001 as compared to the
comparable period of 2000, was also due to an increase in headcount in
connection with our network attach storage program. We believe that research and
development expenses will continue to increase moderately during the remainder
of 2001 due to new projects currently under development.

Marketing and sales expenses were $1,008,000 and $2,588,000 for the three and
nine months ended September 30, 2001 compared to $726,000 and $1,919,000 for the
comparable periods in 2000. The increase for the three months ended September
30, 2001 as compared to the comparable period in 2000, is primarily due to an
increase in headcount and related marketing and sales expenses related to the
acquisition of DISC GmbH. In addition to the acquisition of DISC GmbH, the
increase in expenses for the nine month period ended September 30, 2001, as
compared to the comparable period of 2000, is primarily due to an increase in


<PAGE>


our sales and marketing headcount. We believe that marketing and sales expenses
will increase during the remainder of 2001 as we have added significant
resources in marketing and business development to allow us to address new
markets and expand our customer base.

General and administrative expenses were $392,000 and $982,000 for the three and
nine months ended September 30, 2001, compared to $250,000 and $772,000 for the
comparable periods in 2000. For the three month period ended September 30, 2001,
the increase is primarily due to the acquisition of DISC GmbH, and the increase
for the nine month period ended September 30, 2001, was also due to an increase
in headcount and an increase in professional fees. General and administrative
expenses are expected to remain relatively constant during the remainder of
2001.

Notwithstanding the foregoing, we may incur significant, unexpected expenses as
a result of attempts to respond to technological advances, increased
competition, new product announcements and releases by our competitors, changes
in the data storage market, market opportunities and other factors discussed
below in "Factors That May Affect Future Operating Results and the Market Price
of Our Stock."

LIQUIDITY AND CAPITAL RESOURCES

During the nine month period ended September 30, 2001, we used $4,171,000 of
cash in operations, primarily to fund operating losses. During the first nine
months of 2001, we received $4,650,000 of equity financing from our largest
investor (see Note 5 Related Party Transactions in Condensed Notes to Financial
Statements). Our largest investor also agreed to provide up to an additional
$300,000 of equity financing to us, if needed. We believe that this committed
investment together with borrowing from our factoring agreement with a financial
institution, which allows us to sell the lesser of $1,500,000 or 85% of eligible
accounts receivable, current cash reserves and cash to be generated from
operations will be sufficient to meet our operating requirements at least
through the end of 2001, although we anticipate that we will continue to incur
net losses for the foreseeable future. We also expect to require increasing
amounts to increase sales as we approach large system integrators and OEMs with
additional sales and sales support staff and evaluation units. In addition, we
plan to expand our current network of resellers. We also expect that it will
require cash to finance purchases of inventory in anticipation of possible
increases in sales. In addition, we expect that the integration of our recent
acquisition of DISC GmbH and the support of its operations will require cash as
well. If we incur greater expenditures than we currently anticipate in
connection with these or other matters, and if we cannot raise funds on
acceptable terms, we may not be able to develop or enhance our products, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements.

The ability to sustain our operations for a significant period after December
31, 2001 will depend on our ability to significantly increase sales or raise
significant additional equity or debt financing. We may not be able to increase
sales or raise significant additional equity or debt financing, from our largest
investor or otherwise, on a timely basis or at all. In particular, while we have
relied upon regular investments by our largest investor to sustain our
operations, our largest investor has no commitment to continue its investments,
other than with respect to the additional $300,000 of equity financing mentioned
above.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and requires recognition of all
derivatives as assets or liabilities in the balance sheet and measurement of
those instruments at fair value. We adopted SFAS 133 as of January 1, 2001 and
it did not have a material effect on our financial condition or results of
operations.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations." This standard eliminates the pooling-of-interests method of
accounting for business combinations, except for qualifying business
combinations that were initiated prior to July 1, 2001, and applies to all
business combinations accounted for under the purchase method that are completed
after June 30, 2001. We have adopted SFAS 141 as of July 1, 2001.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 ("SFAS No. 142"), "Goodwill and Other
Intangible Assets." This standard eliminates the amortization of goodwill, and
requires goodwill to be reviewed at least annually for impairment, the useful
lives of previously recognized intangible assets to be reassessed and the
remaining amortization periods to be adjusted accordingly. This standard is
effective for fiscal years beginning after December 15, 2001. The implementation
of this standard is not expected to have a significant impact on the Company's
financial condition or results of operations.



