<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                    FORM 10-K

                      FOR ANNUAL AND TRANSITIONAL REPORTS
                        PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ____________

                         Commission file number 0-27755

                                 JNI CORPORATION
                (Name of Registrant as Specified in its Charter)

                DELAWARE                                33-0740004
     (State or Other Jurisdiction of                 (I.R.S. Employer
     Incorporation or Organization)                 Identification No.)


         9775 TOWNE CENTRE DRIVE
          SAN DIEGO, CALIFORNIA                          92121
  (Address of Principal Executive Offices)             (Zip Code)

                                 (858) 535-3121
              (Registrant's Telephone Number, Including Area Code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None.

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 par value
                Preferred Stock Purchase Rights, $0.00 par value
                                (Title of Class)

              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 ___

         Indicate by check mark if disclosure of delinquent filer pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ___

         As of February 28, 2001, the aggregate market value of the registrant's
voting stock held by non-affiliates of the registrant was approximately
$316,084,183 based on the closing price of the Company's Common Stock on the
Nasdaq National Market on February 28, 2001 of $11.6875 per share.

         As of February 28, 2001, 27,044,636 shares of registrant's Common
Stock, $0.001 par value, were outstanding.

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                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Company's definitive Proxy Statement to be filed with
the Securities and Exchange Commission within 120 days after the close of the
fiscal year are incorporated by reference into Part III of this report.




FORWARD LOOKING STATEMENTS

         This document contains "forward-looking statements," which may include
the following:

         o        our business strategy;

         o        the timing of and plans for the introduction of new products
                  and enhancements;

         o        anticipated growth in the market for SAN connectivity
                  products;

         o        our ability to obtain ISO 9001 certification;

         o        entering into strategic alliances; and

         o        the adequacy of anticipated sources of funds to fund our
                  operations for at least the 12 months following the date of
                  this report.

         Other statements about our plans, objectives, expectations and
intentions contained in this report that are not historical facts may also be
forward-looking statements. When used in this report, the words "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates,"
"continue," "may," "should" or "will" or the negative of these terms or similar
expressions are generally intended to identify forward-looking statements.
Because these forward-looking statements involve risks and uncertainties,
actual results could differ materially from those expressed or implied by these
forward-looking statements for a number of reasons, including those discussed
under "Factors that may affect future performance" and elsewhere in this
report. We assume no obligation to update any forward-looking statements.

ITEM 1. BUSINESS

OVERVIEW

         We are a leading designer and supplier of Fibre Channel hardware and
software products that connect servers and data storage devices across storage
area networks, or SANs. SANs were made possible by the emergence of Fibre
Channel technology, a new generation of server-to-storage communications
technology that improves data communication speeds, connectivity, distance
between connections, reliability and accessibility. We currently market a broad
range of Fibre Channel host bus adapters and software that connect servers and
storage subsystems to facilitate the integration and management of SAN devices.
We also design and market high-performance application specific integrated
circuits, or ASICs, based on our proprietary technology. Throughout our history,
we have designed Fibre Channel products for the most demanding enterprise-level
systems running mission critical SAN applications that are integral to our
customers' businesses. We were the first in the industry to demonstrate products
capable of sustained two gigabit per second Fibre Channel transmissions.

         We design our products to operate with all major server operating
systems and network configurations used in SANs. Our Fibre Channel host bus
adapters, many of which incorporate our proprietary ASIC technology, can be used
both with UNIX and PC-based server platforms and their associated interfaces. We
have designed our proprietary driver software on a common code base to
facilitate rapid certification by original equipment manufacturers, or OEMs, and
to enhance our ability to bring new products and features to market rapidly in a
variety of operating system environments. Our software drivers significantly
reduce the need for a variety of adapters in

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heterogeneous environments and ensure interoperability between different sets of
platforms and servers. Our EZ Fibre configuration and management software
simplifies the installation of our adapters in supported operating system
environments.

         We sell our products domestically and internationally primarily through
OEM and distribution channel customers including distributors, system
integrators and value added resellers who sell directly to end-users. Our
significant customers include leading storage solution providers, server OEMs
and storage OEMs.

INDUSTRY BACKGROUND

GROWTH AND MANAGEMENT OF DATA

         In today's information-based economy, a company's information and
databases are central to the value of the enterprise. The volume of
business-critical data generated, processed, stored and manipulated has grown
dramatically over the last decade, and managing the increase in data is one of
the most important challenges for organizations. IDC estimates that the amount
of stored network data will grow from 10,500 terabytes in 1998 to 718,000
terabytes in 2003. The dramatic increase in stored data is the result of a
variety of factors, including:

         o        the development of Web-based business operations and
                  e-commerce;

         o        high-volume database access and transaction processing;

         o        enterprise resource planning applications;

         o        data warehousing and data mining of large databases;

         o        data replication services;

         o        digital video storage, transmission and editing; and

         o        business and scientific computing.

         As a result, enterprises face heightened requirements for data storage
solutions that offer:

         o        improved access to shared data;

         o        cost-effective, efficient management of shared data;

         o        business continuance;

         o        reduced costs of ownership;

         o        increased connectivity capabilities;

         o        higher performance; and

         o        uninterrupted data availability.

         Traditionally, enterprises accessed, shared and managed data storage
challenges utilizing a data communication technology known as direct attached
storage. Direct attached storage is based on the model of connecting each server
directly to a storage device. Stored data is only available to applications
running on the server directly connected to the storage device. Hence,
performance is limited to the performance of the server on which the application
is running, and there is virtually no disaster tolerance.

         The direct attached storage architectures can provide acceptable
performance in smaller enterprises and even in larger organizations when a
single server runs the complete application. Over the past few years, however,

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the explosive growth of networked computers has led to the distribution of
applications over hundreds or even thousands of servers. This trend, in
combination with the growth in stored data, has highlighted a number of
significant problems for enterprises using the direct attached storage
architecture:

         o        SCALABILITY. To increase the amount of storage capacity
                  without degrading network performance, a business using a
                  direct attached storage architecture will generally increase
                  the number of servers on the network as well as the number of
                  storage devices. Further, this architecture necessitates the
                  replication of data in multiple locations to eliminate
                  bottlenecks, thus increasing the cost of storing data.

         o        AVAILABILITY. Because access to each storage device is
                  controlled by a single server in the direct attached storage
                  architecture, data can become inaccessible if the server goes
                  down. Further, because the server must process all requests
                  for data in the storage device, the direct attached model
                  drains server processing power and increases latency for
                  network users which results in degraded overall network
                  performance.

         o        SPEED AND DISTANCE. To achieve faster transmission speeds in
                  direct attached architectures, the distance between storage
                  devices and servers must be limited to less than 12 meters.
                  This close proximity increases network configuration
                  complexity and exposure to data loss in disaster situations.
                  Furthermore, in direct attached storage architectures, data
                  transmission to or from the storage device from or to the
                  client requesting the data must pass through the small
                  computer systems interface, or SCSI, connection, the server
                  and the network. Direct attached storage architectures create
                  a bottleneck at the server which degrades network performance
                  and lengthens backup times.

         o        MANAGEABILITY. Businesses that use direct attached storage
                  architectures must rely on network servers to provide
                  performance, configuration, accounting, fault and security
                  management of the SCSI connection and the stored data. This
                  decentralized management approach increases the costs of
                  operating a network and limits the ability to improve
                  performance, ensure data security and enable highly available
                  data access.

         As a result, the direct attached storage architecture does not
adequately support the increasing requirements of today's data-intensive
enterprises. To meet these demands, companies have applied networking principles
to storage management that has resulted in two new storage architectures:
network attached storage, or NAS, and storage area networks, or SANs. NAS
enables data sharing over existing local area networks, or LANs, by connecting
storage devices to the LAN through a server at a single point on the LAN. Recent
developments in Gigabit Ethernet networking technologies that have substantially
increased bandwidth availability on LANs make it possible for NAS servers to
enable data sharing over greater distances through wide area networks, including
the Internet. By extending the access to data over the LAN, users can run
applications on multiple servers and client systems in the enterprise with the
same data. However, because NAS technology relies on LAN protocols for
transport, it cannot effectively handle large blocks of data utilized in
enterprise resource planning, online transaction processing and other
applications that rely heavily on databases.

FIBRE CHANNEL TECHNOLOGY

         In response to the demand for high-speed and high-reliability
storage-to-server and server-to-server connectivity for the transmission of
blocks of data, the Fibre Channel interconnect protocol was developed in the
early 1990s and received the approval of the American National Standards
Institute in 1994. Fibre Channel is an open, efficient transport system
supporting multiple protocols using Fibre Channel guaranteed delivery services.
Fibre Channel represents an integration of channels and networks with active,
intelligent communication among devices. Fibre Channel technology has the
following capabilities:

         o        performance capability of over two gigabits per second;

         o        support for distances up to 10 kilometers without loss of
                  speed;

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         o        efficient serial transmission in hardware;

         o        scalable network configurations;

         o        reliable data transmission through multiple classes of
                  service;

         o        interoperability with standard components;

         o        support for multiple cost/performance levels, from small
                  systems to supercomputers; and

         o        ability to carry multiple existing interface data protocols,
                  including Internet Protocol, SCSI and custom protocols.

         As a result of its broad range of features, many industry analysts
consider Fibre Channel to be the most reliable, scalable, gigabit communications
technology available today for high speed transmissions of blocks of data. Since
its introduction, Fibre Channel has earned increasing acceptance from industry
and independent testing laboratories. IDC forecasts that the market for products
based on Fibre Channel technology will grow from approximately $4.1 billion in
1999 to approximately $18.0 billion by 2004. Because Fibre Channel technology is
so effective in handling data block transmissions, it can be implemented in a
wide variety of applications, including enterprise resource planning, computer
clustering, networking, digital video transmission and editing and storage
access. To date, the most widely accepted and deployed application for Fibre
Channel technology has been in SANs.

STORAGE AREA NETWORKS

         A storage area network is a dedicated network of interconnected
servers and data storage devices enabling data sharing at gigabit per second
speeds with greater performance, manageability, availability and scalability
than the direct attached storage architecture. Fibre Channel is the critical
enabling technology that has made implementation of a SAN possible. Businesses
are investing in SANs because they have found that establishing a separate
network for storage takes data movement off the local area network thereby
freeing up network resources and reducing the impact on network users. SANs
provide an open, scalable platform for storage access in data intensive
environments such as those used for mission-critical online transaction
processing applications, data warehousing and digital imaging. A mission
critical SAN is used where the data on the storage network is considered so
vital to the operation of the company, that the company has installed a system
which would prevent service outages or data loss for any significant period of
time. In a data warehousing SAN, large volumes of data must be available for
relatively instant access for reference or analysis, as in the case of a large
e-commerce site holding records of past customer transactions, shipping
information, credit records, products for purchase and other data. A digital
imaging SAN is used for manipulating and storing all types of still and moving
digital graphics images. Because graphics and digital image files are normally
very large, transferring these images is time consuming over traditional LANs.

         SANs can be more cost effective to manage and expand than traditional
storage architectures because they enable shared, high-speed access to stored
data which can significantly reduce data replication. Through their use of Fibre
Channel, SANs also provide the following additional benefits that address the
growing challenges facing businesses using data-intensive, mission-critical
applications:

         o        SCALABILITY. By combining networking models with advanced
                  server performance and mass storage capacity, a SAN eliminates
                  the bandwidth bottlenecks and scalability limitations imposed
                  by the direct attached storage architecture. Because Fibre
                  Channel supports multiple topologies, SANs can support up to
                  126 devices in simple configurations and up to 16 million
                  devices in the most complex configurations.

         o        AVAILABILITY. SANs enable businesses to eliminate the
                  bottlenecks inherent in the traditional architectures and to
                  reduce the dependence on a single server to access each
                  storage device. Because SANs use Fibre Channel technology and
                  a networked approach, SANs can be designed with multiple
                  fail-overs to provide more reliable connections and thereby
                  assure availability of data despite failures of individual
                  servers or components of the system.

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         o        SPEED AND DISTANCE. By using Fibre Channel technology, SANs
                  support large data block transfers at gigabit per second
                  speeds and are, therefore, very effective for data transfers
                  between storage systems and servers. Fibre Channel has
                  demonstrated transmission speeds of up to two gigabits per
                  second and is designed to scale to significantly higher
                  speeds. Additionally, Fibre Channel supports a transmission
                  distance of up to 10 kilometers without loss of speed, which
                  simplifies network configuration and significantly reduces
                  susceptibility to environmental disaster.

         o        MANAGEABILITY. Fibre Channel facilitates the use of network
                  management software for monitoring and control. Thus, network
                  administrators are able to more closely monitor storage
                  systems, giving them the control to group storage devices into
                  logical unit numbers, distribute data loading more evenly
                  across peripherals and reroute traffic under error conditions.
                  Fibre Channel hardware can be configured to offer several
                  levels of reliability that increases the security and
                  accessibility of stored data. Industry standards organizations
                  currently are working towards defining standards for managing
                  SANs.

         o        FLEXIBILITY. SANs provide high-speed connectivity for
                  data-intensive applications across multiple operating systems,
                  including UNIX, Novell, Windows NT and Windows 2000 and Mac
                  OS. SANs apply a distributed computing model to computer
                  storage systems and servers and take advantage of the
                  inherent benefits of a networked approach. SANs can be
                  configured in multiple topologies, and the various
                  topologies contribute to the flexibility of the SAN to
                  solve storage management issues by offering enterprises
                  alternatives in cost and scale. The first commonly used
                  topology in deployed SANs was the arbitrated loop, or
                  FC-AL, because it offers most of the benefits of a SAN at a
                  lower cost than the most complex topology. The switched
                  topology, or FC-SW, is the most common today and provides
                  the most aggregate throughput as it allows for multiple
                  data transmissions to occur simultaneously.

         The SAN environment complements the ongoing advancements in local area
network technologies by extending the benefits of improved performance and
capabilities from the client local area network to servers and storage.

         Virtually all SANs use several basic components to make up the network,
including the following:

         o        servers and management software;

         o        storage devices and Fibre Channel disc controllers;

         o        switches, hubs and Fibre Channel to SCSI bridges;

         o        host bus adapters; and

         o        fiber optic or copper cables.

HOST BUS ADAPTERS AND ASICS

         Regardless of topology, each server connects to a SAN through host bus
adapters, which are electronic circuit cards that fit standard sockets on
computer motherboards and enable high-speed data transfer. A host bus adapter
connects the server to other devices on a SAN via cables. The cables connect the
host bus adapter either directly to the Fibre Channel controller which is
installed in the storage device or to a hub or a switch.

         A host bus adapter is one of the most critical and complex devices on
the SAN. A host bus adapter provides the necessary bridge between a SAN and a
computer bus, which is an internal communication pathway between the central
processing unit and internal memory or peripheral devices. By leveraging the
advantages of Fibre Channel technology, a single host bus adapter can handle a
multitude of tasks that previously required distinct host bus adapters for each
protocol. Host bus adapters are typically classified by:

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         o        bus architecture;

         o        computer operating system; and

         o        topology.

         Each host bus adapter product is designed to support a particular bus
architecture, typically either the PCI bus architecture or the Sun Microsystems
SBus architecture. In the future, adapters may migrate to the PCI/X bus
architecture or to a new standard, InfiniBand. Because Fibre Channel host bus
adapter functions are regulated by software, each host bus adapter must include
software designed to work with the particular operating system being used by the
server/storage solution. These systems include all types of UNIX as well as
Windows NT and Windows 2000, Novell, Mac OS and mainframe systems. Each host bus
adapter also must operate under at least one of the three Fibre Channel
topologies--switched fabric, arbitrated loop and point-to-point. Host bus
adapters are therefore designed to work with one or more operating systems and
one or more Fibre Channel topologies. IDC projects that the annual market for
Fibre Channel host bus adapters will grow from $269 million in 1999 to
approximately $1.7 billion by 2003.

         The core technology of a host bus adapter and other components of a SAN
is embodied in application specific integrated circuits, or ASICs, that perform
the most complex functions, and software that enables the integration and
management of the SAN equipment. ASIC development is a technically complex
process that requires significant technical expertise and resources. Likewise,
developing software to work with and manage SAN components involves an extensive
design effort. This effort is compounded by the need to test and debug software
code for each Fibre Channel product and ensure compliance with several distinct
operating platforms. These technological barriers to entry create a significant
market opportunity for companies that have developed and deployed Fibre Channel-
based products, particularly host bus adapters, that utilize proprietary ASICs
and software designed to work in the emerging SAN environment.

THE JNI SOLUTION

         We are a leading developer and manufacturer of Fibre Channel hardware
and software products that form critical elements of SANs. We developed some of
the first commercially available Fibre Channel-based products and focus our
efforts exclusively on the Fibre Channel market. Because of our early and
continuous focus on developing technology and products based on the Fibre
Channel standard, we have successfully developed a broad line of host bus
adapters, ASICs and software that provide increased bandwidth for data
communication, increased distance for high speed data transmission, guaranteed
data delivery and scalability to large numbers of network connections. Our
proprietary ASICs have been designed to work in the most demanding, high-end
enterprise applications and are particularly effective in switched environments.
We believe that we offer the broadest range of Fibre Channel host bus adapters
in the SAN industry. Our proprietary configuration and driver software
incorporates advanced features that significantly enhance and simplify SAN
device integration and management. Our advanced technology and broad product
offerings enable us to deliver the following benefits to our customers and
end-users:

         o        FLEXIBILITY. Our products can be used with PCI, PCI/X and SBus
                  interfaces, work with all SAN topologies and are designed to
                  interoperate with all major operating systems and computer
                  platforms, including Sun Microsystems Solaris, Red Hat Linux,
                  Hewlett-Packard HP-UX, IBM AIX, Microsoft Windows 2000 and
                  Windows NT and Novell NetWare.

         o        RELIABILITY. JNI products are installed in some of the most
                  demanding business environments, and our customers typically
                  have extremely low tolerance for system downtime. We conduct
                  extensive testing with complex simulations of user
                  configurations to help ensure that our products will not cause
                  any data loss, data interruption, SAN crashes or lockups and
                  that our products can withstand most failures or interruptions
                  in other parts of the system.

         o        MANAGEABILITY. Our EZ Fibre SAN management software is a
                  powerful and easy- to-use tool for configuring and managing a
                  SAN and its components. Our software can help eliminate
                  configuration errors, which are the most common cause of SAN
                  failure. EZ Fibre's point and click


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                  interface and helpful diagnostic tools give the user an
                  intuitive and effective way to manage JNI products in SANs of
                  all sizes.

         o        PERFORMANCE. Our ASIC technology enables a high performance
                  connection to the SAN. We believe our products deliver
                  exceptional price/performance, regardless of scale or
                  configuration. We were the first in the industry to
                  demonstrate products capable of sustained two gigabit per
                  second Fibre Channel transmissions. We also believe that our
                  ASICs provide the lowest latency and central processing unit
                  utilization available in the most complex, switched SANs.

         o        SCALABILITY. Our ASIC and host bus adapter architectures
                  provide high performance in simple, cost-sensitive SAN
                  configurations and they are also capable of scaling to
                  switched, multi-terabyte enterprise solutions. Our products
                  include both workgroup class solutions and enterprise
                  solutions that can support the full range of connectivity
                  enabled by the Fibre Channel standard. Using our products,
                  customers can seamlessly add storage to a SAN while it is
                  operating, and they can easily migrate from simple to complex
                  topologies to support larger networks.

         o        QUALITY. We design, manufacture and test our products to meet
                  high standards for quality. During the product design process,
                  each component is qualified by testing to provide the
                  necessary performance over ranges of environmental conditions
                  that are more extreme than what our customers will encounter
                  in normal use. Our latest ASIC technology has reduced the
                  number of parts on our host bus adapters, which improves
                  quality by simplifying data/error checking.

THE JNI STRATEGY

         Our objective is to become the market leader in SAN connectivity
solutions by providing a family of integrated host bus adapter, ASIC and
software products that exceed competitive offerings in features, flexibility and
price/performance. Key elements of our strategy include the following:

BUILD ON OUR LEADING POSITION IN FIBRE CHANNEL TO EXPAND OUR SAN CONNECTIVITY
PRODUCT OFFERING. We base all of our current products on Fibre Channel
technology because it is the only current viable protocol for SANs. We plan to
enhance our presence in the SAN market by continuing to develop, market and
supply superior Fibre Channel connectivity products. By focusing on the design
and development of Fibre Channel products, we believe that we can enhance our
existing products and develop new products for SANs and other applications
rapidly and efficiently. We believe that our success in designing and delivering
advanced Fibre Channel products will provide us with a competitive advantage in
developing new SAN connectivity products that implement emerging technologies
such as iSCSI and Infiniband.

LEVERAGE OUR SUN SOLARIS EXPERTISE TO CONTINUE TO DEVELOP PRODUCTS COMPATIBLE
WITH ALL MAJOR OPERATING SYSTEMS AND INTERFACES. We have established a
leadership position in sales of host bus adapters for Sun Microsystems Solaris
environments. We are continuing to build upon this expertise to develop products
compatible with all major operating systems. We have extended our UNIX focus to
include Hewlett-Packard HP-UX, IBM AIX and Red Hat Linux operating systems,
while also addressing the rapidly growing market for Microsoft Windows NT and
Windows 2000 and Novell NetWare. We strive to offer products with the broadest
compatibility across multiple computing platforms in the industry. We also
intend to continue to invest our engineering resources in ASIC and software
development and to provide leading technologies to increase the performance and
functionality of our products. We believe that early technology and product
leadership can translate into market leadership.

EXPAND PENETRATION OF OUR EXISTING OEM PARTNERS AND CUSTOMERS AND LEVERAGE
MULTIPLE DISTRIBUTION CHANNELS. We are focused on increasing product sales to
new customers and extending our product penetration worldwide within our direct
OEM and indirect distribution channels. Once a customer buys our product for one
system in the SAN, our strategy is to then obtain certification for other
operating systems. Our driver developer kit operating system driver architecture
provides us with a competitive advantage in achieving this goal. By integrating
additional JNI products, a customer can obtain the increased benefits of our
product breadth by simplifying SAN configuration using common device drivers,
management utilities and vendor support. We intend to increase our reseller
programs to complement our distribution channels. To complement and support our
domestic and international reseller and OEM channels, we are increasing our
worldwide field sales force.

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PROVIDE THE HIGHEST QUALITY PRODUCTS AND SUPERIOR CUSTOMER SUPPORT. We recognize
that product quality is an indispensable condition of competitiveness, and we
are focused on continuously improving product quality, delivery, performance and
service. We have obtained ISO 9002 certification and intend to obtain ISO 9001
certification by the end of 2002. In addition, we are committed to providing
customer-driven product functionality through feedback from key prospects,
consultants, distribution channel and OEM customers and customer surveys. We
intend to continue to enhance the ease of use of our products and invest in
additional support services by increasing staffing and adding new programs for
our OEM and distribution channel customers. We also seek to enhance customer
satisfaction and build customer loyalty through the quality of our service and
support.

PROMOTE THE JNI BRAND. We plan to continue building awareness of the JNI brand
in order to position ourselves as a leading provider of high-performance SAN
connectivity products for high-end, enterprise-level business applications. We
believe an established brand will promote customer loyalty and become
increasingly important as our distribution channels expand to include resellers.
To promote our brand, we plan to increase our investments in a range of joint
marketing programs with key SAN partners such as Brocade, EMC and Hitachi Data
Systems, including seminar promotions, advertising in print publications, direct
marketing, public relations and Web-based marketing.

ESTABLISH AND MAINTAIN STRATEGIC ALLIANCES AND PURSUE ACQUISITIONS. We intend to
continue working closely with leaders in the storage, networking and computing
industries to develop new and enhanced SAN connectivity products. We believe
that establishing strategic relationships with technology partners is essential
to ensure that we continue to develop competitive products that integrate well
with solutions from other leading participants in the SAN market. We also
believe that strategic relationships will enable us to leverage our technical
and market strengths to enter into emerging SAN technologies such as iSCSI and
Infiniband. To this end, we have formed an alliance with Brocade Communications
Systems, Inc. to collaborate on product development, service and support, as
well as marketing and sales initiatives, to advance the adoption of open SANs in
enterprise environments. We also have created the JNI SAN partners program,
helping us form strategic relationships and industry alliances with leading
technology companies. In addition to many of our OEMs, charter members of our
SAN partners program include Brocade, Crossroads Systems, Inc., Gadzoox
Networks, Inc., Legato Systems, Inc., VERITAS Software Corporation and Vixel
Corporation. We also intend to pursue joint ventures, licensing and acquisition
strategies to meet these goals. We believe that the emerging SAN industry will
present numerous opportunities to employ an acquisition or partnering strategy
with key software and hardware companies.

PRODUCTS

         We believe we offer high quality SAN connectivity products with a
superior price/performance profile. Our products include a comprehensive suite
of host bus adapters, ASICs and software.

HOST BUS ADAPTERS

         We design, manufacture and sell a suite of Fibre Channel host bus
adapters, management software and related device driver software. A host bus
adapter is an electronic circuit card that fits standard sockets on motherboards
for servers, workstations, disk arrays and other SAN devices and enables
high-speed data transfer within the SAN. Communication between the host bus
adapter and the operating system is regulated by device driver software which is
included with the host bus adapter. In addition to communication, the device
driver software provides a high-reliability data path from a user's application
to a storage device across a SAN. Working in conjunction with our device driver
software, our host bus adapters work with all SAN topologies, interoperate with
all major operating systems and can be used with both the PCI and the SBus
interfaces, which we believe makes our host bus adapter capabilities the
broadest currently available.

         We have organized our device driver software into our PC Server
DriverSuite and our UNIX DriverSuite. The PC Server DriverSuite, introduced in
January 2000, is a single, integrated software driver platform that enables JNI
FibreStar host bus adapters to operate under all major PC server operating
systems, including Microsoft Windows NT and Windows 2000, Novell NetWare, Red
Hat Linux and Apple Macintosh operating systems. The UNIX DriverSuite, which we
announced in April 2000, complements the PC Server DriverSuite and is designed
to allow JNI FibreStar host bus adapters to operate under nearly all UNIX server
operating systems, including Sun Microsystems Solaris, Red Hat Linux,
Hewlett-Packard HP-UX and IBM AIX.

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         In addition to the different operating systems, the PC Server
DriverSuite and UNIX DriverSuite operate under all three Fibre Channel
topologies--switched fabric, arbitrated loop and point-to-point. The PC Server
DriverSuite and UNIX DriverSuite, both of which are based on common code bases,
assure all features and performance are consistent across all major operating
systems, allowing a single host bus adapter to function in a heterogeneous
environment. SANs normally are heterogeneous, connecting systems and storage
devices running under different hardware and operating system configurations.
Our PC Server DriverSuite and UNIX DriverSuite also reduce the amount of time
required for OEMs to qualify our products. OEMs typically require months of
testing before certifying a host bus adapter to run on a specific operating
system or environment. Most OEMs support multiple operating system and hardware
environments, and must repeat the certification process for each new operating
system and hardware configuration supported. With a common code base,
qualification time for the PC Server DriverSuite and UNIX DriverSuite drivers is
cut from months to weeks because the feature-set is largely the same.

         Because of the high level of reliability of our device driver software
and the functionality of our host bus adapters, we have been certified as a
designated supplier by leading storage OEMs, including Compaq, EMC,
Hewlett-Packard, Hitachi, McData, MTI Technology Corporation and StorageTek.

         We commenced volume production of host bus adapters in 1996 with our
FibreStar line of host bus adapters designed for the SBus interface, and we are
currently the leading independent supplier of host bus adapters for the Sun
Solaris operating system. In late 1998, we obtained our initial certification
from an OEM customer for our host bus adapters for the PCI interface. In 1999,
we introduced our lower cost Emerald-based host bus adapter for the SBus and PCI
interfaces based on Fibre Channel products and technology acquired from Adaptec.
The new Emerald-based host bus adapters also offer significantly improved
performance and flexibility and include software for Solaris and other UNIX
variants and the PC Server DriverSuite.

ASICS

         We incorporate our Emerald Fibre Channel controller ASICs into our
latest generation of host bus adapters and sell them to OEMs for products such
as SAN controllers for disk arrays, tape libraries and other SAN devices. In
addition, we sell our ASICs to OEMs who in turn incorporate them into the
motherboards of enterprise and workgroup servers. Commercially available
versions of the Emerald transmit data at one gigabit per second, and we were the
first to introduce and publicly demonstrate versions capable of sustained two
gigabit per second transmission speeds, which is the highest speed demonstrated
in the industry. Adaptec developed the original architecture of the Emerald in a
three-year research and development program. We acquired all of the technology
related to the Emerald architecture from Adaptec in November 1998. With
enhancements we have implemented since the acquisition, the reliability and
performance of the Emerald have been substantially improved, and we are
developing enhanced ASICs based on the Emerald architecture. In addition to the
circuits required for Fibre Channel data formatting and control, the Emerald
ASIC incorporates a PCI interface circuit, leading to cost effective host bus
adapter products.

SOFTWARE

         We offer our EZ Fibre management software to simplify the installation
and configuration of host bus adapters in SANs and to provide diagnostic and
monitoring information to SAN administrators. Without EZ Fibre, host bus adapter
cards must be manually configured and diagnosed, often leading to improper
configuration. EZ Fibre, by contrast, provides the user with an easy to use,
graphical view of the host bus adapters and other SAN components attached to the
system. EZ Fibre enables the user to easily configure complex systems that
include multiple busses and multiple host bus adapters. EZ Fibre users also can
view information about the Fibre Channel SAN controllers and SAN devices
attached to the system. The SAN administrator can then configure the SAN for use
in a multiple operating system environment using the advanced capabilities built
into the host bus adapter and the driver software. These capabilities allow
partitioning of a SAN for use in a multiple operating system environment and the
partitioning of storage resources among different servers that may be running
different operating systems all by using the advanced capabilities built into
the host bus adapter and the driver software. Storage resources can also be
reallocated and repartitioned dynamically without the need to reboot the system.
EZ

                                       10
<PAGE>

Fibre also provides a diagnostic utility that can be used to verify the
operation of our host bus adapters when installed in a SAN.

         Our latest release, EZ Fibre 2.0, is Java-based and works with JNI's
FibreStar PCI and SBus host bus adapters under Solaris, IBM AIX , Windows 2000
and Windows NT environments. EZ Fibre also includes interfaces that permit the
host bus adapter management and diagnostic capabilities to be integrated into
larger network management packages such as those provided by Computer
Associates, Tivoli, Hewlett-Packard, Legato, Microsoft, Sun and Veritas. We
bundle EZ Fibre software with our latest generation of Emerald-based host bus
adapters and make it available for free on our Website.

TECHNOLOGY

         We possess a high level of multi-disciplinary technological expertise,
which we utilize in designing our products. This expertise includes Fibre
Channel technology, core ASIC design, system design, system integration and
software development. We believe that our expertise in these technologies
provides us with competitive advantages in time-to-market, price/performance,
interoperability and product capabilities.

ASIC DESIGN EXPERTISE. We employ state-of-the-art ASIC design methodologies to
develop high-performance, complex ASICs. Our proprietary Emerald ASIC
architecture utilizes an embedded processor with on-board memory to achieve
efficient command and data communication. This architecture significantly
reduces command processing time to enable complex communication, while
maintaining full performance when operating in any SAN topology. Our
architecture also allows us to implement significant portions of Fibre Channel
protocol in embedded software while keeping higher level functions in the device
driver software. As a result of this multi-layered software implementation and
reduced geometry CMOS technology, we are able to react quickly as technical
standards evolve or new standards are defined. Our expertise in ASIC design has
enabled us to offer products capable of sustained two gigabit per second
transmission speed, which is currently the fastest transmission speed in the
Fibre Channel market.

SYSTEM DESIGN. We employ computer-aided design tools to engineer and design our
printed circuit boards. Our system design team has expertise in the containment
of high-frequency electromagnetic interference, which is inherent in high-speed
networking devices.

SOFTWARE. Our team of software developers has extensive experience in developing
software for Fibre Channel devices and applications. We have considerable
experience in programming to meet the requirements of enterprise level systems
running mission-critical applications. Our engineers have experience in
developing software for all major operating systems and computer platforms.

SYSTEM INTEGRATION. At our principal offices in San Diego, we have established
the JNI system integration lab, or SIL, to provide comprehensive functional and
system level integration/interoperability testing between our host bus adapters
and various computer platforms and Fibre Channel systems. To facilitate expanded
market penetration of our products and technology, our integration test
methodologies and software are continually evolving to mirror qualification
processes used by major SAN suppliers and OEMs. We conduct functionality testing
at our SIL in formal, repeatable processes using documented product
specifications and features to verify the operation of both our hardware and our
software. Our products are tested with departmental and enterprise class
servers, including platforms from Compaq, Dell Computer Corporation,
Hewlett-Packard, Sun Microsystems and others, and from the leading vendors of
Fibre Channel hubs, switches and SAN systems, including Amdahl, Brocade, Compaq,
Dell, Hewlett Packard, IBM, EMC/DG/CLARiiON, Gadzoox, LSI Logic, McData and
Vixel Corporation. Integration testing at our SIL combines our products with
various Fibre Channel SAN components to simulate the most commonly used
functional configurations defined by system integrators and major OEMs. The
overall goal is to ensure enterprise class performance and interoperability in
real world SAN deployments.

SELLING AND MARKETING

         We sell domestically and internationally to OEMs, distribution channel
customers, which include distributors, system integrators and value-added
resellers, and directly to end-users. We principally target OEMs and

                                       11
<PAGE>

distributors who resell our products as a part of complete SAN solutions to
end-users. Our selling and marketing strategy will continue to focus on the
development of the SAN connectivity market. We have continued expanding
internationally by partnering with additional OEMs and resellers who have a
strong international presence and are capable of selling and installing complex
SAN solutions. In the future, as Fibre Channel becomes targeted at end-users, we
will expand our strategy to include channel partners who serve small- to
medium-sized businesses.

         Our marketing efforts are focused on increasing awareness of our Fibre
Channel products and our JNI brand, promoting SAN-based solutions, and
advocating industry-wide standards and interoperability. Key components of our
marketing efforts include:

         o        extending our strategic alliances to promote standardization
                  and enhance interoperability;

         o        promoting our products under the JNI brand name to strengthen
                  sales through distribution channels;

         o        increasing focus on the end user with the top SAN storage
                  resellers globally;

         o        launching the FibreStars channel partners program to encourage
                  value-added reseller and system integrators to help stimulate
                  demand for the products we sell through distributors and to
                  increase the number of representatives selling JNI products;

         o        continuing our active participation in industry associations
                  and standards committees to promote and further enhance Fibre
                  Channel technology and increase our visibility as industry
                  experts; and

         o        participating in major trade show events and SAN conferences
                  to promote our products and to continue our leading role in
                  educating customers on the value of SANs.

         As of December 31, 2000, our selling and marketing organization
consisted of 50 employees, including field sales representatives, applications
engineers, customer service personnel, product marketing, product management,
marketing communications and inside sales personnel. Our field sales personnel
are located in San Diego, Irvine and Fremont, California, Denver, Colorado,
Atlanta, Georgia, Chicago, Illinois, Boston, Massachusetts, Raleigh, North
Carolina and Munich, Germany.

OEMS

         OEMs can exercise significant influence in the early development of our
market because they utilize our products to deliver to end-users complete,
factory-configured solutions that are installed and field-serviced by OEMs'
technical support organizations. We intend to continue partnering with leading
OEM customers to introduce new products and develop new markets. OEMs will
continue to provide critical input as we develop the next generation of
products.

         OEM customers have been integral to our growth in the emerging Fibre
Channel market and have represented a significant portion of our revenues. We
believe the evolutionary nature of the Fibre Channel market should enable us to
continue to present our OEM customers with the opportunity to integrate and
deploy new capabilities as they are developed. To help drive new technologies
and capabilities, we plan to continue to strengthen our OEM customer
relationships.

DISTRIBUTION CHANNEL CUSTOMERS

         As the markets for Fibre Channel products and SAN solutions evolve and
as end-user awareness of the benefits of Fibre Channel increases, we believe an
increasing volume of sales will occur through distribution channels. We have
established a worldwide two-tier distribution channel that is comprised of
distributors and resellers. We sell through distributors who in turn sell to
resellers, including systems integrators, throughout the United States, Europe
and the Asia-Pacific region. We believe that this distribution channel, which
accounted for a significant portion of total net revenues during 2000, provides
us with a diversified customer base. In addition, our distribution channel
relationships enable us to more effectively pursue a number of vertical markets
including


                                       12
<PAGE>

e-commerce, financial services, Internet service providers, digital video,
digital publishing, oil and gas exploration and medical imaging. We believe
that as the market for Fibre Channel matures, we are well positioned to
leverage sales through distributors, and that such sales will represent an
increasing percent of our total net revenues. As this market continues to
develop, we plan to establish additional relationships with select domestic
and international resellers to reach additional markets and increase our
geographic coverage.

CUSTOMERS AND END-USERS

         The following is a representative list of our key OEM and distribution
channel customers since the beginning of 1999:


<TABLE>
<CAPTION>
         OEM                                    DISTRIBUTION CHANNELS
<S>                                             <C>
Advanced Digital Information Corporation        ACA Pacific
Amdahl                                          Acal Electronics
ATL Products                                    Bell Microproducts, Inc.
AVID                                            Consan, Inc.
Chaparral                                       Daein Computers
Compaq                                          Hewlett-Packard
EMC/DG/CLARiiON                                 Info-X
Hitachi Data Systems                            Netmarks
LSI Logic                                       TidalWire
McData                                          Systex Corporation
MTI                                             Vistor
StorageTek
</TABLE>


         In the year ended December 31, 2000, our top five customers accounted
for 63% of our total net revenues, and, in the year ended December 31, 1999, our
top five customers accounted for 60% of our total net revenues. In particular,
in the year ended December 31, 2000, Info X, Inc. accounted for 21% of our net
revenues, TidalWire accounted for 16% of our net revenues and Acal Electronics
accounted for 13% of our net revenues.

         End-users of JNI products who receive product from OEMs and through our
distribution channels include the following:

<TABLE>
<S>                                             <C>
America Online                                  Federal Express
Boeing                                          Fidelity Investments
British Airways                                 GTE
Charles Schwab                                  Lexis-Nexis
Convergys                                       Mannesmann
DaimlerChrysler                                 Morgan Stanley Dean Witter
DBS Bank Singapore                              NTT DoCoMo
Deutsche Telekom                                Safeway Stores
E*Trade                                         US WEST Capital Funding
</TABLE>


CUSTOMER SERVICE AND SUPPORT

         We offer a wide range of standard support programs that includes
telephone support 24 hours a day, seven days a week. In addition, we have
designed our products to allow easy diagnostics and administration. For example,
users can access all of the configuration and performance parameters of our host
bus adapters from a single graphical user interface for configuration,
troubleshooting and maintenance. Our customer service and support organization
provides technical support to our OEM and systems integrator customers, enabling
them to provide technical support to their end-users. We prepare our OEMs and
systems integrator customers for product launch through a comprehensive training
program. In addition, we employ systems engineers for pre- and post-sales
support


                                       13
<PAGE>

and technical support engineers for field support. Our OEM and systems
integrator customers provide primary technical support to end-users of our
products.

         We have developed an extensive training course for our OEM and
distribution channel customers. The curriculum includes Fibre Channel
configuration, SAN implementation and JNI product training. Most of our OEM and
channel customers attend our training courses to learn Fibre Channel
configuration and SAN reliability design.

MANUFACTURING, TEST AND ASSEMBLY

         We outsource the majority of our manufacturing, and we conduct quality
assurance, manufacturing engineering, documentation control and certain finish
assembly operations at our headquarters facility in San Diego, California. This
approach enables us to reduce fixed costs and to provide flexibility in meeting
market demands. All of our contract manufacturers are ISO 9002 certified.

         Taiwan Semiconductor Manufacturing Company fabricates our Emerald ASIC
wafers in Asia. Various subcontractors, such as Amkor Technology, Caesar
International Inc. and Siliconware USA Inc., perform assembly, packaging and
testing of our ASICs, allowing us to purchase and receive only finished product.
SCI Systems in Rapid City, South Dakota, and SMS in San Diego, California
perform substantially all assembly operations for our host bus adapters. These
contract manufacturers purchase the components of our host bus adapters,
including printed circuit boards, third party ASICs and memory integrated
circuits, and assemble them to our specifications. The contract manufacturers
deliver the assembled host bus adapters to us, and we perform certain finish
assembly procedures before testing and packaging the final products with
software and manuals in our San Diego facility.

         We believe most component parts used in our host bus adapters are
standard off-the-shelf items, which are, or can be, purchased from two or more
sources. We select suppliers on the basis of technology, manufacturing capacity,
quality and cost. Whenever possible and practicable, we strive to have at least
two manufacturing locations for each product. Nevertheless, our reliance on
third- party manufacturers involves risks, including possible limitations on
availability of products due to market abnormalities, unavailability of, or
delays in obtaining access to, certain product technologies and the absence of
complete control over delivery schedules, manufacturing yields, and total
production costs. The inability of our suppliers to deliver products of
acceptable quality and in a timely manner or our inability to procure adequate
supplies of our products could have a material adverse effect on our business,
financial condition or operating results.