<PAGE>
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

This quarterly report on Form 10-Q contains certain forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and we intend
that these forward-looking statements are subject to the safe harbors created by
those provisions. These forward-looking statements include statements relating
to:

-    future research and development projects;

-    increasing our sales efforts and possible increases in sales;

-    potential future decreases in costs of sales per unit;

-    expected research and development, marketing and sales and general and
     administrative expenditures;

-    expanding our sales channels;

-    expected sales cycles;

-    the need for, and availability of, additional financing; and

-    actual and potential acquisitions and their effects on our financial
     position.

The forward-looking statements included in this quarterly report on Form 10-Q
are based on current expectations that involve a number of risks and
uncertainties. These forward-looking statements are based on assumptions
regarding our business, which involve judgments with respect to, among other
things, future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our control. Although we believe that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, our business and operations are subject to substantial risks which
increase the uncertainty inherent in such forward-looking statements (see
"Additional Factors that May Affect Future Operating Results and the Market
Price of our Stock" starting on page 5 of our annual report on Form 10-K for the
year ended December 31, 2000 and "Factors that May Affect Future Operating
Results and the Market Price of our Stock" below). In light of the significant
uncertainties inherent in the forward-looking information included in this
quarterly report on Form 10-Q, the inclusion of such information should not be
regarded as a representation by us or any other person that our objectives or
plans will be achieved.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS AND THE MARKET PRICE OF OUR
STOCK

Our future operating results, and stock price, may be affected by a number of
factors, many of which are beyond our control. These factors include the
following:

OUR QUARTERLY REVENUES AND OPERATING RESULTS MAY FLUCTUATE FOR A NUMBER OF
REASONS, WHICH MAY CAUSE OUR STOCK PRICE TO FLUCTUATE.

Our quarterly operating results have varied in the past and are likely to vary
significantly in the future due to several factors, including:

-    the size and timing of significant customer orders;

-    shifts in product or distribution channel mix;

-    increased competition and pricing pressure;

-    timing of new product announcements and releases by us or our competitors;

-    new product developments by storage device manufacturers;

-    the rate of growth in the data storage market;

-    market acceptance of new and enhanced versions of our products;


<PAGE>


-    timing and levels of our sales and operating expenses;

-    gain or loss of significant customers or distributors;

-    changes in economic conditions;

-    personnel changes; and

-    our ability to effectively integrate the products and operations of NSM
     Storage GmbH with ours.

Our quarterly revenue and operating results have been affected by seasonal
trends. These trends often result in lower revenue in the first quarter of each
fiscal year compared to the fourth quarter of the previous fiscal year due to
customer purchasing and budgetary practices.

The general sales cycles for distribution of our products are similar to those
of most businesses selling products designed for use as part of large systems,
and range from three to six months for value added resellers and small system
integrators and from one to two years for original equipment manufacturers,
product integrators and large system integrators. Our variable and extended
sales cycle makes it difficult to predict if or when revenue will be earned.
Since our operating expenses are based on anticipated revenue levels and because
a high percentage of these expenses are relatively fixed, a delay in a sale or
revenue recognition for a sale could cause significant variations in our
operating results from quarter to quarter and could cause unexpected results.

Operating results in any period should not be considered indicative of the
results investors can expect for any future period. Due to the forgoing and
other factors related to our industry, past results are a much less reliable
predicator of future results than is the case in many older, more stable and
less dynamic industries. We cannot assure you that we will be able to increase
or even sustain our recent levels of quarterly revenue and net sales, as
normalized for unusual or one-time items, or that we will attain or maintain
profitability in any future period. Any unfavorable change in the factors
described above or any other factors could adversely affect our operating
results for a particular quarter. In addition, it is likely that in some future
quarters our operating results will be below the expectations of public market
analysts and investors. In any of these events, the price of our common stock
would likely decline.