         For a discussion of the risks associated with our reliance on
third-party manufacturers, please see "Factors That May Affect Future
Performance--Because we rely on third parties, and in some cases, a sole
manufacturer, for substantially all of our manufacturing and assembly, failures
by these third parties to provide products of sufficient quality and quantity
could cause us to delay product shipments, which could result in delayed or lost
revenues or customer dissatisfaction."

RESEARCH AND DEVELOPMENT

         Our success will depend to a substantial degree upon our ability to
develop and introduce in a timely fashion new products and enhancements to our
existing products that meet changing customer requirements and emerging industry
standards. We have made and plan to continue to make substantial investments in
research and development and to participate in the development of industry
standards. Our research and development expenses in the year ended December 31,
2000 were $18.9 million. In the year ended December 31, 1999, our research and
development expenses were $12.0 million, compared to $2.9 million in 1998 and
$1.2 million in 1997.

         We have made a significant investment in our ASIC technologies through
research and development and intend to continue to focus our development efforts
on Fibre Channel ASICs and related software drivers and tools. Before a new
product is developed, our research and development engineers work with marketing
managers and customers to develop a comprehensive requirements specification.
After the product is designed and commercially released, our engineers continue
to work with customers on early design-in efforts to understand requirements for
future generations and upgrades.



                                       14
<PAGE>

         Research and development expenses primarily consist of salaries and
related costs of employees engaged in ongoing research, design and development
activities and subcontracting costs. As of December 31, 2000, we had 94
employees engaged in research and development. We are seeking to hire additional
skilled development engineers. Our business, operating results and financial
condition could be adversely affected if we encounter delays in hiring
additional engineers.

         For a discussion of the risks we face in achieving our goals in
research and development, please see "Factors That May Affect Future Performance
--Delays in product development could adversely affect our market position or
customer relationships" and "Risk Factors--Our failure to retain the principal
members of our management team or our failure to attract and retain key
technical, selling and marketing personnel could adversely affect our business."

COMPETITION

         The market in which we compete is intensely competitive and is
characterized by frequent new product introductions, changing customer
preferences and evolving technology and industry standards. Our competitors
continue to introduce products with improved price/performance characteristics,
and we will have to do the same to remain competitive. Increased competition
could result in significant price competition, reduced revenues, lower profit
margins or loss of market share, any of which would have a material adverse
effect on our business, operating results and financial condition.

         Our principal competitors in the host bus adapter market are Emulex
and Qlogic, We face competition for our ASICs from Agilent and Qlogic. Our
products may also compete at the end-user level with other technology
alternatives, such as SCSI, which are available from companies such as Adaptec,
LSI Logic and Qlogic as well as a number of smaller companies. In the future,
other technologies, including iSCSI and InfiniBand, may evolve to address the
applications served by Fibre Channel today, and because we exclusively sell
Fibre Channel products, our business would suffer as a result of competition
from such competing technologies.

         Some of our OEM customers could develop products internally that would
replace our products. The resulting reduction in sales of our products to any
such OEM customers, in addition to the increased competition presented by these
customers, could have a material adverse effect on our business, operating
results and financial condition.

         We believe that the principal bases of SAN connectivity product
competition presently include reliability, scalability, connectivity,
performance and customization. We believe that other competitive factors
include pricing and technical support. We believe that we compete favorably
with respect to each of these factors. We also believe that we have a
competitive strength in the alliances we have built with customers,
particularly our close relationships with OEM customers. We believe that our
experience with distribution channels will provide competitive benefits as the
SAN connectivity market matures. Some of our other competitive advantages
include our early entry into Fibre Channel technology, our workforce of highly
experienced researchers and designers and our intellectual property.

INTELLECTUAL PROPERTY AND LICENSES

         The intellectual property rights we have in our technology, which
generally consist of ASIC designs, system designs, software and know-how
associated with our product portfolio, principally arise from exclusive licenses
and our own internal development efforts. We began our commercial Fibre Channel
development efforts in 1993 while operating as a division of Jaycor. In February
1997, the intellectual property rights arising from this development effort were
transferred to JNI pursuant to an exclusive license agreement with Jaymark. In
November 1998, we acquired Fibre Channel products and technology developed by
Adaptec, including the design, software, masks and documentation of the Emerald
ASIC architecture. The technology we acquired from Jaymark and Adaptec, in
conjunction with our significant development efforts undertaken to enhance such
technology, forms the central element of our host bus adapter and ASIC products
and is critical to our success. We attempt to protect our technology through a
combination of copyrights, trade secret laws, trademarks and contractual
obligations. There can be no assurance that our intellectual property protection
measures will be sufficient to prevent misappropriation of our technology or
that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technology. In addition, the laws of
many foreign countries do not protect our


                                       15
<PAGE>

intellectual property rights to the same extent as the laws of the United
States. Our failure to protect our proprietary information could have a material
adverse effect on our business, financial condition or operating results. In
order to avoid disclosure of key elements of our technology, we have not sought
patent protection which may be available to us. The lack of patent protection
may make it more difficult for us to prevent other parties from developing or
using technology substantially similar to ours. Our software products are
protected by copyright laws, and we have several common law trademarks.

         We may need to initiate litigation in the future to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Litigation could result
in substantial costs and diversion of our resources and could materially harm
our business. We may receive in the future notice of infringement claims of
other parties' proprietary rights. Infringement or other claims could be
asserted or prosecuted against us in the future, and it is possible that such
assertions or prosecutions could harm our business. Any such claims, with or
without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel, cause delays in the development
and release of our products, or require us to develop non-infringing technology
or enter into royalty or licensing arrangements. Such royalty or licensing
arrangements, if required, may not be available on terms acceptable to us, or at
all. For these reasons, infringement claims could materially harm our business.

FACTORS THAT MAY AFFECT FUTURE PERFORMANCE

RISKS RELATING TO OUR BUSINESS

WE HAVE A LIMITED HISTORY OF PROFITABILITY WHICH MAY BE DIFFICULT TO MAINTAIN.

         We shipped our first commercially available Fibre Channel products in
1995, but we did not achieve operating income until the quarter ended September
30, 1998. You should consider the risks and difficulties frequently encountered
by companies such as ours in new and rapidly evolving markets. Although our net
revenues have grown in recent quarters, we may not be able to sustain this
growth, and we may not realize sufficient net revenues to maintain
profitability. In addition, because of the competition in the Fibre Channel and
SAN markets and the evolving nature of these markets, sustaining profitability
may be extremely challenging.

OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND MAY CAUSE OUR STOCK PRICE TO
FLUCTUATE.

         Our future revenues and operating results are likely to vary
significantly from quarter to quarter due to a number of factors, many of which
are outside of our control. Accordingly, you should not rely on
quarter-to-quarter comparisons of our operating results as an indication of
future performance. It is possible that in some future periods our operating
results will be below the expectations of public market analysts and investors.
In this event, the price of our common stock will likely decline. Factors that
may cause our revenues, gross margins and operating results to fluctuate include
the following:

         o        the size, timing, terms and fluctuations of customer orders,
                  particularly large orders from our significant OEM or reseller
                  customers;

         o        changes in customer buying patterns;

         o        declining average selling prices of our products;

         o        fluctuations in sales levels of Sun servers;

         o        the timing of the introduction or enhancement of products by
                  us, our significant OEM or reseller customers or our
                  competitors;

         o        our ability to obtain sufficient supplies of single- or
                  limited-source components of our products;

         o        fluctuations in costs of goods sold and potential write-offs
                  of obsolete inventory as we transition to new products;

                                       16
<PAGE>

         o        operating expenses, particularly in connection with our
                  strategies to increase brand awareness or to invest in
                  accelerated research and development; and

         o        general economic conditions.

         Because our revenues in a given quarter depend substantially on orders
booked in that quarter, a decrease in the number of orders we receive is likely
to adversely and disproportionately affect our quarterly operating results. This
is because our expense levels are partially based on our expectations of future
sales and we may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. As a result, our expenses may be
disproportionately large as compared to sales in a quarter with reduced orders.
Any shortfall in sales in relation to our quarterly expectations or any delay of
customer orders would likely have an immediate and adverse impact on our
business, quarterly operating results and financial condition.

DELAYS IN PRODUCT DEVELOPMENT COULD ADVERSELY AFFECT OUR MARKET POSITION OR
CUSTOMER RELATIONSHIPS.

         We have experienced delays in product development in the past and may
experience similar delays in the future. Given the short product life cycles in
the markets for our products, any delay or unanticipated difficulty associated
with new product introductions or product enhancements could cause us to lose
customers and damage our competitive position. Prior delays have resulted from
numerous factors, such as:

         o        changing OEM product specifications;

         o        undetected errors or failures in software and hardware;
         o        changing market or competitive product requirements;

         o        difficulties in hiring and retaining necessary personnel;

         o        difficulties in reallocating engineering resources and other
                  resource limitations;

         o        difficulties with independent contractors;

         o        unanticipated engineering complexity; and

         o        delays in the acceptance or shipment of products by OEM
                  customers.

BECAUSE WE DEPEND ON A SMALL NUMBER OF OEM AND DISTRIBUTION CHANNEL CUSTOMERS
FOR A SIGNIFICANT PORTION OF OUR REVENUES IN EACH PERIOD, THE LOSS OF ANY OF
THESE CUSTOMERS, THE FAILURE TO OBTAIN CERTIFICATIONS OR ANY CANCELLATION OR
DELAY OF A LARGE PURCHASE BY ANY OF THESE CUSTOMERS COULD SIGNIFICANTLY REDUCE
OUR NET REVENUES.

         Historically, a limited number of OEMs and distribution channel
customers has accounted for a significant majority of our total net revenues.
The loss of any of our key customers, or a significant reduction in sales to
those customers, could significantly reduce our net revenues. For the year ended
December 31, 2000, Info X, Inc. accounted for 21% of our net revenues, TidalWire
accounted for 16% of our net revenues and Acal Electronics accounted for 13% of
our net revenues. We anticipate that our operating results in any given period
will continue to depend to a significant extent upon revenues from a small
number of customers.

         Before we can sell our products to an OEM or its associated
distribution channel, that OEM must certify our products. The certification
process can take up to 12 months. This process requires the commitment of OEM
personnel and test equipment, and we compete with our competitors for these
resources. Any delays in obtaining these certifications or any failure to obtain
these certifications would adversely affect our ability to sell our products. In
addition, because none of our customers is contractually obligated to purchase
any fixed amount of products from us in the future, they may stop placing orders
with us at any time, regardless of any forecast they may have previously
provided. If any of our large customers stops or delays purchases, our revenues
and profitability would be adversely affected, which could cause our stock price
to decline. We cannot be certain that we will retain our current


                                       17
<PAGE>

OEM or distribution channel customers or that we will be able to recruit
additional or replacement customers. As is common in an emerging technology
industry, our agreements with OEMs and distribution channel customers typically
are non-exclusive and often may be terminated by either party without cause.
Moreover, many of our OEM and distribution channel customers utilize or carry
competing product lines. If we were to suddenly lose one or more important OEM
or distribution channel customers to a competitor, our business, operating
results or financial condition could be materially adversely affected.
Furthermore, some of our OEM customers could develop products internally that
would replace our products. The resulting reduction in sales of our products to
any such OEM customers, in addition to the increased competition presented by
these customers, could have a material adverse effect on our business, operating
results or financial condition.

BECAUSE A SIGNIFICANT PORTION OF OUR PRODUCTS IS DESIGNED TO WORK WITH SERVERS
FROM SUN MICROSYSTEMS, INC. AND STORAGE ARRAYS FROM EMC CORPORATION, OUR
BUSINESS COULD SUFFER IF DEMAND FOR SUCH SUN OR EMC EQUIPMENT DECLINES OR IF WE
FAIL TO ADAPT QUICKLY TO CHANGES IN THE MARKET FOR SUCH EQUIPMENT.

         Our host bus adapters have achieved their greatest market acceptance in
computing environments built with high-end servers from Sun Microsystems due to
our products' interoperability with the Sun Solaris operating system. Further, a
significant portion of our products is currently used to connect high-end Sun
servers that incorporate SBus interfaces to SANs, and these products have
accounted for the substantial majority of our historical revenues. In addition,
we believe that more than half of our host bus adapters are used to form
connections to storage arrays manufactured by EMC. Accordingly, we depend to a
certain extent upon the increased market penetration of Sun and EMC systems, and
if the demand for these systems does not continue to expand, our revenue growth
may suffer. For example, slowing growth in shipments of Sun servers in late 2000
adversely impacted our revenues in the fourth quarter of 2000.

         To maintain our position in the market for Sun Solaris SAN connectivity
products we must continue to develop, market and sell host bus adapters that
interoperate effectively in evolving Sun and EMC environments. It is our
expectation that Sun will in the future release new mid-range and high-end
server products that do not include the SBus interface. In order to maintain our
leading share in this market, we must effectively market and sell host bus
adapters that build on our Solaris expertise but that utilize our proprietary
Emerald ASICs and the PCI bus architecture. Because our SBus host bus adapters
have a higher average selling price than our PCI host bus adapters, a rapid
decline in SBus shipments could adversely affect our revenue levels even if we
maintained our market share through increased shipments of PCI host bus
adapters.

IF WE DO NOT DEVELOP, MARKET AND SELL HOST BUS ADAPTERS THAT INTEROPERATE WITH
OPERATING SYSTEMS OTHER THAN THE SUN SOLARIS OPERATING SYSTEM OUR BUSINESS WILL
SUFFER.

         We have derived a substantial majority of our historical revenues from
sales of host bus adapters that include software designed to work with the Sun
Microsystems Solaris operating system, and we have only recently begun to ship
products that interoperate with operating systems other than the Sun Solaris
operating system and incorporate our proprietary Emerald ASICs. Our success
depends on our ability to continue to develop, market and sell products with
these features. These new products remain in the early stage of market
introduction and are subject to the risks inherent in the commercialization of
new products. We may not be successful in developing solutions for all major
operating systems or in marketing the new products we develop, and we cannot
assure you that our intended customers will purchase our products instead of
competing products. Our failure to obtain a significant share of the market for
host bus adapters compatible with operating systems other than the Sun Solaris
operating system would impair our growth and harm our results of operations.

OUR FUTURE SUCCESS DEPENDS IN PART UPON OUR ABILITY TO MARKET AND SELL PRODUCTS
THAT INCORPORATE OUR PROPRIETARY EMERALD ASICS.

         In 2000, we made our first commercial shipments of host bus adapters
that incorporate our proprietary Emerald family of ASICs rather than the
third-party ASICs we historically have used. We are seeking additional OEM
certifications of our host bus adapters that incorporate our Emerald ASICs, but
we may not obtain these certifications on a timely basis or at all. In addition,
we must continue to develop and release new and enhanced versions of our ASICs
to remain competitive, which will require further certifications by our OEM
customers.


                                       18
<PAGE>

Accordingly, we may not be successful in marketing products using our
proprietary ASICs, and we cannot assure you that our intended customers will
purchase these products instead of competing products.

BECAUSE WE DEPEND ON SOLE SOURCE AND LIMITED SOURCE SUPPLIERS FOR KEY
COMPONENTS, WE ARE SUSCEPTIBLE TO SUPPLY SHORTAGES THAT COULD ADVERSELY AFFECT
OUR OPERATING RESULTS.

         We rely on third-party suppliers for components that are used in our
products, and we have experienced delays and difficulty in securing components
in the past. In times of shortage, we have been required to pay, and may in the
future be required to pay, substantial premiums for components, which could
adversely affect our gross margins. Key components that we use in our products
may, from time to time, only be available from single sources with which we do
not have long-term contracts. The components we use for our products are based
on an emerging technology and may not be available with the performance
characteristics or in the quantities that we require. Any inability to supply
products due to a lack of components or to redesign products to incorporate
alternative components in a timely manner could materially adversely affect our
business, operating results or financial condition.

OUR OPERATING RESULTS MAY SUFFER BECAUSE OF INCREASING COMPETITION IN THE FIBRE
CHANNEL MARKET, AS WELL AS ADDITIONAL COMPETITION FROM ALTERNATIVE DATA STORAGE
SOLUTIONS.

         The market in which we compete is intensely competitive. As a result,
we will face a variety of significant challenges, including rapid technological
advances, price erosion, changing customer preferences and evolving industry
standards. Our competitors continue to introduce products with improved
price/performance characteristics, and we will have to do the same to remain
competitive. Increased competition could result in significant price
competition, reduced revenues, lower profit margins or loss of market share, any
of which would have a material adverse effect on our business, operating results
and financial condition. We cannot be certain that we will be able to compete
successfully against either current or potential competitors in the future.

         Many of our current and potential competitors, including Emulex
Corporation, Qlogic Corporation, Interphase Corporation, Agilent Technologies,
Inc., Troika Software, Inc. and Adaptec, Inc., have substantially greater
financial, technical, marketing and distribution resources than we have. We face
the threat of potential competition from new entrants into the Fibre Channel
market and the Sun Solaris segment of that market, which continues to represent
the substantial majority of our revenues. These potential new entrants include
large technology companies that may develop or acquire differentiating
technology and then apply their resources, including established distribution
channels and brand recognition, to obtain significant market share. Emerging
companies attempting to obtain a share of the existing market also may compete
with us. Our products may also compete at the end-user level with other current
or future technology alternatives, such as SCSI, InfiniBand and Gigabit
Ethernet. Further, businesses that implement SANs may select fully-integrated
SAN systems that are offered by large product solution companies. Because such
systems do not interoperate with products from independent open system
suppliers, like us, customers that invest in these systems will be less likely
to purchase our products. Other technologies designed to address the
applications served by Fibre Channel today are under development, and because we
exclusively sell Fibre Channel products for SAN connectivity, our business could
suffer as a result of competition from such competing technologies.

CONSOLIDATION OF OUR COMPETITORS MAY CAUSE US TO LOSE CUSTOMERS AND HURT OUR
SALES.

         Consolidation in the data storage industry may strengthen our
competitors' positions in our market, cause us to lose customers and hurt our
sales. In addition, acquisitions may strengthen our competitors' financial,
technical and marketing resources and provide them with access to potential
customers, which may harm our business.

OUR FAILURE TO RETAIN THE PRINCIPAL MEMBERS OF OUR MANAGEMENT TEAM OR OUR
FAILURE TO ATTRACT AND RETAIN KEY TECHNICAL, SELLING AND MARKETING PERSONNEL
COULD ADVERSELY AFFECT OUR BUSINESS.

         Our success depends upon our retention of the principal members of our
senior management team and other key technical, selling and marketing personnel.
The loss of the services of key members of our management team might
significantly delay or prevent the achievement of our development and strategic
objectives. We do not


                                       19
<PAGE>

maintain key person life insurance on any members of our senior management team,
and these employees are under no obligation to continue providing services to
JNI.

         We must continue to attract, train and retain managerial, technical,
selling and marketing personnel. In particular, we are currently seeking to hire
additional skilled development engineers who are currently in short supply.
Competition for such highly skilled employees in our industry is intense, and we
cannot be certain that we will be successful in recruiting or retaining such
personnel. We also believe that our success depends to a significant extent on
the ability of our key personnel to operate effectively, both individually and
as a group. Many of our employees have only recently joined us, and we intend to
expand our employee base significantly. If we are unable to identify, hire and
integrate new employees in a timely and cost-effective manner, our operating
results may suffer.

BECAUSE WE EXCLUSIVELY SELL FIBRE CHANNEL PRODUCTS, OUR REVENUES WILL BE LIMITED
IF THE FIBRE CHANNEL MARKET DOES NOT CONTINUE TO EXPAND.

         The growth of the market for our current products depends upon the
continued acceptance of Fibre Channel technology as an alternative to other
technologies utilized for network and storage communications. If the Fibre
Channel market develops more slowly than anticipated or attracts more
competitors than we expect, our business, operating results and financial
condition would be materially adversely affected. We cannot be certain that
Fibre Channel products will gain broader market acceptance or that customers
will choose our technology and products.

         To achieve widespread market acceptance, Fibre Channel must supplant
current widely accepted alternative technologies such as Small Computer Systems
Interface, or SCSI. It may be difficult to convince new customers to adopt Fibre
Channel technology because many technology companies with SCSI-based product
portfolios already have:

         o        well-established relationships with our current and potential
                  customers;

         o        extensive knowledge of the markets we serve;

         o        better name recognition; and

         o        extensive development, selling and marketing resources.

         If Fibre Channel does not replace existing technologies such as SCSI in
emerging applications or otherwise achieve broad market acceptance, our growth
will be limited. Additionally, new technologies are currently in development
that may compete for market share with Fibre Channel if they are successfully
developed and commercialized. Because these competing new technologies are
likely to have support from technology companies with more significant resources
than we and other Fibre Channel companies have, they may limit the growth of the
Fibre Channel market and therefore our growth.

IN OUR INDUSTRY, TECHNOLOGY AND OTHER STANDARDS CHANGE RAPIDLY, AND WE MUST KEEP
PACE WITH THE CHANGES TO COMPETE SUCCESSFULLY.

         The market for our products is characterized by rapidly changing
technology, evolving industry standards and the frequent introduction of new
products and enhancements. Our future success depends in a large part on our
ability to enhance our existing products and to introduce new products on a
timely basis to meet changes in customer preferences and evolving industry
standards. Additionally, changes in technology and customer preferences could
potentially render our current products uncompetitive or obsolete. We cannot be
certain that we will be successful in designing, supplying and marketing new
products or product enhancements that respond to such changes in a timely manner
and achieve market acceptance. We also cannot be certain that we will be able to
develop the underlying core technologies necessary to create new products and
enhancements, or that we will be able to license the core technologies from
third parties. In addition, because our products are designed to work with
software produced by third parties, our operating results could be adversely
affected if such third parties delay introduction of new versions of their
software for which we have designed new products or if they make unanticipated
modifications to such software. If we are unable, for technological or other
reasons, to develop new products or enhance existing


                                       20
<PAGE>

products in a timely manner in response to technological and market changes, our
business, operating results and financial condition would be materially
adversely affected.

THE SAN MARKET IN WHICH WE COMPETE IS NEW AND UNPREDICTABLE, AND IF THIS MARKET
DOES NOT DEVELOP AND EXPAND AS WE ANTICIPATE, OUR BUSINESS WILL SUFFER.

         Our products are principally purchased for use in SANs. Accordingly,
widespread adoption of SANs as an integral part of data-intensive enterprise
computing environments is crucial to our future success. The market for SANs and
the related equipment, including the host bus adapters, ASICs and management
software we offer, has only recently begun to develop and is rapidly evolving.
Because this market is new, it is difficult to predict its potential size or
future growth rate. Potential end-users who have invested substantial resources
in their existing data storage and management systems may be reluctant or slow
to adopt a new approach like a SAN. If this market does not develop as rapidly
as we anticipate, our operating results may be below the expectations of public
market analysts and investors, which would likely cause our stock price to
decline. Furthermore, the evolution of the SAN architecture is uncertain. If
products are developed that incorporate the host bus adapter or do not require
separate adapters, our adapter products may be rendered obsolete or unnecessary.

IF WE FAIL TO EXPAND OUR DISTRIBUTION CHANNELS AND MANAGE OUR DISTRIBUTION
RELATIONSHIPS, OUR RESULTS OF OPERATIONS COULD BE HARMED SIGNIFICANTLY.

         Our success will depend on our continuing ability to develop and manage
relationships with significant OEMs, resellers and systems integrators, as well
as on the sales efforts and success of these customers. We may not be able to
expand our distribution channels or manage our distribution relationships
successfully, and our customers may not market our products effectively. Our
failure to expand our distribution channels or successfully manage our
distribution relationships or the failure of our customers to sell our products
could harm our results of operations.

CONTINUED RAPID GROWTH WILL STRAIN OUR OPERATIONS AND REQUIRE THAT WE INCUR
COSTS TO UPGRADE OUR INFRASTRUCTURE.

         We have recently experienced a period of rapid growth and expansion
which has placed, and continues to place, a significant strain on our resources.
Unless we manage such growth effectively, we may make mistakes in operating our
business such as inaccurate sales forecasting, material planning, inventory
management or financial reporting, which may result in unanticipated
fluctuations in our operating results. We may not be able to install adequate
control systems in an efficient and timely manner, and our current or planned
personnel, systems, procedures and controls may not be adequate to support our
future operations. In addition, although we test substantially all of our
products prior to shipment, some of our customers require additional testing of
the products we sell to them. During the year ended December 31, 2000, more than
half of the units we shipped were subject to such additional tests. If our
capacity to conduct this testing does not expand concurrently with the
anticipated growth of our business, product shipments could be delayed, which
could result in delayed or lost revenues and customer dissatisfaction.

THE SALES CYCLE FOR OUR PRODUCTS IS LONG, AND WE MAY INCUR SUBSTANTIAL,
NON-RECOVERABLE EXPENSES OR DEVOTE SIGNIFICANT RESOURCES TO SALES THAT DO NOT
OCCUR WHEN ANTICIPATED OR AT ALL.

         Our sales cycle, particularly to OEMs, typically involves a lengthy
certification process during which we generally invest significant resources in
addressing customer specifications. The purchase of our products or solutions
that incorporate our products typically involves significant internal procedures
associated with the evaluation, testing, implementation and acceptance of new
technologies. This evaluation process frequently results in a lengthy sales
process, typically ranging from three months to longer than a year, and is
subject to a number of significant risks, including budgetary constraints and
internal acceptance reviews. The length of our sales cycle also varies
substantially from customer to customer. Because of the length of the sales
cycle, we may experience a delay between increasing expenses for research and
development and selling and marketing efforts and the generation of higher
revenues, if any, from such expenditures.

                                       21
<PAGE>

THE FAILURE OF OUR OEM CUSTOMERS TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE
AND TO SUCCESSFULLY DEVELOP AND INTRODUCE NEW PRODUCTS COULD ADVERSELY AFFECT
OUR NET REVENUES.

         Our ability to generate increased revenues depends significantly upon
the ability and willingness of our OEM customers to develop and promote products
on a timely basis that incorporate our technology. OEMs must commit significant
resources each time they develop a product that incorporates one of our new
products. If our OEM customers do not invest in the development and marketing of
solutions that incorporate our products and successfully market these solutions,
then sales of our products to the OEM customers will be adversely affected. The
ability and willingness of OEM customers to develop and promote such products is
based upon a number of factors beyond our control.

WE EXPECT THAT THE AVERAGE SELLING PRICES OF EACH OF OUR PRODUCTS MAY DECREASE
OVER TIME FOLLOWING RELEASE, WHICH MAY REDUCE GROSS MARGINS OR REVENUES.

         To date, the market for Fibre Channel products has not experienced
rapid erosion of average selling prices. However, we expect that, as this market
matures, we may experience downward pricing pressure and substantial
period-to-period fluctuations in future operating results due to the potentially
adverse effect of declining average selling prices. We anticipate that, in the
future, the average selling prices of each of our products will decrease over
time following its release in response to competitive pricing pressures,
increased sales discounts, new product introductions by us or our competitors or
other factors. Therefore, to maintain our gross margins, we must develop and
introduce on a timely basis new products and product enhancements and
continually reduce our product costs. Our failure to do so would cause our
revenue and gross margins to decline, which could materially adversely affect
our operating results and cause the price of our common stock to decline.

OUR PRODUCT CYCLES MAY BE SHORT, AND FROM TIME TO TIME WE MAY NEED TO WRITE OFF
EXCESS AND OBSOLETE INVENTORY.

         In the rapidly changing technology environment in which we operate,
product cycles tend to be short. However, we must have sufficient quantities of
our products available to satisfy our customers' demands. Accordingly, we order
significant quantities of our products from our manufacturers prior to receiving
customer orders. Although we expect to sell the inventory within a short period
of time, products may remain in inventory for extended periods and may become
obsolete because of the passage of time and the introduction of new products.
For example, as we introduce successive generations of ASICs, we may experience
excess inventory of host bus adapters that incorporate the prior generation of
ASICs. In these situations, we would be required to write off obsolete
inventory, which could have a material adverse effect on our business, financial
condition and results of operations.

BECAUSE WE RELY ON THIRD PARTIES, AND IN SOME CASES, A SOLE MANUFACTURER, FOR
SUBSTANTIALLY ALL OF OUR MANUFACTURING AND ASSEMBLY, FAILURES BY THESE THIRD
PARTIES TO PROVIDE PRODUCTS OF SUFFICIENT QUALITY AND QUANTITY COULD CAUSE US TO
DELAY PRODUCT SHIPMENTS, WHICH COULD RESULT IN DELAYED OR LOST REVENUES OR
CUSTOMER DISSATISFACTION.

         Taiwan Semiconductor Manufacturing Company, or TSMC, is currently our
sole manufacturer for all of our Emerald ASIC wafers, and various
subcontractors, such as Amkor Technology, Inc., Caesar International Inc. and
Siliconware USA Inc., perform assembly, packaging and testing of our ASICs so
that we purchase and receive only finished product. SCI Systems, Inc. in Rapid
City, South Dakota, and SMS Technologies, Inc. in San Diego, California perform
substantially all assembly operations for our host bus adapters. We have no firm
long-term commitments from TSMC, SCI or SMS to supply products to us for any
specific period, or in any specific quantity, except as may be provided in a
particular purchase order.

         Our reliance on TSMC for fabrication of our Emerald ASIC wafers
involves particular risks. The semiconductor industry is highly cyclical and, in
the past, foundry capacity has been very limited at times and may become limited
in the future. Our dependence on TSMC increases our exposure to this cyclicality
and to possible shortages of key components, product performance shortfalls and
reduced controls over delivery schedules, manufacturing capability, quality
assurance, quantity and costs. If TSMC or any of our other third-party
manufacturers experiences delays, disruptions, earthquakes, capacity constraints
or quality control problems in its


                                       22
<PAGE>

manufacturing operations, then product shipments to our customers could be
delayed, which would negatively impact our net revenues, competitive position
and reputation.

         Further, our business would be harmed if we fail to effectively manage
the manufacture of our products. Because we place orders with our manufacturers
based on our forecasts of expected demand for our products, if we inaccurately
forecast demand, we may be unable to obtain adequate manufacturing capacity or
adequate quantities of components to meet our customers' delivery requirements,
or we may accumulate excess inventories.

         We may in the future need to find new contract manufacturers in order
to increase our volumes or to reduce our costs. We may not be able to find
contract manufacturers that meet our needs, and even if we do, qualifying a new
contract manufacturer and commencing volume production is expensive and time
consuming. If we are required or elect to change contract manufacturers, we may
lose revenues, and our customer relationships may suffer.

OUR RELIANCE ON MANUFACTURERS IN OTHER COUNTRIES OUTSIDE THE U.S. SUBJECTS US TO
RISKS INHERENT IN DOING BUSINESS ON AN INTERNATIONAL LEVEL THAT COULD HARM OUR
OPERATING RESULTS.

         Currently, our ASIC products are manufactured by a third party located
in Asia, and we may expand our manufacturing, assembly and testing activities
abroad. Accordingly, we are subject to risks inherent in international
operations, which include:

         o        political, social and economic instability;

         o        trade restrictions and tariffs;

         o        the imposition of governmental controls;

         o        exposure to different legal standards, particularly with
                  respect to intellectual property;

         o        import and export license requirements;

         o        unexpected changes in regulatory requirements; and

         o        potentially adverse tax consequences.

         In particular, many Asian countries have in recent years experienced
significant economic difficulties, including currency devaluation and
instability, business failures and a generally depressed business climate,
particularly in the semiconductor industry. In view of our reliance on Asian
manufacturers, and our expanded international operations, any future economic
downturns in the Asian economy may seriously harm our business.

BECAUSE OUR INTELLECTUAL PROPERTY IS CRITICAL TO THE SUCCESS OF OUR BUSINESS,
OUR OPERATING RESULTS WOULD SUFFER IF WE WERE UNABLE TO ADEQUATELY PROTECT OUR
INTELLECTUAL PROPERTY.

         Our proprietary technologies are crucial to our success and ability to
compete. We rely primarily on a combination of copyrights, trademarks, trade
secret laws and contractual provisions to establish and protect our intellectual
property rights in our proprietary technologies, including the source code for
our software and the reference designs for our ASICs. We presently have no
patents. We generally enter into confidentiality or license agreements with
employees, consultants and customers and seek to control access to and
distribution of our source code, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
proprietary information is difficult. Other parties also may independently
develop or otherwise acquire equivalent or superior technology. In addition, the
laws of some of the countries in which our products are or may be developed,
manufactured or sold may not protect our products and intellectual property
rights to the same extent as the laws of the United States, or at all. Our
failure to protect our intellectual property rights could have a material
adverse effect on our business, operating results or financial condition.

                                       23
<PAGE>

WE MAY BECOME INVOLVED IN COSTLY AND LENGTHY PATENT INFRINGEMENT OR INTELLECTUAL
PROPERTY LITIGATION WHICH COULD SERIOUSLY HARM OUR BUSINESS.

         In recent years, there has been significant litigation in the United
States and in foreign countries involving patents and other intellectual
property rights. We may become party to litigation in the future as a result of
an alleged infringement of others' intellectual property. From time to time, we
receive inquiries from other companies concerning whether we used their
proprietary information to develop driver software compatible with their
operating systems. Any claims that we improperly use another party's proprietary
information or that we infringe another party's intellectual property, with or
without merit, could adversely affect or delay sales of our products that use
the technology in question, result in costly and time-consuming litigation,
divert our technical and management personnel, or require us to develop
non-infringing technology or enter into royalty or licensing arrangements, any
of which would adversely affect our business, financial condition or operating
results. It also is possible that patent holders will assert patent rights which
apply broadly to our industry, and that such patent rights, if valid, may apply
to our products or technology. These or other claims may require us to stop
using the challenged intellectual property or to enter into royalty or licensing
agreements. We cannot be certain that the necessary licenses will be available
or that they can be obtained on commercially reasonable terms. If we were to
fail to obtain such royalty or licensing agreements in a timely manner or on
reasonable terms, our business, operating results or financial condition could
be materially adversely affected.

OUR EXPORT SALES SUBJECT US TO RISKS THAT COULD ADVERSELY AFFECT OUR BUSINESS.

         Export sales accounted for 23% of our net revenues in 2000, 17% of our
net revenues in 1999 and 14% of net revenues in 1998. Accordingly, we encounter
risks inherent in international operations. Because all of our sales are
currently denominated in U.S. dollars, if the value of the U.S. dollar increases
relative to foreign currencies, our products could become less competitive in
international markets. Our export sales could also be limited or disrupted by
any of the following factors:

         o        restrictions on the export of technology;

         o        longer accounts receivable payment cycles;

         o        reduced and limited protections of intellectual property
                  rights;

         o        trade restrictions; and

         o        changes in tariffs.

FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS BY US OR OUR OEM CUSTOMERS COULD
REDUCE OUR SALES OR REQUIRE DESIGN MODIFICATIONS.

         Our products are subject to U.S. Department of Commerce and Federal
Communications Commission regulations as well as various standards established
by authorities in other countries. Failure to comply with existing or evolving
U.S. or foreign governmental regulation or to obtain timely domestic or foreign
regulatory approvals or certificates could materially harm our business by
reducing our sales or requiring design modifications to our products or the
products of our OEM customers. Neither we nor our customers may export such
products without obtaining an export license. United States export laws also
prohibit the export of our products to a number of countries deemed by the U.S.
to be hostile. These restrictions may make foreign competitors facing less
stringent controls on their products more competitive in the global market than
we or our customers are. The U.S. government may not approve any pending or
future export license requests. In addition, the list of products and countries
for which export approval is required, and the regulatory policies with respect
thereto, could be revised.

OUR PRODUCTS ARE COMPLEX AND MAY CONTAIN UNDETECTED SOFTWARE OR HARDWARE ERRORS
THAT COULD LEAD TO AN INCREASE IN OUR COSTS, REDUCE OUR NET REVENUES OR DAMAGE
OUR REPUTATION.

         Products as complex as ours frequently contain undetected software or
hardware errors when first introduced or as new versions are released. We have
from time to time found errors in existing products, and we


                                       24
<PAGE>

may from time to time find errors in our existing, new or enhanced products. The
occurrence of hardware or software errors could adversely affect sales of our
products, cause us to incur significant warranty and repair costs, divert the
attention of our engineering personnel from our product development efforts and
cause us to lose credibility with current or prospective customers.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE TO FUND THE GROWTH OF OUR BUSINESS,
AND FINANCING MAY NOT BE AVAILABLE.

         We currently anticipate that our available capital resources, combined
with cash flows from operations and expected interest income, will be sufficient
to meet our expected working capital and capital expenditure requirements for at
least the next 12 months. However, we cannot assure you that such resources will
be sufficient to fund the growth of our business.

         We may also raise additional funds through public or private debt or
equity financings if such financings become available on favorable terms, but
such financings would likely dilute our stockholders. We cannot assure you that
any additional financing we may need will be available on terms favorable to us,
or at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to take advantage of unanticipated
opportunities, develop new products or otherwise respond to competitive
pressures. In any such case, our business, operating results or financial
condition could be materially adversely affected.

WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE OUR STOCKHOLDERS' EQUITY AND
CAUSE US TO INCUR DEBT OR ASSUME CONTINGENT LIABILITIES.

         We may pursue acquisitions that could provide new technologies or
products. Future acquisitions may involve the use of significant amounts of
cash, potentially dilutive issuances of equity or equity-linked securities, the
incurrence of debt, or amortization expenses related to goodwill and other
intangible assets.

         In addition, acquisitions involve numerous risks, including:

         o        difficulties in the assimilation of the operations,
                  technologies, products and personnel of the acquired company;

         o        the diversion of management's attention from other business
                  concerns;

         o        risks of entering markets in which we have no or limited prior
                  experience; and

         o        the potential loss of key employees of the acquired company.

         We currently have no commitments or agreements with respect to any such
acquisition. In the event that such an acquisition does occur and we are unable
to successfully integrate businesses, products, technologies or personnel that
we acquire, our business, operating results or financial condition could be
materially adversely affected.

ITEM 2. PROPERTIES

         We lease approximately 70,946 square feet in San Diego, California from
Jaycor, a former affiliate of ours, for product development and test
laboratories, for manufacturing operations, and for administrative, engineering,
marketing and sales offices. The term of the lease expires April 30, 2001. We
lease approximately 1,949 square feet of office space in Lake Forest, California
under a lease that expires in September 2003. We also lease approximately 19,727
square feet in Fremont, California under a lease that expires in May 2005. In
July 2000, we entered into leases for our new corporate headquarters in San
Diego, covering approximately 85,000 square feet beginning in March 2001 and an
additional 57,000 square feet beginning in April 2002. We believe that our
current facilities will be adequate to meet our needs until at least the end of
2002.

                                       25
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

         From time to time, we may be involved in litigation relating to claims
arising out of our operations. As of the date of this report, we are not a party
to any legal proceedings that are expected, individually or in the aggregate, to
have a material adverse effect on our business, financial condition or operating
results.

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

         No matters were submitted to a vote of security holders during the
quarter ended December 31, 2000.

                                       26
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock, $0.001 par value per share, has traded on
The Nasdaq National Market under the symbol "JNIC" since October 27, 1999. The
following table sets forth the high and low sale prices for the Common Stock as
reported by the Nasdaq National Market for the periods indicated:

<TABLE>
<CAPTION>
                                                                       HIGH                  LOW
                                                                       ----                  ---
               <S>                                                     <C>                   <C>
               YEAR ENDED DECEMBER 31, 1999
               Fourth Quarter (from October 27, 1999)                  $114.75               $38.75

               YEAR ENDED DECEMBER 31, 2000
               First Quarter                                            $88.00               $48.00
               Second Quarter                                           $52.13               $20.00
               Third Quarter                                            $96.75               $28.88
               Fourth Quarter                                          $126.00               $16.13
</TABLE>

         As of February 28, 2001 there were 27,044,636 shares of common stock
outstanding held by approximately 213 holders of record. The Company has never
declared or paid cash dividends on its common stock.

                                       27
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The selected financial data as of December 31, 2000 and 1999 and for
each of the years in the three-year period ended December 31, 2000 have been
derived from the Company's audited financial statements included elsewhere in
this report. The selected financial data as of December 31, 1998 and 1997 and
for the years ended December 31, 1997 and 1996 have been derived from audited
financial statements for the Company not included herein. The selected financial
data as of December 31, 1996 is unaudited, has been prepared on the same basis
as the audited financial statements and, in our opinion, reflects all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial information in accordance with generally accepted
accounting principles. The selected financial data set forth below is qualified
in its entirety by reference to, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and related notes thereto included
elsewhere in this report.