OUR STOCK PRICE MAY BE EXTREMELY VOLATILE.

The market price of our common stock has experienced fluctuations and is likely
to fluctuate significantly in the future. Our stock price can fluctuate for a
number of reasons, including:

-    announcements about us or our competitors;

-    quarterly variations in operating results;

-    the introduction of new technologies or products;

-    changes in product pricing policies by us or our competitors;

-    comments regarding us and the data storage market made on Internet bulletin
     boards; and

-    changes in earnings estimates by analysts or changes in accounting
     policies.

In addition, stock markets have experienced extreme price and volume volatility
in recent years. This volatility has had a substantial effect on the market
prices of securities of many smaller public companies for reasons frequently
unrelated or disproportionate to the operating performance of the specific
companies. In addition, the securities of many high technology companies,
including DISC, have historically been subject to extensive price and volume
fluctuations that may affect the market price of their common stock. These broad
market fluctuations may adversely affect the market price of our common stock.

IF OUR SECURITIES ARE DELISTED FROM NASDAQ, THE TRADING MARKET AND PRICES OF OUR
SECURITIES WOULD BE HARMED.

The trading of our common stock on the NASDAQ System is conditioned upon our
meeting certain asset, revenues and stock price tests. If we fail any of these
tests, our common stock may be delisted from trading on the NASDAQ System, which
could materially adversely affect the trading market and prices for those
securities. In addition, low price stocks


<PAGE>


are subject to additional risks including additional state regulatory
requirements and the potential loss of effective trading markets.

COMPETITION IN THE COMPUTER INFORMATION STORAGE MARKET MAY LEAD TO REDUCED
MARKET SHARE, DECLINING PRICES AND REDUCED PROFITS.

The markets for data storage solutions are intensely competitive, fragmented and
characterized by rapidly changing technology and evolving standards. These
conditions could render our products less competitive or obsolete and could harm
our business, financial condition and ability to market our products. Some of
our competitors have significantly more financial, technical, manufacturing,
marketing and other resources than we have. As a result, our competitors may be
able to respond more quickly than we can to new or changing opportunities,
technologies, standards or customer requirements. Competitors may develop
products and technologies that are less expensive or technologically superior to
our products. In addition, our competitors may manufacture and market their
products more successfully than we do our products. Competition from computer
companies and others diversifying into the field is expected to increase as the
market develops. We may face substantial competition from new entrants in the
industry and from established and emerging companies in related industries.
There is significant price competition in the markets in which we compete, and
we believe that pricing pressures are likely to continue. Certain competitors
may reduce prices in order to preserve or gain market share. This pricing
pressure could result in significant price erosion, reduced gross profit margins
and loss of market share, any of which could negatively affect our business,
financial condition and operating results.

THE STORAGE DEVICE MARKET IS CHARACTERIZED BY RAPID TECHNOLOGICAL EVOLUTION, AND
OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP NEW PRODUCTS.

The market for our products is characterized by rapidly changing technology and
evolving industry standards and is highly competitive with respect to timely
innovation. At this time, the data storage market is particularly subject to
change with the emergence of Fibre Channel protocol and new storage solutions
such as storage area networks, or SANs, and network attached storage, or NAS,
devices. The introduction of new products embodying new or alternative
technology or the emergence of new industry standards could render our existing
products obsolete or unmarketable. Our future success will depend in part on our
ability to anticipate changes in technology, to gain access to such technology
for incorporation into our products and to develop new and enhanced products on
a timely and cost-effective basis. Risks inherent in the development and
introduction of new products include:

-    the difficulty in forecasting customer demand accurately;

-    the possibility that sales of new products may cannibalize sales of our
     current products;

-    delays in our initial shipments of new products;

-    competitors' responses to our introduction of new products; and

-    the desire by customers to evaluate new products for longer periods of time
     before making a purchase decision.