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                             -----------------------
                                                               2000        1999        1998        1997        1996
                                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S>                                                           <C>          <C>         <C>       <C>          <C>
  Net revenues ...........................................    $103,181     $40,171     $12,189      $2,903        $374
  Cost of revenues .......................................      42,050      15,402       5,361       1,252         348
                                                              --------     -------     -------   ---------    --------
    Gross margin .........................................      61,131      24,769       6,828       1,651          26
  Operating expenses:
    Research and development .............................      18,918      11,951       2,919       1,202         510
    Selling and marketing ................................      12,323       4,806       1,526         681         532
    General and administrative ...........................       7,938       3,476       1,698         822         471
    Amortization of intangible assets ....................       5,359       1,506          47           -           -
    Amortization of stock-based compensation .............         623         842          35           -           -
                                                              --------     -------     -------   ---------    --------
      Total operating expenses ...........................      45,161      22,581       6,225       2,705       1,513
                                                              --------     -------     -------   ---------    --------
  Operating income (loss) ................................      15,970       2,188         603     (1,054)     (1,487)
  Interest income ........................................       2,908         352           -           -           -
  Interest expense .......................................          -        (455)       (265)       (130)           -
                                                              --------     -------     -------   ---------    --------
  Income (loss) before income taxes ......................      18,878       2,085         338     (1,184)     (1,487)
  Income tax provision (benefit) .........................       4,622       (673)          27           -           -
                                                              --------     -------     -------   ---------    --------
  Net income (loss) ......................................     $14,256      $2,758       $ 311   $ (1,184)    $(1,487)
                                                              ========     =======     =======   =========    ========
Earnings (loss) per common share:
  Basic ..................................................       $0.61       $0.64      $ 0.74     $(2.82)     $(3.54)
                                                              ========     =======     =======   =========    ========
  Diluted ................................................       $0.53       $0.12      $ 0.02     $(2.82)     $(3.54)
                                                              ========     =======     =======   =========    ========
Number of shares used in per share computations:
  Basic (1) ..............................................      23,541       4,285         420         420         420
  Diluted (1) ............................................      27,009      23,789      17,977         420         420
BALANCE SHEET DATA:
  Cash, cash equivalents and marketable securities .......    $116,445    $ 44,829         $ -         $ -         $ -
  Working capital ........................................     142,446      49,346     (1,830)       (923)         325
  Total assets ...........................................     178,094      72,825       7,814       1,900         446
  Due to affiliate .......................................           -           -       3,061       1,950           -
  Stockholders' equity (deficit) .........................     156,689      65,222       1,173       (740)         362
</TABLE>


         (1) The number of shares used in the basic and diluted share
computations assumes the shares of common stock issued in February 1997 were
outstanding for all prior periods.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

         The following discussion should be read in conjunction with the
financial statements and the related notes contained elsewhere in this report.

                                       28
<PAGE>

OVERVIEW

         We are a leading developer and manufacturer of Fibre Channel hardware
and software products that form critical elements of SANs. We offer a broad line
of host bus adapters, ASICs and software that provide high bandwidth for data
communication, high speed data transmission without degradation over distances
of up to ten kilometers, guaranteed data delivery and scalability to large
numbers of network connections. We commenced volume production of host bus
adapters in 1996, and we are currently the leading independent supplier of host
bus adapters for the Sun Solaris operating system. In late 1998, we obtained our
initial certification from an OEM customer for our host bus adapters for the PCI
interface, and in 1999 we introduced a much lower cost host bus adapter for the
PCI interface based on Fibre Channel products and technology acquired from
Adaptec. We first achieved operating income in the quarter ended September 30,
1998. We completed our initial public offering in October 1999.

         We recognize revenue from product sales upon shipment except for sales
to distributor customers that have contractual rights of return. Revenue from
sales to distributors that have contractual rights of return is recognized when
these distributors ship our products to their end-user customers. Allowances for
estimated sales returns are provided at the time revenue is recognized. We
reserve for uncollectable accounts and warranty claims based on past history and
expected future returns related to products shipped.

         Cost of revenues is comprised principally of payments to our contract
manufacturers, costs of components, material expediting charges, final assembly
costs, manufacturing and quality-related costs, inventory management costs and
support costs. We expect our gross margin to be affected by many factors,
including changes in average unit selling price, fluctuations in demand for our
products, the mix of products sold, the mix of sales channels through which our
products are sold, the timing and size of customer orders, fluctuations in
manufacturing volumes, changes in costs of components, inventory write-offs, and
new product introductions both by us and our competitors.

         Research and development expenses consist primarily of salaries and
related expenses for engineering personnel, fees paid to consultants and outside
service providers, depreciation of development and test equipment, prototyping
expenses related to the design, development, testing and enhancements of our
products and the cost of computer support services. We expense all research and
development costs as incurred.

         Selling and marketing expenses consist primarily of salaries,
commissions and related expenses for personnel engaged in marketing, sales and
customer support functions, public relations, advertising, promotional and trade
show costs and travel expenses.

         General and administrative expenses include salaries and related
expenses for personnel engaged in finance, human resources, information
technology, administrative activities and legal and accounting fees.

         Amortization of intangible assets arises from the amortization of
intangible assets acquired in connection with the purchase of products and
technology from Adaptec in November 1998 for 1,132,895 shares of common stock
and a warrant to purchase 840,000 shares of common stock. As a result of the
consideration paid to Adaptec, we recorded $11.6 million in intangible assets
related to the core technology acquired which is being amortized over an
estimated useful life of three years.

         Amortization of stock-based compensation relates to deferred
compensation recorded in connection with the grant of stock options to employees
in all operating expense categories where the option exercise price is less than
the fair value of the underlying shares of common stock as determined for
financial reporting purposes. We have recorded deferred compensation within
stockholders' equity of approximately $2.2 million which is being amortized over
the vesting period of the related stock options, generally four years.

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999

NET REVENUES. Net revenues increased $63.0 million, or 157%, to $103.2 million
in the year ended December 31, 2000 from $40.2 million in the year ended
December 31, 1999. The increase was due to an increase in sales of SBus and PCI
host bus adapter products with a $46.6 million increase in SBus sales and a
$16.9 million increase in PCI


                                       29
<PAGE>

sales, partially offset by a decrease in sales of our ASICs. The increase in
revenues reflects the increased demand for our products and the continued growth
in the market for Fibre Channel products. Sales to customers outside of the
United States accounted for 23% of net revenues in 2000 compared to 17% of net
revenues in 1999.

GROSS MARGIN. Gross margin increased $36.4 million, or 147%, to $61.1 million in
the year ended December 31, 2000 from $24.8 million in the year ended December
31, 1999. Gross margin as a percentage of net revenues decreased to 59.2% during
the year ended December 31, 2000 from 61.7% during the year ended December 31,
1999. The decrease was due to increased sales of our PCI host bus adapter
products which generally have lower gross margins than our SBus host bus adapter
products. Gross margins for the year ended December 31, 2000 also decreased as a
result of inventory reserves recorded for slow moving and obsolete inventory and
higher prices on certain components due to industry-wide shortages.

RESEARCH AND DEVELOPMENT. Research and development expenses increased $7.0
million, or 58%, to $18.9 million for the year ended December 31, 2000 from
$12.0 million for the year ended December 31, 1999. The increase was due
primarily to higher personnel costs and contracted services, resulting from an
increase in the number of personnel needed in order to staff a higher level of
research and development, and higher depreciation expense, resulting from an
increase in capital expenditures necessary to expand our research and
development efforts. As a percentage of net revenues, research and development
expenses decreased to 18.3% for the year ended December 31, 2000 from 29.8% for
the year ended December 31, 1999. This decrease was primarily attributable to
the increase in revenues. We anticipate that research and development expenses
will increase in absolute dollars in future periods as we hire additional
personnel and introduce enhanced versions of our products.

SELLING AND MARKETING. Selling and marketing expenses increased $7.5 million,
or 156%, to $12.3 million for the year ended December 31, 2000 from $4.8
million for the year ended December 31, 1999. The increase in selling and
marketing expenses was due primarily to an increase in personnel costs
resulting from the expansion of our sales and marketing staff, increased
trade show participation and continued spending on an advertising and
marketing program which we launched in 2000 to focus on our premium branding
and channel expansion. Selling and marketing expenses as a percentage of net
revenues decreased to 11.9% for the year ended December 31, 2000 from 12.0%
for the year ended December 31, 1999. We anticipate that selling and
marketing expenses will increase in absolute dollars in future periods as we
continue our efforts to increase brand awareness and expand our sales channel.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $4.5
million, or 128%, to $7.9 million for the year ended December 31, 2000 from $3.5
million for the year ended December 31, 1999. The increase was primarily due to
higher personnel costs arising from the addition of new employees and additional
expenses associated with being a public company. Expenses associated with the
hiring of a new chief executive officer and vice president of human resources in
2000 also contributed to the increase in general and administrative expenses.
General and administrative expenses as a percentage of net revenues decreased to
7.7% for the year ended December 31, 2000 from 8.7% for the year ended December
31, 1999. We anticipate that general and administrative expenses will increase
in absolute dollars in future periods.

AMORTIZATION OF INTANGIBLE ASSETS. We amortized $5.4 million of intangible
assets during the year ended December 31, 2000 compared to $1.5 million during
the year ended December 31, 1999. The increase in amortization expense relates
to the significant increase in intangible assets that resulted from the
additional consideration we issued to Adaptec in the third quarter of 1999 for
the Fibre Channel technology we acquired from Adaptec in November 1998. The
balance will be amortized through the fourth quarter of 2001.

AMORTIZATION OF STOCK-BASED COMPENSATION. In connection with the grant of stock
options to employees, we recorded total unearned stock-based compensation within
stockholders' equity (deficit) of $2.2 million and amortized stock-based
compensation of $623,000 and $842,000 during the years ended December 31, 2000
and 1999, respectively.

INTEREST INCOME. Interest income of $2.9 million primarily represents interest
earned on our investments in marketable securities during the year ended
December 31, 2000, resulting from the proceeds from the initial public offering
completed in October 1999 and the public offering completed in October 2000.
Interest income of $352,000 in 1999 primarily represents interest earned in
November and December 1999 on our investments in


                                       30
<PAGE>

marketable securities, resulting from the proceeds from our initial public
offering completed at the end of October 1999.

INTEREST EXPENSE. Interest expense for the year ended December 31, 1999
represents interest associated with our intercompany revolver borrowings from
Jaycor. Subsequent to our initial public offering, we repaid the outstanding
balance to Jaycor in full. Accordingly, we had no interest expense in the year
ended December 31, 2000.

INCOME TAX PROVISION (BENEFIT). We recognized an income tax provision of $4.6
million, with an effective tax rate of 24.5%, during the year ended December 31,
2000 as a result of the taxable income generated in the year ended December 31,
2000. The difference between our effective tax rate of 24.5% and the statutory
tax rate is primarily a result of research and development tax credits
generated. We recorded a valuation allowance on our net deferred tax assets as
of December 31, 2000 because of uncertainty regarding their realizability due to
the expectation that deductions from future employee stock option exercises and
related deductions will exceed future taxable income.

         We recognized an income tax benefit of $673,000 in the year ended
December 31, 1999 due primarily to the utilization of net operating loss
carryforwards and the release of a deferred tax asset valuation allowance. The
valuation allowance was released during the second quarter of 1999 based on
management's determination at the time that our ability to realize such a
benefit was more likely than not. This determination was based on our historical
operating results, which included the fourth consecutive quarter of pre-tax net
income (before non-deductible stock-based compensation), and anticipated future
operating results. Excluding the effect for the release of the valuation
allowance, the tax rate for 1999 would have been approximately 35%.

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

NET REVENUES. Net revenues increased $28.0 million, or 230%, to $40.2 million
for the year ended December 31, 1999 from $12.2 million for the year ended
December 31, 1998. The substantial majority of the increase was due to an
increase in sales of SBus host bus adapters. To a lesser extent, the increase in
net revenues was due to an increase in sales of PCI host bus adapters. The
increase in revenues also reflects the growth in the market for Fibre Channel
products and the increased market acceptance of our products. In 1999, our top
five customers accounted for 60% of net revenues compared to 56% of net revenues
for the top five customers in 1998. Sales to customers outside of the United
States accounted for 17% of net revenues in 1999 compared to 14% of net revenues
in 1998.

GROSS MARGIN. Gross margin increased $17.9 million, or 263%, to $24.8 million in
1999 from $6.8 million in 1998. Gross margin as a percentage of net revenues
increased to 61.7% in 1999 from 56.0% in 1998. The increase was due to lower
component and manufacturing costs and the allocation of fixed manufacturing
costs over a greater revenue base.

RESEARCH AND DEVELOPMENT. Research and development expenses increased $9.0
million, or 309%, to $12.0 million in 1999 from $2.9 million in 1998. The
increase was due primarily to higher personnel costs and contracted services,
resulting from an increase in the number of personnel in order to staff a higher
level of research and development activities and the payment of incentive
bonuses in 1999. In addition, equipment purchases and rentals and prototyping
expenses increased to complete development of products based on the technology
we acquired from Adaptec in November 1998. We also incurred increased research
and development expenses related to improvements in our SBus host bus adapters
and the development of new drivers for our PCI host bus adapters. As a
percentage of net revenues, research and development expenses increased to 29.8%
in 1999 from 23.9% in 1998.

SELLING AND MARKETING. Selling and marketing expenses increased $3.3 million, or
215%, to $4.8 million in 1999 from $1.5 million in 1998. The increase was
primarily due to higher personnel costs, trade shows and promotional items, and
travel expenses resulting from an increase in the number of selling and
marketing personnel and increased trade show participation. Selling and
marketing expenses as a percentage of net revenues decreased to 12.0% in 1999
from 12.5% in 1998 primarily due to the increase in our revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $1.8
million, or 105%, to $3.5 million in 1999 from $1.7 million in 1998. The
increase was primarily due to higher personnel costs arising from the addition
of new employees and higher legal and accounting costs resulting from increased
business activity. General


                                       31
<PAGE>

and administrative expenses as a percentage of net revenues decreased to 8.7% in
1999 from 13.9% in 1998 due to the increase in revenues.

AMORTIZATION OF INTANGIBLE ASSETS. We amortized $1.5 million of intangible
assets during the year ended December 31, 1999 compared to $47,000 during the
year ended December 31, 1998. The increase in amortization expense is attributed
to the significant increase in intangible assets resulting from the additional
consideration issued to Adaptec in the third quarter of fiscal 1999 for the
Fibre Channel technology acquired from Adaptec in November 1998. See Note 2 to
the Financial Statements.

AMORTIZATION OF STOCK-BASED COMPENSATION. We amortized stock-based compensation
of $842,000 and $35,000 during the years ended December 31, 1999 and 1998,
respectively, related to the grant of stock options to employees.

INTEREST INCOME. Interest income of $352,000 primarily represents interest
earned in November and December 1999 on our investments in marketable
securities.

INTEREST EXPENSE. Interest expense increased by $190,000 to $455,000 for the
year ended December 31, 1999 from $265,000 for the year ended December 31, 1998.
The increase resulted from higher intercompany revolver borrowings from Jaycor
to finance increased inventory and accounts receivable, reflecting the rapid
growth in revenues during that period. Subsequent to our initial public
offering, the outstanding balance to Jaycor was paid in full.

INCOME TAX PROVISION (BENEFIT). We recognized an income tax benefit of $673,000
during the year ended December 31, 1999 due primarily to the utilization of net
operating loss carryforwards and the release of a deferred tax asset valuation
allowance. The valuation allowance was released during the second quarter of
1999 based on management's determination that it became more likely than not
that our net deferred tax assets will be realized. This determination was based
on our historical operating results, which included the fourth consecutive
quarter of pre-tax net income (before non-deductible stock-based compensation),
and anticipated future operating results. Excluding the effect of the release of
the valuation allowance, the tax rate for 1999 would have been approximately
35%. In 1998, we recorded an income tax provision of $27,000 which represented a
current tax liability for alternative minimum taxes.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

NET REVENUES. Net revenues increased $9.3 million, or 320%, to $12.2 million in
1998 from $2.9 million in 1997. These increases primarily reflect a higher level
of sales to our OEM customers resulting from increased market acceptance of
Fibre Channel technology and our products and the initiation of sales through
our distribution channel customers. In the year ended December 31, 1998, our top
five customers accounted for approximately 57% of our net revenues, compared to
54% for the top five customers in 1997.

GROSS MARGIN. Gross margin increased $5.1 million, or 314%, to $6.8 million in
1998 from $1.7 million in 1997 due to increased revenues. Gross margin as a
percentage of net revenues decreased slightly to 56.0% in 1998 from 56.9% in
1997.

RESEARCH AND DEVELOPMENT. Research and development expenses increased $1.7
million, or 143%, to $2.9 million in 1998, primarily due to expenses related to
developing new products and enhancements to existing products. As a percentage
of net revenues, research and development expenses decreased to 23.9% in 1998
from 41.4% in 1997. This decrease was primarily attributable to the increase in
revenues.

SELLING AND MARKETING. Selling and marketing expenses increased $845,000, or
124%, to $1.5 million in 1998 from $681,000 in 1997. The increase was primarily
due to additional salaries and expenses for marketing and sales personnel.
Selling and marketing expenses as a percentage of net revenues decreased to
12.5% in 1998 from 23.5% in 1997 primarily due to the increase in revenues.

                                       32
<PAGE>

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$876,000, or 107%, to $1.7 million in 1998 from $822,000 in 1997. The increase
was primarily due to higher personnel costs arising from the addition of new
employees. General and administrative expenses as a percentage of net revenues
decreased to 13.9% in 1998 from 28.3% in 1997 as a result of an increase in
revenues.

AMORTIZATION OF INTANGIBLE ASSETS. We amortized $47,000 of intangible assets
during the year ended December 31, 1998. Amortization of intangible assets
during the year ended December 31, 1997 was $0.

AMORTIZATION OF STOCK-BASED COMPENSATION. In connection with the grant of stock
options to employees during the year ended December 31, 1998, we recorded
unearned stock-based compensation within stockholders' equity (deficit) of $1.0
million. We amortized $35,000 of that amount during 1998. Amortization of
stock-based compensation during the year ended December 31, 1997 was $0.

INTEREST EXPENSE. Interest expense increased by $135,000, or 104%, to $265,000
in 1998 from $130,000 in 1997. The increase resulted from higher intercompany
revolver borrowings from Jaycor to finance increased accounts receivable and
inventories to support the increased level of sales.

INCOME TAX PROVISION (BENEFIT). In 1998, we recorded an income tax provision of
$27,000 which represented a current tax liability for alternative minimum taxes.
Due to our history of losses, our regular tax liability was offset by net
operating loss carryforwards for which no benefit had previously been
recognized. An income tax provision of $0 was recognized in 1997 due to our loss
position.

LIQUIDITY AND CAPITAL RESOURCES

         During the year ended December 31, 2000, cash provided by operating
activities was $4.8 million, compared to $2.6 million and $751,000 of cash
provided by operating activities during 1999 and 1998, respectively. The cash
provided by operations during the year ended December 31, 2000 reflects net
income before depreciation and amortization of approximately $22.5 million
offset primarily by cash used for working capital items such as increased
accounts receivable and inventories resulting from the continued sales growth in
2000.

         Net cash used in investing activities was $79.2 million in the year
ended December 31, 2000 and consisted of capital expenditures and purchases of
marketable securities available for sale. Net cash used in investing activities
was $43.1 million in 1999 and consisted of purchases of marketable securities
available for sale and capital expenditures partially offset by proceeds from
the sale of marketable securities. Net cash used in investing activities was
$1.6 million in 1998 and consisted solely of capital expenditures. The capital
expenditures reflect our investment in computer and lab equipment, software
development tools and facilities, which are required to support our business
expansion.

         Net cash provided by financing activities was $73.3 million in the year
ended December 31, 2000, which resulted primarily from the net proceeds from our
second public offering in October 2000. In addition, the proceeds from the
exercise of stock options and purchases of shares under our employee stock
purchase plan also provided cash from financing activities in 2000. Net cash
provided by financing activities was $45.5 million in 1999, which was generated
primarily from our initial public offering in October 1999, partially offset by
net payments to affiliates. Net cash provided by financing activities was
$846,000 in 1998, all of which was provided by advances from Jaycor.

         We had $116.4 million of cash and cash equivalents and marketable
securities at December 31, 2000. Working capital increased to $142.4 million at
December 31, 2000 from $49.3 million at December 31, 1999.

         We believe that our current cash, cash equivalents and short term
investments, together with expected cash flows from operations, will be
sufficient to meet our working capital needs at least through the next 12
months. Our future capital requirements will depend on many factors, including
the rate of revenue growth, the timing and extent of spending to support
product development efforts and expansion of sales and marketing, the timing of
introductions of new products and enhancements to existing products, and market
acceptance of our products. There can be no assurance that additional equity or
debt financing, if required, will be available on acceptable terms, or at all.