In addition, we must be able to maintain the compatibility of our products with
significant future device technologies, and we must rely on producers of new
device technologies to achieve and sustain market acceptance of those
technologies. Development schedules for high-technology products are subject to
uncertainty, and we may not meet our product development schedules.

We have in the past experienced delays in the introduction of some new products.
If we are unable, for technological or other reasons, to develop products in a
timely manner or if the products or product enhancements that we develop do not
achieve market acceptance, our business will be harmed.

WE HAVE A HISTORY OF LOSSES AND WE EXPECT TO INCUR FUTURE LOSSES.

We have experienced significant operating losses since our inception, and as of
September 30, 2001 had an accumulated deficit of $34,491,000. We expect to
continue to incur net losses for the foreseeable future, and our ability to
sustain our operations for a significant period after December 31, 2001 will
depend on our ability to significantly increase or even maintain sales or raise
significant additional debt or equity financing. There can be no assurance we
will be able to increase sales or that additional financing will be available on
acceptable terms, or at all. Even if we are able to increase sales, we may incur
net losses for the foreseeable future due to anticipated spending increases
primarily on sales, marketing and research and development efforts. Even if we
do achieve profitability, we may not sustain or increase profitability on a
quarterly or annual basis.


<PAGE>


ANY INABILITY TO MEET OUR FUTURE CAPITAL REQUIREMENTS WOULD LIMIT OUR ABILITY TO
GROW.

We will likely need to seek additional funding in the future. In the event we
need to raise additional funds, we may not be able to do so on favorable terms,
if at all. We have a commitment from our largest investor to invest up to
$300,000 during the remainder of 2001, if needed, to help fund our capital
requirements. However there can be no assurance that this investor, or any of
our other investors, will be willing to make similar commitments in the future.
Further, if we issue equity securities, shareholders may experience additional
dilution or the new equity securities may have rights, preferences or privileges
senior to those of our existing securities. If we cannot raise funds on
acceptable terms, we may not be able to develop or enhance our products, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements.

CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL SHAREHOLDERS MAY PREVENT OTHER INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.

As of October 31, 2001, our executive officers, directors and principal
shareholders beneficially owned, in the aggregate, approximately 88% of our
outstanding common stock, preferred stock and warrants, on an as-if-converted
basis. In particular, our largest investor beneficially owns approximately 87%
of our outstanding common stock, preferred stock and warrants, on an
as-converted basis. As a result, these shareholders, if acting together, will be
able to exercise control over all matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership could disadvantage other
shareholders with interests different from those of our officers, directors and
principal shareholders. For example, our officers, directors and principal
shareholders could delay or prevent an acquisition or merger even if the
transaction would benefit other shareholders.

WE ACQUIRED DISC GmbH. IF WE ARE NOT SUCCESSFUL IN INTEGRATING THEIR
PRODUCTS AND OPERATIONS WITH OURS, OUR REVENUE AND OPERATING RESULTS COULD
DECLINE.

We recently acquired DISC GmbH, formerly NSM Storage GmbH. If we are not
successful in integrating its products, services, technology and operations with
ours, including coordinating our research development and sales and marketing
efforts, the net sales and operating results of the combined company could
decline. During the integration of DISC GmbH, our financial performance will be
subject to risks commonly associated with an acquisition, including the
financial impact of expenses necessary to realize benefits from the acquisition
and the potential for disruption of operations, including the diversion of
management's attention. We will face difficulties integrating personnel with
disparate backgrounds and combining corporate cultures, and we may lose key
employees. We may also lose customers and potential customers of DISC GmbH in
connection with the transition of ownership or otherwise.

We may not be able to accurately predict the impairment of the goodwill
resulting form the acquisition. Further, we may not be able to accurately
forecast the effect on future operating results from amortization of
identifiable intangible assets.

BECAUSE WE OPERATE WITH LITTLE BACKLOG, OUR OPERATING RESULTS COULD BE ADVERSELY
AFFECTED IF WE DO NOT ACCURATELY ANTICIPATE FUTURE SALES LEVELS.