                                       33
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities" was issued.
This statement will be effective for JNI on January 1, 2001. SFAS 133 requires
certain accounting and reporting standards for derivative financial instruments
and hedging activities. Under SFAS 133, all derivatives must be recognized as
assets and liabilities and measured at fair value. We do not currently use
derivative instruments and therefore do not expect the adoption of this new
accounting standard will have any impact on our financial position or results of
operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Our exposure to market risk for changes in interest rates relates
primarily to changes in the fair market value of our investments and the amount
of interest income earned on our investment portfolio. In the normal course of
business, we employ established policies and procedures to manage our exposure
to changes in the fair market value of our investments.

         Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes. We ensure the safety
and preservation of our invested principal funds by limiting default risks,
market risk and reinvestment risk. We mitigate default risk by investing in
investment grade securities. A hypothetical 100 basis point adverse move in
interest rates along the entire interest rate yield curve would not materially
affect the fair value of our interest sensitive financial instruments at
December 31, 2000.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See the Index to Financial Statements on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this Item will be set forth in the section
headed "Proposal 1--Election of Directors" in the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders of the Company (the "Proxy
Statement") which is expected to be filed not later than 120 days after the end
of the Company's fiscal year ended December 31, 2000, and is incorporated in
this report by reference.

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this Item is set forth in the section
headed "Executive Compensation" in the Company's definitive Proxy Statement and
is incorporated in this report by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item is set forth in the section
headed "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive Proxy Statement and is incorporated in this report by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is set forth in the sections headed
"Certain Relationships and Related Transactions" and "Compensation Committee
Interlocks and Insider Participation" in the Company's definitive Proxy
Statement and is incorporated in this report by reference.
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

         1.       FINANCIAL STATEMENTS:

         The financial statements of JNI listed below are incorporated in this
         report by reference to JNI's Annual Report to Stockholders for the
         fiscal year ended December 31, 2000:

         Report of Independent Accountants

         Balance Sheets as of December 31, 2000 and 1999

         Statements of Income for the Years Ended December 31, 2000, 1999 and
         1998

         Statements of Stockholders' Equity (Deficit) and Comprehensive Income
         for the Years Ended December 31, 2000, 1999 and 1998

         Statements of Cash Flows for the Years Ended December 31, 2000, 1999
         and 1998

         Notes to Financial Statements

         2.       FINANCIAL STATEMENT SCHEDULES:

         Report of Independent Accountants on Financial Statement Schedule

         Schedule II - Valuation & Qualifying Accounts

         All other schedules are omitted because they are not applicable or the
         required information is shown in the financial statements or notes
         thereto.

(b)      REPORTS ON FORM 8-K

         The Company did not file any Current Reports on Form 8-K during the
         quarter ended December 31, 2000.

                                       35
<PAGE>

(c)      EXHIBITS:

<TABLE>
<CAPTION>
         EXHIBIT
         NUMBER                  DESCRIPTION
         ------                  -----------
         <S>            <C>
          3.1(2)        Fourth Amended and Restated Certificate of Incorporation of the
                        Company
          3.2(2)        By-laws of the Company
          4.1(2)        Specimen Common Stock Certificate
         10.1(2)        Form of Indemnity Agreement for directors and executive officers
         10.2(2)        1997 Stock Option Plan, as amended, and forms of Incentive Stock
                        Option Agreement and Nonstatutory Stock Option Agreement thereunder
         10.3(6)        Amended and Restated 1999 Stock Option Plan, terms of Stock Option
                        Agreement and form of Stock Option Grant Agreement thereunder
         10.4(2)        1999 Employee Stock Purchase Plan and form of subscription agreement
                        thereunder
         10.5(7)        2000 Non-Qualified Stock Option Plan, terms of Stock Option
                        Agreement and form of Stock Option Grant Agreement thereunder
         10.6(2)        Sublease, dated October 7, 1998 between Jaycor, Inc. and JNI
                        Corporation
         10.7(2)        First Amendment to Sublease, dated December 1, 1998 between Jaycor,
                        Inc. and JNI Corporation
         10.8(2)        Second Amendment to Sublease, dated April 1, 1999 between Jaycor,
                        Inc. and JNI Corporation
         10.9(2)        Third Amendment to Sublease, dated May 15, 1999 between Jaycor, Inc.
                        and JNI Corporation
         10.10(2)       Fourth Amendment to Sublease, dated August 1, 1999 between Jaycor,
                        Inc. and JNI Corporation
         10.11(2)       Sublease, dated January 14, 1999 between Obsidian, Inc. and JNI
                        Corporation
         10.12(2)       Form of Severance and Change of Control Agreement, dated September
                        1, 1999, entered into by JNI Corporation and each of Terry M.
                        Flanagan, Thomas K. Gregory, Charles McKnett and Gloria Purdy
         10.13(2)       Tax Sharing Agreement, dated September 1, 1999 between JNI
                        Corporation and Jaymark, Inc.
         10.14(3)       Amended and Restated Sublease Agreement, dated February 17, 2000
                        between Jaycor, Inc. and JNI Corporation
         10.15(3)       First Amendment to Lease and Consent to Sublease, dated April 4,
                        2000 between CarrAmerica Realty, L.P., Jaycor, Inc. and JNI
                        Corporation
         10.16(4)       Lease dated, July 11, 2000 between Pacific Plaza Carmel Valley LLC
                        and JNI Corporation (Building A)
         10.17(4)       Lease dated, July 11, 2000 between Pacific Plaza Carmel Valley LLC
                        and JNI Corporation (Building B)
         10.18(5)       Asset Acquisition and Plan of Reorganization, dated July 24, 2000,
                        among JNI Corporation, Jaymark, Inc., Jaycor, Inc. and California
                        Tube Labratories, Inc.
         10.19(6)       Severance Agreement, dated September 13, 2000, between JNI
                        Corporation and Terry M. Flanagan
         10.20(6)       Amendment No. 1 to Severance and Change of Control Agreement, dated
                        September 14, 2000, between JNI Corporation and Gloria Purdy
         10.21(1)       Loan Agreement and Promissory Note between JNI and Neal Waddington,
                        dated January 9, 2001
         23.1(1)        Consent of PricewaterhouseCoopers LLP

</TABLE>
         -------------------
         (1) Filed herewith.

         (2) Incorporated by reference to the Registration Statement on Form S-1
             filed by JNI Corporation (File No.333-86501).

         (3) Incorporated by reference to the Quarterly Report on Form 10-Q
             filed by JNI for the quarter ended March 31, 2000.

                                       36
<PAGE>

         (4) Incorporated by reference to the Quarterly Report on Form 10-Q
             filed by JNI for the quarter ended June 30, 2000.

         (5) Incorporated by reference to the Current Report on Form 8-K filed
             by JNI on August 4, 2000.

         (6) Incorporated by reference to the Registration Statement on Form S-1
             filed by JNI Corporation (File No.333-45934).

         (7) Incorporated by reference to the Registration Statement on Form
             S-8 filed by JNI on September 14, 2000 (File No. 333-45752)

                                       37
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.

                                   JNI CORPORATION

                                   March 23, 2001



                                   By:    /s/ NEAL WADDINGTON
                                   ---------------------------------------------
                                          Neal Waddington
                                          PRESIDENT, CHIEF EXECUTIVE OFFICER AND
                                          DIRECTOR

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                                TITLE                                              DATE
---------                                -----                                              ----
<S>                                      <C>                                                <C>
     /s/ NEAL WADDINGTON                 President, Chief Executive Officer and Director    March 23, 2001
-------------------------------------    (Principal Executive Officer)
         Neal Waddington


     /s/ GLORIA PURDY                    Chief Financial Officer                            March 23, 2001
-------------------------------------    (Principal Financial and Accounting Officer)
         Gloria Purdy


     /s/ ERIC P. WENAAS                  Chairman of the Board of Directors                 March 23, 2001
-------------------------------------
         Eric P. Wenaas


     /s/ JOHN BOLGER                     Director                                           March 23, 2001
-------------------------------------
         John Bolger


     /s/ LAWRENCE E. FOX                 Director                                           March 23, 2001
-------------------------------------
         Lawrence E. Fox


     /s/ JOHN STISKA                     Director                                           March 23, 2001
-------------------------------------
         John Stiska
</TABLE>

                                       38
<PAGE>

                                 JNI CORPORATION

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                         PAGE
<S>                                                                                                      <C>
Report of Independent Accountants....................................................................    F-2
Balance Sheets as of December 31, 2000 and 1999......................................................    F-3
Statements of Income for the Years Ended December 31, 2000, 1999 and 1998............................    F-4
Statements of Stockholders' Equity (Deficit) and Comprehensive Income for the Years Ended
December 31, 2000, 1999 and 1998.....................................................................    F-5
Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998........................    F-6
Notes to Financial Statements........................................................................    F-7
</TABLE>


                                       F-1
<PAGE>

                                 JNI CORPORATION

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of JNI Corporation

In our opinion, the accompanying balance sheets and the related statements of
income, of stockholders' equity (deficit) and comprehensive income and of cash
flows present fairly, in all material respects, the financial position of JNI
Corporation at December 31, 2000 and 1999, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2000
in conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.




PRICEWATERHOUSECOOPERS LLP

San Diego, California
January 23, 2001

                                       F-2
<PAGE>

                                 JNI CORPORATION

                                 BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                                            ----------------------
                                                                               2000         1999
<S>                                                                         <C>           <C>
Current assets:
  Cash and cash equivalents ............................................    $   4,095     $  5,062
  Marketable securities available for sale .............................      112,350       39,767
  Accounts receivable, net .............................................       21,635        6,305
  Inventories ..........................................................       19,262        4,046
  Other current assets .................................................        6,509          711
  Deferred income taxes ................................................            -          946
                                                                            ---------     --------
          Total current assets .........................................      163,851       56,837
Property and equipment, net ............................................        8,995        4,632
Intangible assets, net .................................................        4,688       10,047
Deferred income taxes ..................................................            -        1,309
Other assets ...........................................................          560            -
                                                                            ---------     --------
                                                                            $ 178,094     $ 72,825
                                                                            =========     ========

                           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable .....................................................    $   9,126     $  4,124
  Accrued liabilities ..................................................        7,575        3,367
  Deferred revenue .....................................................        4,704            -
                                                                            ---------     --------
          Total current liabilities ....................................       21,405        7,491
  Other liabilities ....................................................            -          112
                                                                            ---------     --------
          Total liabilities ............................................       21,405        7,603
                                                                            ---------     --------

Commitments (Note 10)

Stockholders' equity:
 Preferred stock, undesignated series, 5,000,000 shares authorized;
     none issued .......................................................            -            -

 Common stock, par value $.001 per share; 100,000,000 shares authorized;
     25,551,749 and 21,838,679 shares issued and outstanding ...........           26           22
  Additional paid-in capital ...........................................      143,610       67,078
  Unearned stock-based compensation ....................................         (665)      (1,311)
  Accumulated other comprehensive income (loss) ........................            6          (23)
  Retained earnings (deficit) ..........................................       13,712         (544)
                                                                            ---------     --------
          Total stockholders' equity ...................................      156,689       65,222
                                                                            ---------     --------
                                                                            $ 178,094     $ 72,825
                                                                            =========     ========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       F-3
<PAGE>

                                 JNI CORPORATION

                              STATEMENTS OF INCOME
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                    --------------------------------------------
                                                        2000           1999             1998
<S>                                                 <C>            <C>              <C>
  Net revenues .................................    $   103,181    $     40,171     $     12,189
  Cost of revenues .............................         42,050          15,402            5,361
                                                    -----------    ------------     ------------
          Gross margin .........................         61,131          24,769            6,828
                                                    -----------    ------------     ------------

Operating expenses:
  Research and development .....................         18,918          11,951            2,919
  Selling and marketing ........................         12,323           4,806            1,526
  General and administrative ...................          7,938           3,476            1,698
  Amortization of intangible assets ............          5,359           1,506               47
  Amortization of stock-based compensation .....            623             842               35
                                                    -----------    ------------     ------------
          Total operating expenses .............         45,161          22,581            6,225
                                                    -----------    ------------     ------------
Operating income ...............................         15,970           2,188              603
Interest income ................................          2,908             352                -
Interest expense - affiliate ...................              -            (455)            (265)
                                                    -----------    ------------     ------------
Income before income taxes .....................         18,878           2,085              338
Income tax provision (benefit) .................          4,622            (673)              27
                                                    -----------    ------------     ------------

          Net income ...........................    $    14,256    $      2,758     $        311
                                                    ===========    ============     ============

Earnings per share:
  Basic ........................................    $      0.61    $       0.64     $       0.74
                                                    ===========    ============     ============
  Diluted ......................................    $      0.53    $       0.12     $       0.02
                                                    ===========    ============     ============


Number of shares used in per share computations:

  Basic ........................................     23,541,000       4,285,000          420,000
  Diluted ......................................     27,009,000      23,789,000       17,977,000

</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       F-4
<PAGE>

                                 JNI CORPORATION

      STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                CONVERTIBLE
                                                              PREFERRED STOCK,                  COMMON STOCK            ADDITIONAL
                                                                  SERIES A                      ------------             PAID-IN
                                                           SHARES         AMOUNT          SHARES           AMOUNT        CAPITAL
<S>                                                    <C>              <C>              <C>             <C>           <C>
BALANCE - DECEMBER 31, 1997 ........................     16,590,000       $       17         420,000     $       -     $  2,856
  Issuance of convertible preferred stock ..........      1,132,895                1                                      1,566
  Stock-based compensation .........................                                                                      1,005
  Net income .......................................
                                                       ------------       ----------     -----------     ---------     --------
BALANCE - DECEMBER 31, 1998 ........................     17,722,895               18         420,000             -        5,427

  Issuance of warrants .............................                                                                     10,920
  Stock-based compensation .........................                                                                      1,183
  Issuance of common stock in IPO, net of
    issuance costs .................................                                       2,800,000             3       48,049
  Conversion of convertible preferred stock
    into common stock ..............................    (17,722,895)             (18)     17,722,895            18
  Common stock options exercised ...................                                         895,784             1          151
  Unrealized gain (loss) on marketable securities...
  Tax benefit from stock option transactions .......                                                                        490
  Tax benefit from technology transfer from parent..                                                                        858
  Net income .......................................
                                                       ------------       ----------     -----------     ---------     --------
BALANCE - DECEMBER 31, 1999 ........................              -                -      21,838,679            22       67,078

  Exercise of warrants by Adaptec ..................                                         839,998             1
  Stock-based compensation .........................
  Common stock options exercised ...................                                       1,789,409             2        3,047
  Common stock issued under Employee Stock
    Purchase Plan ..................................                                          83,663                      1,381
  Unrealized gain (loss) on marketable securities...
  Tax benefit from stock option transactions .......                                                                      3,187
  Issuance of common stock in public offering,
    net of issuance costs ..........................                                       1,000,000             1       68,917
  Net income .......................................
                                                       ------------       ----------     -----------     ---------     --------
BALANCE - DECEMBER 31, 2000 ........................              -       $        -      25,551,749     $      26     $143,610
                                                       ============       ==========     ===========     =========     ========

<CAPTION>
                                                                         ACCUMULATED                     TOTAL
                                                        UNEARNED            OTHER         RETAINED    STOCKHOLDERS'
                                                       STOCK-BASED      COMPREHENSIVE     EARNINGS       EQUITY       COMPREHENSIVE
                                                      COMPENSATION      INCOME (LOSS)     (DEFICIT)     (DEFICIT)         INCOME
<S>                                                   <C>               <C>             <C>           <C>             <C>
BALANCE - DECEMBER 31, 1997 ........................   $        -       $        -      $   (3,613)      $    (740)
  Issuance of convertible preferred stock ..........                                                         1,567
  Stock-based compensation .........................         (970)                                              35
  Net income .......................................                                           311             311       $     311
                                                       ----------       ----------      ----------       ---------       ---------
BALANCE - DECEMBER 31, 1998 ........................         (970)               -          (3,302)          1,173             311
                                                                                                                         =========
  Issuance of warrants .............................                                                        10,920
  Stock-based compensation .........................         (341)                                             842
  Issuance of common stock in IPO, net of
    issuance costs .................................                                                        48,052
  Conversion of convertible preferred stock
    into common stock ..............................                                                             -
  Common stock options exercised ...................                                                           152
  Unrealized gain (loss) on marketable securities...                           (23)                            (23)            (23)
  Tax benefit from stock option transactions .......                                                           490
  Tax benefit from technology transfer from parent..                                                           858
  Net income .......................................                                         2,758           2,758           2,758
                                                       ----------       ----------      ----------       ---------       ---------
BALANCE - DECEMBER 31, 1999 ........................       (1,311)             (23)           (544)         65,222           2,735
                                                                                                                         =========
  Exercise of warrants by Adaptec ..................                                                             1
  Stock-based compensation .........................          646                                              646
  Common stock options exercised ...................                                                         3,049
  Common stock issued under Employee Stock
    Purchase Plan ..................................                                                         1,381
  Unrealized gain (loss) on marketable securities...                            29                              29              29
  Tax benefit from stock option transactions .......                                                         3,187
  Issuance of common stock in public offering,
    net of issuance costs ..........................                                                        68,918
  Net income .......................................                                        14,256          14,256          14,256
                                                       ----------       ----------      ----------       ---------       ---------
BALANCE - DECEMBER 31, 2000 ........................   $     (665)      $        6      $   13,712       $ 156,689       $  14,285
                                                       ==========       ==========      ==========       =========       =========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       F-5
<PAGE>

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                    ----------------------------------
                                                                        2000       1999         1998
<S>                                                                 <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income...................................................     $  14,256    $   2,758   $     311
  Adjustments to reconcile net income to net cash provided by
    operating activities:
      Deferred income taxes....................................        (3,850)      (1,293)          -
      Tax benefit from stock option transactions...............         3,187          490           -
      Depreciation and amortization............................         2,238        1,148         243
      Amortization of intangible assets........................         5,359        1,506          47
      Amortization of stock-based compensation.................           646          842          35
      Accrued interest expense - affiliate.....................             -         (395)        265
      Accrued receivable - affiliate...........................             -          159           -
  Changes in assets and liabilities:
      Accounts receivable, net.................................       (15,330)      (3,005)     (2,444)
      Inventories..............................................       (15,216)      (2,871)       (439)
      Other assets.............................................        (6,358)        (471)       (157)
      Deferred income taxes....................................         6,105            -           -
      Accounts payable.........................................         5,002        1,583       2,057
      Accrued liabilities......................................         4,208        2,165         799
      Deferred revenue.........................................         4,704            -           -
      Other liabilities........................................          (112)          12          34
                                                                    ----------   ----------  ----------
Net cash provided by operating activities......................         4,839        2,628         751
                                                                    ----------   ----------  ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of marketable securities available for sale........       (72,554)     (49,790)          -
  Proceeds from sale of marketable securities available for sale            -       10,000           -
  Capital expenditures.........................................        (6,601)      (3,314)     (1,597)
                                                                    ----------   ----------  ----------
Net cash used in investing activities..........................       (79,155)     (43,104)     (1,597)
                                                                    ----------   ----------  ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (payments to) advances from affiliate....................             -       (2,666)        846
  Net proceeds from issuance of common stock...................        73,349       48,204           -
                                                                    ----------   ----------  ----------
Net cash provided by financing activities......................        73,349       45,538         846
                                                                    ----------   ----------  ----------
Net change in cash.............................................          (967)       5,062           -
Cash, beginning of period......................................         5,062            -           -
                                                                    ----------   ----------  ----------
Cash, end of period............................................     $   4,095    $   5,062   $       -
                                                                    ==========   ==========  ==========

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchase of property and equipment and intangible assets in
  exchange for convertible preferred stock and warrants to
  purchase convertible preferred stock.........................     $       -    $  10,920   $   1,567
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       F-6

<PAGE>
                                 JNI CORPORATION

                         NOTES TO FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

     JNI Corporation ("JNI" or the "Company") commenced operations in 1993 as a
division of Jaycor, Inc. ("Jaycor"). In February 1997, Jaycor effected a
corporate reorganization in which it formed two new corporations: Jaymark, Inc.
("Jaymark") and the Company. Jaymark became the parent of Jaycor and of the
Company in that reorganization transaction. Jaycor then transferred technology
and assets relating to its fibre channel division to Jaymark, which in turn
contributed these to the Company in exchange for shares of the Company's common
and preferred stock, which automatically converted into common stock upon the
closing of the Company's initial public offering. In July 2000, Jaymark
distributed its shares to its stockholders in a reorganization transaction which
resulted in Jaymark's liquidation and dissolution and eliminated control of JNI
by Jaymark (Note 3).

     The Company is a leading designer and supplier of fibre channel hardware
and software products that connect servers and data storage devices to form
storage area networks. Storage area networks were made possible by the emergence
of fibre channel technology, a new generation of server to storage
communications technology that improves data communication speeds, connectivity,
distance between connections, reliability and access. The Company operates in
one business segment.