Historically, we have operated with little order backlog and, due to the nature
of our business, do not anticipate that we will have significant backlog in the
future. Consequently, a large portion of our revenue in each quarter results
from orders placed during that quarter. Because of the relatively large dollar
size of orders from our distributors and original equipment manufacturers, or
OEMs, delay in the placing of a small number of orders by a small number of
purchasers could negatively affect our operating results for a particular
period. In addition, our operating expense levels are, in the short term,
largely fixed and are based, in part, on expectations regarding future revenue.
Thus, our operating results could be disproportionately affected if we do not
receive the expected number of orders in a given quarter and our net sales falls
below our expectations.

WE DEPEND ON CERTAIN KEY SUPPLIERS AND IF WE ARE UNABLE TO OBTAIN ADEQUATE
SUPPLIES, OUR SALES AND OPERATING RESULTS COULD BE SIGNIFICANTLY ADVERSELY
AFFECTED.

We do not possess proprietary optical disk, high-density disk or other storage
technologies and, consequently, we depend on a limited number of third-party
manufacturers to supply us with the devices that we incorporate into our
products. In some cases, these manufacturers are sole-source providers of the
device technology. Our suppliers have in the past been, and may in the future
be, unable to meet our supply needs, including our needs for timely delivery,


<PAGE>


adequate quantity and high quality. We do not have long-term contracts with any
of our significant suppliers. If these suppliers were to decide to pursue the
disc library market directly, they may cease supplying us with disc drives and
media, in which case we may be unable to obtain adequate supplies of disc drives
and media at acceptable prices, if at all. The partial or complete loss of any
of our suppliers could result in significant lost sales, added costs and
production delays or may otherwise harm our business, financial condition,
operating results and customer relationships.

WE HAVE A CONCENTRATED CUSTOMER BASE, AND THEREFORE THE LOSS OF A SINGLE
CUSTOMER COULD NEGATIVELY AFFECT OUR OPERATING RESULTS.

The majority of our end users purchase our products from distributors,
value-added resellers, or VARs, original equipment manufacturers, or OEMs, and
systems integrators, or SIs. We have no long-term orders with any of our
significant customers or distributors. Generally we sell products pursuant to
purchase orders. In addition, our distributors carry competing product lines
which they may promote over our products. A distributor may not continue to
purchase our products or market them effectively. Moreover, certain of our
contracts with our distributors contain "most favored nation" pricing provisions
which mandate that we offer our products to these customers at the lowest price
offered to other similarly situated customers. Our operating results could be
adversely affected if any of the following factors were to occur relating to one
or more of our significant resellers:

-    the reduction, delay or cancellation of orders or the return of a
     significant amount of products;

-    the loss of one or more of such resellers; or

-    any financial difficulties of those resellers that result in their
     inability to pay amounts owed to us.

BECAUSE WE ARE DEPENDENT ON INTERNATIONAL SALES FOR A SUBSTANTIAL AMOUNT OF OUR
NET REVENUES, WE FACE THE RISKS OF INTERNATIONAL BUSINESS AND ASSOCIATED
CURRENCY FLUCTUATIONS, WHICH MIGHT ADVERSELY AFFECT OUR OPERATING RESULTS.

We expect that international revenues will continue to represent a significant
portion of our net revenues in the foreseeable future. Doing business
internationally involves greater expenses and many additional risks. For
example, because the products we sell abroad and the products and services we
buy abroad are priced in foreign currencies, we may be affected by fluctuating
exchange rates. We might not successfully protect ourselves against currency
rate fluctuations, and our financial performance could be harmed as a result. In
addition, we face other risks of doing business internationally, including:

-    unexpected changes in regulatory requirements, taxes, trade laws and
     tariffs;

-    reduced protection for intellectual property rights in some countries;

-    differing labor regulations;

-    compliance with a wide variety of complex regulatory requirements;

-    changes in a country's or region's political or economic conditions;

-    greater difficulty in staffing and managing foreign operations; and

-    increased financial accounting and reporting burdens and complexities.

Our international operations require significant attention from our management
and substantial financial resources. We do not know whether our investments in
other countries will produce desired levels of net revenues or profitability.

WE RELY ON A CONTINUOUS POWER SUPPLY TO CONDUCT OUR OPERATIONS, AND CALIFORNIA'S
CURRENT ENERGY CRISIS COULD DISRUPT OUR OPERATIONS AND INCREASE OUR EXPENSES.

California is in the midst of an energy crisis that could disrupt our operations
and increase our expenses. In the event of an acute power shortage, that is,
when power reserves for the state of California fall below certain critical
levels, California has on some occasions implemented, and may in the future
continue to implement, rolling blackouts throughout California. We currently do
not have backup generators or alternate sources of power in the event of a


<PAGE>


blackout, and our current insurance does not provide coverage for any damages we
or our customers may suffer as a result of any interruption in our power supply.
If blackouts interrupt our power supply, we would be temporarily unable to
continue operations at our California facilities. Any such interruption in our
ability to continue operations at our facilities could damage our reputation,
harm our ability to retain existing customers and to obtain new customers, and
could result in lost revenue, any of which could substantially harm our business
and results of operations.

Furthermore, the deregulation of the energy industry instituted in 1996 by the
California government has caused power prices to increase. Under deregulation,
utilities were encouraged to sell their plants, which traditionally had produced
most of California's power, to independent energy companies that were expected
to compete aggressively on price. Instead, due in part to a shortage of supply,
wholesale prices have skyrocketed over the past year. If wholesale prices
continue to increase, the operating expenses associated with our facilities are
located in California will likely increase which would harm our results of
operations.

WE MAY BE SUED BY OUR CUSTOMERS FOR PRODUCT LIABILITY CLAIMS AS A RESULT OF
FAILURES IN OUR DATA STORAGE PRODUCTS.

We face potential liability for performance problems of our products because our
end users employ our storage technologies for the storage and backup of
important data. Although we maintain general liability insurance, our insurance
may not cover potential claims of this type or may not be adequate to indemnify
us for all liability that may be imposed. Any imposition of liability that is
not covered by insurance or is in excess of our insurance coverage could harm
our business.

DOWNTURNS IN THE COMPUTER INFORMATION STORAGE MARKET AND RELATED MARKETS MAY
DECREASE OUR REVENUES AND MARGINS.

The market for our products depends on economic conditions affecting the broader
information technology and related markets. Downturns in these markets may cause
our customers to delay or cancel information technology projects, reduce their
information technology budgets or reduce or cancel orders for our products. In
this environment, customers may experience financial difficulty, cease
operations or fail to budget for the purchase of our products. This, in turn,
may lead to longer sales cycles, delays in payment and collection, and price
pressures, causing us to realize lower revenues and margins. A prolonged
economic downturn would also increase our exposure to credit risk on trade
receivables. In particular, capital spending in the information technology
sector generally has decreased in the past 12 months, and many of our customers
and potential customers have experienced declines in their revenues and
operations. In addition, the terrorist acts of September 11, 2001 and subsequent
terrorist activities have created an uncertain economic environment and we
cannot predict the impact of these events, or of any related military action, on
our customers or business. We believer that, in light of these events, some
businesses may curtail or eliminate capital spending on information technology.
If capital spending in our markets declines, it may be necessary for us to gain
significant market share from our competitors in order to achieve our financial
goals and achieve profitability.

A NUMBER OF KEY PERSONNEL ARE CRITICAL TO THE SUCCESS OF OUR BUSINESS.

Our future success depends in large part on our ability to retain certain key
executives and other personnel, some of whom have been instrumental in
establishing and maintaining strategic relationships with key suppliers and
customers. We do not have any employment agreements with our employees. Our
future growth and success will depend in large part on our ability to hire,
motivate and retain highly qualified management, technical, operations and sales
and marketing personnel. Competition for such personnel is intense in the
high-technology industry, particularly in the San Francisco Bay area. We may not
be able to retain our existing personnel or attract additional qualified
personnel in the future. In addition, companies in our industry whose employees
accept positions with competitors frequently claim that their competitors have
engaged in unfair hiring practices. We may receive such claims in the future as
we seek to hire qualified personnel, and such claims could result in litigation.
Regardless of the merits of these claims, we could incur substantial costs in
defending ourselves against these claims.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


<PAGE>


We are not exposed to significant market risk related to fluctuations in
interest rates, as we are not expected to have a significant amount of interest
income in fiscal 2001. In addition, we do not use derivative financial
instruments of any kind and all of our transactions are in U.S. currency.