BASIS OF PRESENTATION

     The accompanying financial statements reflect the financial position,
results of operations, changes in stockholders' equity and cash flows as if the
Company was a separate entity for all periods presented. The financial
statements have been prepared using the historical basis in the assets and
liabilities and historical results of operations related to the Company's
business. When the Company was a division of Jaycor, the cash used by the
Company was funded by Jaycor. Subsequent to incorporation, the Company's cash
receipts and disbursements continued to be processed by Jaycor until the Company
completed its initial public offering (Note 6). Subsequent to its initial public
offering, the Company commenced processing its cash receipts and disbursements.

     Prior to the Company's initial public offering, general corporate overhead
related to Jaymark's corporate headquarters and common support divisions have
been allocated to the Company generally based on the proportion of the Company's
total labor costs to the total of all of Jaymark's subsidiaries' total labor
costs. Allocated charges included in operating expenses totaled $1,086 and $509
for the years ended December 31, 1999 and 1998, respectively. Management
believes these allocations fairly and reasonably approximate costs incurred by
Jaymark on behalf of the Company's operations.

USE OF ESTIMATES

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

CASH AND CASH EQUIVALENTS

     The Company considers cash equivalents to be only those investments which
are highly liquid, readily convertible to cash and which mature within three
months from the date of purchase. The carrying value of cash and cash
equivalents approximates fair value due to the nature of their short-term
maturities.

                                       F-7
<PAGE>

MARKETABLE SECURITIES

     The Company's marketable securities consist principally of government or
government agency securities and corporate notes and bonds. The Company has
classified its marketable securities as "available for sale" and carries them at
fair value with net unrealized holding gains and losses reported in accumulated
other comprehensive income (loss).

INVENTORIES

     Inventories are stated at the lower of cost (first-in, first-out method) or
market. Provisions, when necessary, are made to reduce excess and obsolete
inventories to their estimated net realizable values.

PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost and are depreciated over their
estimated useful lives, using the straight-line method. Useful lives range from
three to seven years for equipment and furniture and the shorter of the useful
lives or the terms of the leases (one to three years) for leasehold
improvements. Additions to property and equipment together with major renewals
and betterments are capitalized. Maintenance, repairs and minor renewals and
betterments are charged to expense as incurred.

LONG-LIVED ASSETS

     The Company evaluates the carrying value of its long-lived assets when
events or changes in circumstances indicate that an asset's carrying value may
not be recoverable. An impairment loss is recognized when the sum of the
expected future undiscounted net cash flows is less than the carrying value of
the asset. An impairment loss would be measured by comparing the amount by which
the carrying value exceeds the fair value of the asset being evaluated for
impairment. No such losses have been identified by the Company.

INTANGIBLE ASSETS

     Intangible assets represent certain products and technology purchased in
November 1998 (Note 2) and are being amortized over their estimated useful lives
of three years using the straight-line method. Accumulated amortization totaled
$6,894 and $1,535 at December 31, 2000 and 1999, respectively.

REVENUE RECOGNITION

     Revenue from product sales is recognized upon shipment except for sales to
distributor customers that have contractual rights of return. Revenue from sales
to distributors that have contractual rights of return is recognized when these
distributors ship the Company's products to their end-user customers. Allowances
for estimated sales returns are provided at the time revenue is recognized. The
Company reserves for uncollectable accounts and warranty claims based on past
history and expected future returns related to products shipped.

     The Company's current practice is generally to warrant its adapter products
against defects in materials and workmanship for a three-year period from the
date of shipment and its Application Specific Integrated Circuits ("ASICs")
products for a one-year period from the date of shipment. The estimated cost of
warranty obligations is accrued at the time revenue is recognized.

RESEARCH AND DEVELOPMENT COSTS

     The Company is involved in a large and continuing research and development
effort that includes the continual development of new products and the
improvement of existing products. All research and development costs are
expensed as incurred.

                                       F-8
<PAGE>

     The Company capitalizes eligible computer software development costs upon
the establishment of technological feasibility, which is defined as completion
of designing, coding and testing activities. The amount of costs eligible for
capitalization, after consideration of factors such as net realizable value,
have not historically been material and, accordingly, all software development
costs have been charged to research and development expense as incurred in the
accompanying statements of income.

INCOME TAXES

     Until the consummation of the initial public offering, the Company was a
member of the Jaymark affiliated group of corporations which files a
consolidated federal income tax return and certain combined and consolidated
state income tax returns. Beginning October 27, 1999, the Company files its own
federal and state income tax returns. Income taxes are calculated as if the
Company had filed separate tax returns for federal and state purposes for all
periods presented. In connection with the separation from the Jaymark
consolidated tax group, the Company realized a deferred tax asset related to the
transfer of certain technology from Jaymark and accounted for this as additional
paid-in capital.

     Current income tax expense is the amount of income taxes expected to be
payable for the current year. A deferred tax asset and/or liability is computed
for both the expected future impact of differences between the financial
statement and tax bases of assets and liabilities and for the expected future
tax benefit to be derived from tax loss and tax credit carryforwards. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be "more likely than not" realized in future tax returns. Tax
rate changes are reflected in income in the period such changes are enacted.

STOCK-BASED COMPENSATION

     The Company measures compensation costs related to stock option plans using
the intrinsic value method and provides pro forma disclosures of net income
(loss) and earnings (loss) per common share as if the fair value based method
had been applied in measuring compensation costs. Accordingly, compensation cost
for stock options is measured as the excess, if any, of the deemed fair value of
the Company's common stock at the date of grant over the amount an employee must
pay to acquire the stock and is amortized over the vesting period, generally
four years.

EARNINGS PER SHARE

     Earnings per share is computed using the weighted average number of shares
of common stock outstanding and is presented for basic and diluted earnings per
share. Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding during the period increased to include, if dilutive, the number of
additional common shares that would have been outstanding if the potential
common shares had been issued. The dilutive effect of outstanding stock options
is reflected in diluted earnings per share by application of the treasury stock
method.

                                       F-9
<PAGE>

     The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                              --------------------------------------
                                                                                  2000          1999          1998
<S>                                                                           <C>           <C>           <C>
      Numerator:
        Net income .......................................................       $14,256        $2,758          $311
                                                                              ==========    ==========    ==========
      Denominator:
        Denominator for basic earnings per share - weighted average shares
           outstanding ...................................................    23,541,000     4,285,000       420,000
        Effect of dilutive securities:
           Dilutive warrants outstanding .................................        69,000       840,000             -
           Dilutive options outstanding ..................................     3,378,000     4,144,000       815,000
           Employee stock purchase plan shares ...........................        21,000         1,000             -
           Convertible preferred stock ...................................             -    14,519,000    16,742,000
                                                                              ----------    ----------    ----------
        Denominator for diluted earnings per share - adjusted weighted
           average shares ................................................    27,009,000    23,789,000    17,977,000
      Basic earnings per share ...........................................         $0.61         $0.64         $0.74
      Diluted earnings per share .........................................         $0.53         $0.12         $0.02
</TABLE>


RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued. This
statement will be effective for the Company on January 1, 2001. SFAS 133
requires certain accounting and reporting standards for derivative financial
instruments and hedging activities. Under SFAS 133, all derivatives must be
recognized as assets and liabilities and measured at fair value. The Company
does not currently use derivative instruments and therefore does not expect the
adoption of this new accounting standard will have any impact on its financial
position or results of operations.

RECLASSIFICATIONS

     Certain prior year amounts have been reclassified to conform to the current
year presentation.

NOTE 2 -- ACQUISITION

     In November 1998, the Company purchased certain fibre channel technology,
products and property and equipment from Adaptec, Inc. ("Adaptec"). As
consideration for the purchase, the Company issued to Adaptec 1,132,895 shares
of the Company's Series A Convertible Preferred Stock with a fair value, as
determined for financial reporting purposes, of approximately $1.383 per share
for an aggregate purchase price of approximately $1,567. The Company also issued
three series of warrants to purchase shares of the Company's Series A
Convertible Preferred Stock as additional consideration to Adaptec.

     On September 30, 1999, the Company and Adaptec amended the first of the
Series A warrants to fix the number of shares issuable thereunder at 840,000. No
shares were issuable under the second and third warrants as a result of the
actual revenues earned by the Company on sales of products based on the acquired
technology during the period from February 1, 1999 to the date of the Company's
initial public offering. As a result of the issuance of the 840,000 warrants,
additional purchase price consideration of $10,920 was recorded on September 30,
1999. This additional purchase price was allocated to intangible assets and is
being amortized over the remaining useful life of the asset.

     The 1,132,895 shares of the Company's Series A Convertible Preferred Stock
converted to common stock as of the date of the Company's initial public
offering. During the first quarter of 2000, Adaptec exercised its warrant to
purchase 840,000 shares of the Company's common stock. Adaptec performed a net
exercise of the warrant, pursuant to which the Company issued a total of 839,998
common shares to Adaptec after taking into consideration the one hundred dollar
exercise price.

                                       F-10
<PAGE>

NOTE 3 -- JAYMARK REORGANIZATION

     On July 24, 2000, Jaymark, Inc., previously the parent company of JNI
Corporation, distributed 14,175,000 shares to its stockholders in a
reorganization transaction which resulted in Jaymark's liquidation and
dissolution and eliminated control of the Company by Jaymark. Under a
reorganization agreement among the Company, Jaymark and two of Jaymark's
subsidiaries, the Company facilitated Jaymark's reorganization and liquidating
distribution in exchange for certain lock-up agreements that restrict Jaymark
stockholders' ability to sell the Company's shares received in the distribution.
The Company also granted the former Jaymark stockholders certain registration
rights under the reorganization agreement with respect to the shares of the
Company's common stock that Jaymark previously held. Under the reorganization
agreement, the former Jaymark stockholders were entitled to include at least
2,000,000 shares in any registration for a public offering effected by the
Company within five months after Jaymark's reorganization. The Company fulfilled
this obligation in conjunction with the public offering in October 2000. The
Company further agreed in the reorganization agreement that in the event it
initiates a second public offering of the Company's common stock during a time
period when the sale or transfer of any shares of the Company's common stock is
restricted pursuant to the reorganization agreement, the Company will include
20% of the shares subject to such restrictions in any registration statement it
files for the purpose of effecting such an offering.

NOTE 4 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

<TABLE>
<CAPTION>
                                                                 AS OF DECEMBER 31,
                                                            --------------------------
                                                               2000            1999
<S>                                                         <C>             <C>
Accounts receivable:
  Accounts receivable................................       $  22,461       $   6,800
  Less allowance for doubtful accounts...............            (826)           (495)
                                                            ---------       ---------
              Total.................................        $  21,635       $   6,305
                                                            =========       =========

                                                                 AS OF DECEMBER 31,
                                                            --------------------------
                                                               2000            1999
Inventories:
  Raw materials......................................       $  14,149       $   3,027
  Work in process....................................           2,260             299
  Finished goods.....................................           2,853             720
                                                            ---------       ---------
              Total.................................        $  19,262       $   4,046
                                                            =========       =========

                                                                 AS OF DECEMBER 31,
                                                            --------------------------
                                                               2000            1999
Property and equipment, net:
  Computer and test equipment...........................    $  10,177       $   5,611
  Leasehold improvements................................          706             110
  Office furniture and other equipment..................        1,869             430
                                                            ---------       ---------
                                                               12,752           6,151
Less accumulated depreciation and amortization..........       (3,757)         (1,519)
                                                            ---------       ---------
              Total.....................................    $   8,995       $   4,632
                                                            =========       =========

                                                                 AS OF DECEMBER 31,
                                                            --------------------------
                                                               2000            1999
Accrued liabilities:
  Payroll and payroll related costs.....................    $   4,447       $   2,251
  Other.................................................        3,128           1,116
                                                            ---------       ---------
                                                            $   7,575       $   3,367
                                                            =========       =========
</TABLE>

                                       F-11
<PAGE>

NOTE 5 -- MARKETABLE SECURITIES

     At December 31, 2000 and 1999, the amortized cost and estimated fair value
of marketable securities available for sale were as follows:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31, 2000
                                                  --------------------------------------------------
                                                  AMORTIZED    UNREALIZED    UNREALIZED       FAIR
                                                     COST         GAINS        LOSSES         VALUE
                                                  ---------    ----------    ----------     ---------

<S>                                               <C>           <C>             <C>         <C>
U.S. government and agency debt...............    $   5,393     $       -       $   -       $  5,393
State, municipal, and county government debt..       87,578             -           -         87,578
Corporate debt................................       19,373             6           -         19,379
                                                  ---------     ---------       -----      ---------
                                                  $ 112,344     $       6       $   -      $ 112,350
                                                  =========     =========       =====      =========

<CAPTION>
                                                                  DECEMBER 31, 1999
                                                  --------------------------------------------------
                                                   AMORTIZED   UNREALIZED    UNREALIZED       FAIR
                                                     COST         GAINS        LOSSES         VALUE
                                                  ---------    ----------    ----------     ---------

<S>                                               <C>           <C>             <C>        <C>
U.S. government and agency debt...............    $   2,317     $       -       $  (5)     $   2,312
State, municipal, and county government debt..       30,584             -         (18)        30,566
Corporate debt................................        6,889             -           -          6,889
                                                  ---------     ---------       -----      ---------
                                                  $  39,790     $       -       $ (23)     $  39,767
                                                  =========     =========       =====      =========
</TABLE>

     The cost of securities sold is based on the specific identification
method. Realized losses on the sale of available for sale securities during the
year ended December 31, 2000 were $41. No gains or losses were realized on the
sale of available for sale securities during the year ended December 31, 1999.

NOTE 6 -- STOCKHOLDERS' EQUITY

     During October 1999, the Company completed its initial public offering for
the sale of 5,635,000 shares of common stock (of which 2,800,000 shares were
sold by the Company and 2,835,000 were sold by the Company's former principal
stockholder, Jaymark) at a price to the public of $19.00 per share, which
resulted in net proceeds to the Company of $49,476 after the payment of
underwriters' commission but before the deduction of offering expenses. Upon
the closing of the Company's initial public offering, all the outstanding
Series A Convertible Preferred Stock was automatically converted into
17,722,895 shares of common stock.

     During October 2000, the Company completed a public offering of 5,175,000
shares of common stock (of which 1,000,000 shares were sold by the Company and
4,175,000 were sold by selling stockholders) at a price to the public of $74.00
per share, which resulted in net proceeds to the Company of $69,930 after the
payment of underwriters' commission but before the deduction of offering
expenses.

     The Board of Directors of the Company (the "Board") is authorized to issue
up to 5,000,000 shares of preferred stock or other senior securities and
determine the series and number of preferred shares to be issued and any related
designations, powers, preferences, rights, qualifications, limitations or
restrictions.

NOTE 7 -- BENEFIT PLANS

     The Company has a savings plan under Section 401(k) of the Internal Revenue
Code under which all employees are eligible to participate on the first day of
the month following their hire date. The plan allows for a Company matching
contribution (the "Match") in which employees vest 20% per year on the second
through sixth anniversaries of their hire date. The Match is 100% of the
employee's first five percentage points of salary contributed. During the years
ended December 31, 2000 and 1999, the charge to operations for the Match was
$621 and $256, respectively.

                                       F-12
<PAGE>

     During February 1997, the Company adopted an option plan (the "1997 Plan")
which provides for the issuance of 4,396,441 shares of the Company's common
stock. The 1997 Plan provides for the grant to employees and directors of the
Company of incentive stock options and non-qualified stock options to purchase
shares of the Company's common stock. Options granted under the 1997 Plan
became exercisable upon the Company's initial public offering and have a ten
year term from the date of grant. The exercise price of all options granted
under the 1997 Plan are not less than the fair market value of the Company's
common stock as determined by the Board on the date of grant. As a result of
the reorganization agreement with Jaymark on July 24, 2000 (Note 3), vesting of
options granted under the 1997 Plan was accelerated to a three-year vesting
period from a four year vesting period based on the terms of the stock option
plan. At December 31, 2000, there were 62,737 shares of the Company's common
stock available for future grant under the 1997 Plan.

     In April 1999, the Company adopted a second option plan (the "1999 Plan"),
as amended, which provides for the issuance of up to 2,312,800 shares of the
Company's common stock. The 1999 Plan provides for the grant to employees,
consultants and directors of the Company of incentive stock options and
non-qualified stock options to purchase shares of the Company's common stock.
Options granted under the 1999 Plan shall be exercisable at such time or upon
such event and subject to the terms, conditions and restrictions as determined
by the Board; provided, however, that no option shall be exercisable after ten
years from the date of grant. The exercise price of all incentive stock options
granted under the 1999 Plan are not less than the fair market value of the
Company's common stock on the date of grant. Options granted under the 1999 Plan
generally vest over a four-year period. At December 31, 2000, there were 424,019
shares of the Company's common stock available for future grant under the 1999
Plan.

     In August 2000, the Company adopted a third option plan (the "2000 Plan"),
which provides for the issuance of up to 1,400,000 shares of the Company's
common stock. The 2000 Plan provides for the grant to employees and consultants
of the Company of non-qualified stock options to purchase shares of the
Company's common stock. Options granted under the 2000 Plan shall be exercisable
at such time or upon such event and subject to the terms, conditions and
restrictions as determined by the Board; provided, however, that no option shall
be exercisable after ten years from the date of grant. Options granted under the
2000 Plan generally vest over a four-year period. At December 31, 2000, there
were 539,300 shares of the Company's common stock available for future grant
under the 2000 Plan.

     A summary of the Company's stock option plans as of December 31, 2000, 1999
and 1998 and changes during the periods is as follows:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                      ----------------------------------------------------------------------------------------------
                                                 2000                            1999                          1998
                                                    WEIGHTED AVERAGE                 WEIGHTED AVERAGE               WEIGHTED AVERAGE
                                      (a)Options     EXERCISE PRICE    (b)Options     EXERCISE PRICE   (c)Options    EXERCISE PRICE
<S>                                   <C>                <C>           <C>                <C>          <C>               <C>
Outstanding at beginning of period..   4,568,107          $3.15         4,038,741          $0.17        3,759,840         $0.17
  Granted ..........................   1,858,850          54.18         1,478,700           9.39          808,500          0.17
  Exercised ........................  (1,789,409)          1.70          (895,784)          0.17                -             -
  Cancelled ........................    (239,556)         28.40           (53,550)          0.65         (529,599)         0.17
                                       ---------                        ---------                       ---------
Outstanding at end of period .......   4,397,992         $23.93         4,568,107          $3.15        4,038,741         $0.17
                                       =========                        =========                       =========
Vested at end of period ............   1,614,511                          206,716                         375,984
Exercisable at end of period .......   1,614,511                          206,716                               -
Weighted average fair value per
   option of options granted during
   the period ......................                     $38.81                            $5.42                          $1.34
</TABLE>

                                       F-13
<PAGE>

     The following table summarizes information regarding employee stock options
outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                                           OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                                                        ---------------------------     -----------------------------
                                                           WEIGHTED
                                                            AVERAGE        WEIGHTED                         WEIGHTED
                                                          REMAINING        AVERAGE                          AVERAGE
                                        NUMBER           CONTRACTUAL       EXERCISE       NUMBER            EXERCISE
  EXERCISE PRICES                     OUTSTANDING        LIFE (YEARS)       PRICE       EXERCISABLE          PRICE
<S>                                    <C>                   <C>            <C>          <C>                  <C>
December 31, 2000:
    $0.17..................            1,796,763             7.00            $0.17       1,488,432            $0.17
    $0.71..................              104,035             8.19             0.71          19,615             0.71
    $10.00 - $26.81........              761,094             8.72            13.20         106,214            13.10
    $28.50 - $68.98........            1,472,150             9.63            50.96               -             0.00
    $69.00 - $122.50.......              263,950             9.75            74.97             250            69.00
                                       ---------             ----           ------       ---------            -----
    $0.17 - $122.50........            4,397,992             8.37           $23.93       1,614,511            $1.04
</TABLE>

     Stock-based compensation is recognized using the intrinsic value method. In
connection with the grant of stock options to employees, the Company recorded
unearned stock-based compensation within stockholders' equity of $1,183 and
$1,005 during the years ended December 31, 1999 and 1998, respectively,
representing the difference between the estimated fair value of the common stock
determined for financial reporting purposes and the exercise price of these
options at the date of grant. Amortization of unearned stock-based compensation,
net of any charges reversed during the period for the forfeiture of unvested
options, was $623, $842 and $35 for the years ended December 31, 2000, 1999 and
1998, respectively.