As a result of our recent acquisition of NSM Storage GmbH, we will experience an
increased exposure to the change in foreign currency exchange rates or weak
economic conditions in foreign markets. We plan to assess the need to enter into
foreign exchange forward contracts to offset the impact of currency fluctuations
on certain nonfunctional currency assets and liabilities, primarily denominated
in German Marks. We also plan to assess the need to periodically hedge
anticipated transactions with currency options.

                          PART II -- OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

As more fully discussed in Note 5 to the Condensed Notes to Financial
Statements, we have issued 71,038 shares of our Series BB preferred stock,
70,988 shares of our Series CC preferred stock, 60,000 shares of our Series DD
preferred stock and 90,090 shares of our Series EE preferred stock. The
preferred stock have certain rights, privileges and preferences (including
liquidation preferences) over our common stock.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

We held our Annual Meeting of Shareholders on September 20, 2001. Matters voted
upon at the meeting, and the number of shares cast for, against or withheld were
as follows:

        1.     To elect the following directors.

<TABLE>
<CAPTION>
                                                                     ABSTENTIONS AND
                                 FOR                AGAINST          SHARES NOT VOTED
                             -------------       -------------       ---------------
<S>                          <C>                 <C>                 <C>
J. Richard Ellis                18,173,836                  --           1,232,447
Michael D. Kaufman              18,173,836                  --           1,232,447
Frank T. Connors                18,173,836                  --           1,232,447
F.Rigdon Currie                 18,173,836                  --           1,232,447
Arch J. McGill                  18,173,836                  --           1,232,447
Michael A. McManus, Jr          18,173,836                  --           1,232,447
</TABLE>

        2.     To increase the number of shares of common stock reserved for
               issuance under the 1990 Stock Plan to 2,800,000.

                                                 ABSTENTIONS AND
                   FOR            AGAINST        SHARES NOT VOTED
                ----------       ----------      ----------------
                16,717,172           14,576         2,674,535

        3.     To approve the adoption of our 2001 Stock Plan.

                                                 ABSTENTIONS AND
                   FOR            AGAINST        SHARES NOT VOTED
                ----------       ----------      ----------------
                16,706,392           23,356        2,674,535

        4.     To appoint Pricewaterhouse Coopers LLP as independent auditors
               for the fiscal year ending December 31, 2001.

                                                 ABSTENTIONS AND
                   FOR            AGAINST        SHARES NOT VOTED
                ----------       ----------      ----------------
                18,162,286            9,550        1,234,447

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

<PAGE>

<TABLE>
<CAPTION>
        EXHIBIT
        NUMBER                                 DESCRIPTION
        --------                               -----------
<S>                      <C>
        10.1             Eighteenth Amendment to Convertible Debenture Purchase
                         Agreement dated September 28, 2001.
</TABLE>

(b) Reports on Form 8-K

Current Report on Form 8-K filed on August 14, 2001 relating to the acquisition
of NSM Storage GmbH.

                                   SIGNATURES

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.

                                      DISC, INC.

Dated November 14, 2001               By: /s/ J. Richard Ellis
                                          ------------------------------------
                                          J. Richard Ellis
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)


Dated November 14, 2001               By: /s/ Henry Madrid
                                          -------------------------------------
                                          Henry Madrid
                                          Vice President of Finance and
                                          Chief Financial Officer
                                          (Principal Financial and
                                          Accounting Officer)

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
        EXHIBIT
        NUMBER                                 DESCRIPTION
        --------                               -----------
<S>                      <C>
        10.1             Eighteenth Amendment to Convertible Debenture Purchase
                         Agreement dated September 28, 2001.
</TABLE>