     At December 31, 2000, the remaining unearned stock-based compensation of
approximately $665 will be amortized as follows: $433 in 2001, $219 in 2002 and
$13 in 2003. The amount of stock-based compensation expense to be recorded in
future periods could decrease if options for which accrued but unvested
compensation has been recorded are forfeited.

     During October 1999, the Company adopted the 1999 Employee Stock Purchase
Plan (the "Purchase Plan"). A total of 175,000 shares of the Company's common
stock have been reserved for issuance under the Purchase Plan. As of December
31, 2000, 83,663 shares of common stock have been issued under the Purchase
Plan. The number of shares reserved for issuance under the Purchase Plan is
subject to an annual increase on January 1 of each year beginning in 2001 equal
to the lesser of (a) 87,500 shares, (b) 1.0% of the outstanding shares on such
date or (c) a lesser amount as determined by the Board. The Purchase Plan
permits eligible employees to purchase shares of common stock at a fifteen
percent (15%) discount through payroll deductions during sequential 24-month
offering periods. Each such offering period is divided into four consecutive
six-month purchase periods. Unless the Board establishes a higher price, the
price at which shares are purchased under the Purchase Plan for such offering
period is equal to 85% of the lesser of the fair market value of the common
stock on the first day of such offering period or the last day of the applicable
purchase period within such offering period.

                                       F-14
<PAGE>

     Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans, the Company's net income (loss) and diluted earnings (loss) per common
share would have been as follows:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                    ------------------------------
                                                      2000      1999      1998
      <S>                                           <C>       <C>        <C>
      Net income (loss):
        As reported...........................      $14,256   $ 2,758    $   311
        Pro forma.............................         (211)    1,532        231
      Diluted earnings (loss) per common share:
        As reported...........................      $  0.53   $  0.12    $  0.02
        Pro forma.............................        (0.01)     0.06       0.01

</TABLE>

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                --------------------------------
                                                                  2000        1999       1998
       <S>                                                      <C>         <C>        <C>
       Weighted average grant-date fair value of options
          granted:
          Exercise price equal to estimated fair value of
               stock on the grant date:
               Aggregate value ............................     $ 72,141     $ 6,581     $    12
               Per share value ............................        38.81        5.89        0.07
          Exercise price less than the estimated fair value
               of stock on the grant date:
               Aggregate value ............................     $      -     $ 1,433     $ 1,068
               Per share value ............................            -        3.97        1.67
</TABLE>

     The fair value of each option grant was estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the years ended December 31, 2000, 1999 and
1998: no dividend yield; risk-free interest rate of 6.03%, 5.56% and 4.83% and
expected terms of 3.3 years, 7.4 years and 9.9 years, respectively. The
volatility of the Company's common stock underlying the options was 115% and 95%
during the years ended December 31, 2000 and 1999. The volatility of the
Company's common stock was not considered during the year ended December 31,
1998 because the Company's equity was not publicly-traded as of December 31,
1998. The fair value of the employees' purchase rights pursuant to the Purchase
Plan was estimated using the Black-Scholes model with the following assumptions
for the years ended December 31, 2000 and 1999: no dividend yield; risk-free
interest rate of 5.36% and 5.08%; expected term of 1.3 years and 6 months and
expected volatility of 97% and 95%, respectively. The weighted average fair
value of those purchase rights granted in 2000 and 1999 was $13.80 and $8.00,
respectively.

NOTE 8 -- INCOME TAXES

     The components of the income tax provision (benefit) are as follows:

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,
                                             -----------------------
                                           2000       1999        1998
       <S>                               <C>        <C>           <C>
       CURRENT:
         Federal .....................    $7,618       $619        $22
         State .......................       854          1          5
                                          ------       ----        ---
                                           8,472        620         27
                                          ------       ----        ---


       DEFERRED:
         Federal .....................    (3,170)    (1,008)         -
         State .......................      (680)      (285)         -
                                          ------       ----        ---
                                         $(3,850)   $(1,293)         -
                                          ------       ----        ---
                                          $4,622      $(673)       $27
                                          ------       ----        ---
</TABLE>

     The provision for 1998 relates to the federal and state alternative minimum
tax.

                                       F-15
<PAGE>

     The following is a reconciliation of the statutory federal income tax rate
to the Company's effective tax rate:

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                                          -----------------------
                                                          2000     1999     1998
       <S>                                                <C>      <C>     <C>
       Tax provision (benefit) at statutory rate .......   34%      34%      34%
       State tax, net of federal tax benefit ...........    7        8        7
       Research and development credits ................  (14)     (21)     (21)
       Stock-based compensation ........................    1       14        4
       Utilization of net operating loss carryforwards..    -      (45)    (115)
       Net change in valuation allowance ...............    -      (22)      96
       Other ...........................................   (4)       -        3
                                                          ---      ---     ----
                                                           24%     (32)%      8%
                                                          ===      ===     ====
</TABLE>

     The components of the Company's net deferred tax assets (liabilities) are
as follows:

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                     ----------------------
                                                                                        2000          1999
       <S>                                                                           <C>           <C>
       Deferred tax assets:
         Net operating loss carryforwards ......................................     $  9,432      $      -
         Research and development credit carryforwards .........................        2,396           172
         Allowances and reserves ...............................................        1,602           496
         Accrued payroll and payroll related costs .............................          290           246
         Intangible assets .....................................................        2,976         1,309
         Deferred revenue ......................................................        1,848             -
         Other .................................................................          569            32
                                                                                     --------      --------
                  Total deferred tax assets ....................................     $ 19,113      $  2,255
        Deferred tax liabilities:
         Deferred costs ........................................................     $   (622)            -
         Depreciation ..........................................................     $   (357)     $      -
                                                                                     --------      --------
                 Net deferred tax asset ........................................       18,134         2,255
                 Less valuation allowance ......................................      (18,134)            -
                                                                                     --------      --------
                                                                                     $      -      $  2,255
                                                                                     ========      ========
</TABLE>

     At December 31, 1999, there was no valuation allowance recorded against the
net deferred tax assets as management determined at that time that it was more
likely than not that the net deferred tax assets would be realized based on
historical and anticipated future pre-tax results of operations of the Company.
At December 31, 2000, the Company provided a valuation allowance for its net
deferred tax assets because of uncertainty regarding their realizability due to
the expectation that deductions from future employee stock option exercises and
related deductions will exceed future taxable income. If or when recognized, the
tax benefit of these deferred tax assets will be accounted for as a credit to
stockholders' equity rather than as a reduction of the income tax provision.

     As of December 31, 2000, the Company had federal and state net operating
loss carryforwards of approximately $25,190 and $15,739 expiring from 2005 to
2020. The net operating loss includes the tax benefit related to the exercise of
stock options, which benefit was recorded to additional paid-in capital. The
Company also had federal and state research and development tax credit
carryforwards of approximately $1,546 and $1,288, expiring from 2019 to 2020.

NOTE 9--RELATED PARTY TRANSACTIONS

DUE TO AFFILIATE

     On February 1, 1997, the Company entered into a revolving loan agreement
with Jaycor whereby Jaycor and the Company agreed to consent to borrow and/or
lend sums to each other as may be needed from time to time in the ordinary
course of business. Under the terms of the agreement, the advances bore interest
at a floating rate equal to Jaycor's incremental cost of borrowing (13.3% at
December 31, 1999). During the years ended December 31,

                                      F-16
<PAGE>

1999 and 1998, the Company incurred interest expense on advances from Jaycor of
$455 and $265, respectively. Subsequent to the Company's initial public
offering, the outstanding balance to Jaycor was paid in full.

BUILDING SUBLEASE

     In February 2000, the Company and Jaycor entered into a sublease agreement,
as amended, whereby the Company subleased a certain portion of Jaycor's
facilities for terms consistent with Jaycor's primary lease. The sublease
provides for a base monthly rent and is subject to an annual increase based upon
the Consumer Price Index (CPI) percentage with a minimum increase of 2.5% and a
maximum increase of 5% annually. The term of the lease expires in April 2001. In
addition, the sublease requires the payment of a pro rata portion of the monthly
operating costs, taxes and utilities of the premises. As of December 31, 2000,
the Company's future annual minimum payments due to Jaycor under this sublease
were $457 for the year ending December 31, 2001.

REGISTRATION RIGHTS AGREEMENTS

     Pursuant to a Registration Rights Agreement dated as of September 1, 1999,
the former Jaymark stockholders have registration rights with respect to the
shares of the Company's common stock that Jaymark previously held. Under the
Registration Rights Agreement, if the Company proposes to register any of the
Company's securities under the Securities Act at any time beginning two years
after the date of the Company's initial public offering, either for the
Company's own account or for the account of other security holders, holders of
shares entitled to registration rights are entitled to notice of the
registration and are entitled to include their shares in the registration, at
the Company's expense. Beginning twelve months after the date of the Company's
initial public offering, the former Jaymark stockholders also are entitled to
specified demand registration rights under which they may require the Company to
file a registration statement under the Securities Act at the Company's expense
with respect to shares of the Company's common stock, and the Company is
required to use its best efforts to effect this registration. Further, the
former Jaymark stockholders may require the Company to file additional
registration statements on Form S-3. These registration rights are subject to
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares included in the registration and the
Company's right not to effect a requested registration within twelve months
following the initial offering of the Company's securities. All of these
registration rights terminate after the Company has effected two registration
statements, or at the latest, four years from the date of the Company's initial
public offering.

RELATED PARTY LOAN

     On January 9, 2001, the Company entered into a loan agreement with its
chief executive officer in the amount of $500. Concurrent with the loan
agreement, the Company's chief executive officer executed a promissory note to
pay off the loan with $250 of principal and accrued interest due and payable at
each anniversary date of the loan agreement or payment of all unpaid or
unforgiven principal and accrued interest due upon termination of employment
with the Company. The loan bears interest at a 5% rate. In the event the chief
executive officer's employment with the Company is terminated without cause, all
outstanding principal and interest would be forgiven. Additionally, the Company
will forgive an amount equal to $250 of principal and all accrued interest on
the first and second anniversary dates of the loan provided the chief executive
officer is an employee of the Company on the relevant forgiveness date and has
not given notice of resignation or been given notice of termination for cause.

NOTE 10 -- COMMITMENTS

     The Company leases its operating facilities and certain office equipment
under noncancelable operating leases. The facility leases require the payment of
taxes, maintenance, utilities and insurance.

                                      F-17
<PAGE>

     Future annual minimum lease payments due under noncancelable operating
leases consist of the following at December 31, 2000:

<TABLE>
<CAPTION>
                                               OPERATING
      YEARS ENDING DECEMBER 31,                  LEASES
                                                 ------
      <S>                                       <C>
      2001 .................................    $ 2,965
      2002 .................................      4,134
      2003 .................................      4,608
      2004 .................................      4,681
      2005 .................................      4,548
      Therafter ............................     16,983
                                                -------
         Total minimum lease payments ......    $37,919
</TABLE>


     Rent expense under all operating leases for the years ended December 31,
2000, 1999 and 1998 was $1,560, $1,002 and $353, respectively. Rent expense
incurred from Jaycor (Note 9) was $1,053, $558 and $254 for the years ended
December 31, 2000, 1999 and 1998, respectively.

NOTE 11 -- CONCENTRATIONS OF RISK

     The Company's products are concentrated in the storage area network
industry which is highly competitive and subject to rapid technological change.
The Company's revenues are concentrated with several major customers and certain
vital components of the Company's products are manufactured by a small number of
key suppliers. The loss of a major customer, the interruption of product supply
from a contract manufacturer, a change of suppliers or a significant
technological change in the industry could affect operating results adversely.

     The Company sells its products to original equipment manufacturers,
distribution channel customers and directly to end users and extends credit
based on an evaluation of the customer's financial condition, generally without
requiring collateral. Exposure to losses on receivables is principally dependent
on each customer's financial condition. The Company monitors its exposure for
credit losses and maintains allowances for anticipated losses.

     Sales to customers outside of the United States accounted for 23%, 17% and
14% of the Company's net revenues for the years ended December 31, 2000, 1999
and 1998, respectively. In relation to the Company's net revenues, 5%, 4% and 4%
were to customers located in Japan, 16%, 11% and 9% were to customers located in
Western Europe and 2%, 2% and 1% were to other foreign customers.

     The percentage of sales to significant customers was as follows:

<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31,
                                        ------------------------
                                        2000     1999     1998
      <S>                               <C>      <C>      <C>
      Customer A ...................      16%      16%      19%
      Customer B ...................       8       11       16
      Customer C ...................      21       18        6
      Customer D ...................      13       11        9
</TABLE>

NOTE 12 - SUBSEQUENT EVENTS (UNAUDITED)

STOCKHOLDER RIGHTS PLAN

     On February 1, 2001, the Board of Directors of the Company adopted a
Stockholder Rights Plan (the "Plan"). Under the terms of the Plan, stockholders
of record as of February 28, 2001 received a dividend of one Preferred Stock
Purchase Right ("Right(s)") for each share of common stock held on that date.
The Rights will expire ten years after issuance and will be exercisable only if
a person or group becomes the beneficial owner of 15% or more of the common
stock or commences a tender or exchange offer which would result in the offeror
beneficially owning 15% or more of the common stock. Each Right will entitle
stockholders to purchase one one-hundredth of a share of Series A Preferred
Stock of the Company at an exercise price of $250.00 per Right.

                                      F-18
<PAGE>

     If a person or group accumulates 15% or more of the common stock, each
Right (other than Rights held by a 15% acquiror) allows the stockholder to
purchase common stock having a market value of twice the exercise price of the
Right. In addition, in the event of certain business combinations, the Rights
allow the holders to purchase common stock of an acquiror at a 50% discount. The
Board of Directors is entitled to redeem the Rights at $.001 per Right at any
time prior to the public announcement of the existence of a 15% holder.

STOCK OPTION EXCHANGE PROGRAM

     In February 2001, the Company's compensation committee of its Board of
Directors approved a voluntary stock option exchange program for the Company's
employees, officers and directors.

     Under the program, the Company's employees, officers and directors were
given the opportunity to cancel stock options granted to them between January
2000 and December 2000 in exchange for an equal number of new options to be
granted in the future, on a date more than six months after the date of
cancellation of the original options. The new options will be granted on August
21, 2001. The exercise price of the new options will be the fair market value of
the Company's common stock on that date. Cancelled options total 1,144,450
shares with an average exercise price of $57 per share.

NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                   QUARTER ENDED
                                 MARCH 31       JUNE 30    SEPTEMBER 30  DECEMBER 31
1999
<S>                              <C>            <C>          <C>          <C>
Net revenues                     $  6,363       $ 8,549      $10,852      $14,407
Gross margin                        4,076         5,383        6,610        8,700
Operating income                       66           585        1,094          443
Net income (loss)                $    (75)      $ 1,842      $   440      $   551
Net income (loss) per share      $  (0.18)      $  0.08      $  0.02      $  0.02
2000
Net revenues                     $ 18,477       $24,024      $30,013      $30,667
Gross margin                       11,130        14,136       17,812       18,053
Operating income                    1,620         3,155        5,918        5,277
Net income                       $  1,324       $ 2,292      $ 4,353      $ 6,287
Net income per share             $   0.05       $  0.09      $  0.16      $  0.22
</TABLE>

                                      F-19
<PAGE>

                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULES

To the Board of Directors of JNI Corporation

Our audits of the financial statements referred to in our report dated January
23, 2001 appearing in the 2000 Annual Report to Shareholders of JNI Corporation
(which report and financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the financial statement
schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, these
financial statement schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.

PricewaterhouseCoopers LLP

San Diego, California
January 23, 2001


<PAGE>

                                 JNI CORPORATION

                  SCHEDULE II - VALUATION & QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     BALANCE AT      CHARGED TO         DEDUCTIONS
                                                     BEGINNING        COSTS AND       TAKEN AGAINST       BALANCE AT
                                                     OF PERIOD        EXPENSES          ALLOWANCE       END OF PERIOD
                                                     ---------        --------          ---------       -------------
<S>                                                    <C>             <C>              <C>             <C>
YEAR ENDED DECEMBER 31, 1998:
    Allowance for
        doubtful accounts ...................          $   35          $   194          $   96          $   133

YEAR ENDED DECEMBER 31, 1999:
    Allowance for
        doubtful accounts ...................             133              416              54              495

YEAR ENDED DECEMBER 31, 2000:
    Allowance for
        doubtful accounts ...................             495              677             346              826



YEAR ENDED DECEMBER 31, 1998:
    Deferred income tax asset
        valuation allowance .................          $1,463          $   322          $  388          $ 1,397

YEAR ENDED DECEMBER 31, 1999:
    Deferred income tax asset
        valuation allowance .................           1,397                -           1,397                -

YEAR ENDED DECEMBER 31, 2000:
    Deferred income tax asset
        valuation allowance .................               -           18,134               -           18,134
</TABLE>


<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                     DESCRIPTION

<S>          <C>
 3.1(2)      Fourth Amended and Restated Certificate of Incorporation of the Company
 3.2(2)      By-laws of the Company
 4.1(2)      Specimen Common Stock Certificate
10.1(2)      Form of Indemnity Agreement for directors and executive officers
10.2(2)      1997 Stock Option Plan, as amended, and forms of Incentive Stock Option Agreement
             and Nonstatutory Stock Option Agreement thereunder
10.3(6)      Amended and Restated 1999 Stock Option Plan, terms of Stock Option Agreement and
             form of Stock Option Grant Agreement thereunder
10.4(2)      1999 Employee Stock Purchase Plan and form of subscription agreement thereunder
10.5(7)      2000 Non-Qualified Stock Option Plan, terms of Stock Option Agreement and form of
             Stock Option Grant Agreement thereunder
10.6(2)      Sublease, dated October 7, 1998 between Jaycor, Inc. and JNI Corporation
10.7(2)      First Amendment to Sublease, dated December 1, 1998 between Jaycor, Inc. and JNI
             Corporation
10.8(2)      Second Amendment to Sublease, dated April 1, 1999 between Jaycor, Inc. and JNI
             Corporation
10.9(2)      Third Amendment to Sublease, dated May 15, 1999 between Jaycor, Inc. and JNI
             Corporation
10.10(2)     Fourth Amendment to Sublease, dated August 1, 1999 between Jaycor, Inc. and JNI
             Corporation
10.11(2)     Sublease, dated January 14, 1999 between Obsidian, Inc. and JNI Corporation
10.12(2)     Form of Severance and Change of Control Agreement, dated September 1, 1999,
             entered into by JNI Corporation and each of Terry M. Flanagan, Thomas K. Gregory,
             Charles McKnett and Gloria Purdy
10.13(2)     Tax Sharing Agreement, dated September 1, 1999 between JNI Corporation and
             Jaymark, Inc.
10.14(3)     Amended and Restated Sublease Agreement, dated February 17, 2000 between Jaycor,
             Inc. and JNI Corporation
10.15(3)     First Amendment to Lease and Consent to Sublease, dated April 4, 2000 between
             CarrAmerica Realty, L.P., Jaycor, Inc. and JNI Corporation
10.16(4)     Lease dated, July 11, 2000 between Pacific Plaza Carmel Valley LLC and JNI
             Corporation (Building A)
10.17(4)     Lease dated, July 11, 2000 between Pacific Plaza Carmel Valley LLC and JNI
             Corporation (Building B)
10.18(5)     Asset Acquisition and Plan of Reorganization, dated July 24, 2000, among JNI
             Corporation, Jaymark, Inc., Jaycor, Inc. and California Tube Labratories, Inc.
10.19(6)     Severance Agreement, dated September 13, 2000, between JNI Corporation and Terry
             M. Flanagan
10.20(6)     Amendment No. 1 to Severance and Change of Control Agreement, dated September 14,
             2000, between JNI Corporation and Gloria Purdy
10.21(1)     Loan Agreement and Promissory Note between JNI and Neal Waddington, dated January
             9, 2001
23.1(1)      Consent of PricewaterhouseCoopers LLP

</TABLE>
-------------------
(1)  Filed herewith.

(2)  Incorporated by reference to the Registration Statement on Form S-1 filed
     by JNI Corporation (File No.333-86501).

(3)  Incorporated by reference to the Quarterly Report on Form 10-Q filed by JNI
     for the quarter ended March 31, 2000.

<PAGE>


(4)  Incorporated by reference to the Quarterly Report on Form 10-Q filed by JNI
     for the quarter ended June 30, 2000.

(5)  Incorporated by reference to the Current Report on Form 8-K filed by JNI on
     August 4, 2000.

(6)  Incorporated by reference to the Registration Statement on Form S-1 filed
     by JNI Corporation (File No.333-45934).

(7)  Incorporated by reference to the Registration Statement on Form S-8 filed
     by JNI on September 14, 2000 (File No. 333-45752)