NSO Nstor Technologies

30 Percent Sequential Revenue Growth CARLSBAD, Calif., Aug. 12 /PRNewswire-FirstCall/ -- nStor Technologies, Inc. (AMEX:NSO), an innovative developer of storage networking solutions, today announced operating results for the second quarter and six months ended June 30, 2005. During the second quarter, the company's revenues rose by $2,116,000 or 105% as compared to the corresponding quarter of 2004 and $944,000 or 30 percent from the first quarter of 2005. The company's second quarter net loss available to common stock was $2,139,000 or $.01 per common share on revenues of $4,125,000 compared to a net loss of $1,802,000 or $.01 per common share on revenues of $2,009,000 during the corresponding quarter of 2004. Second quarter bookings and quarter end backlog approximated $5 million and $2.9 million, respectively, again, representing the highest quarterly bookings and quarter end backlog recorded in the company's recent history. These orders are largely scheduled to ship during the third quarter of 2005. For the six months, revenues increased by $3,049,000 or 72% as compared to the corresponding period of 2004. The company's six month net loss available to common stock was $4,451,000 or $.03 per common share on revenues of $7,306,000 compared to a net loss of $3,938,000 or $.02 per common share on revenues of $4,257,000 during the corresponding six month period of 2004. "Our second quarter results demonstrate our continued progress in executing against our strategic plan, as we continue to grow our product portfolio and build on a solid customer base. During 2005, we have experienced a higher volume of orders from existing major customers and have begun significant volume shipments to several new customers," noted Todd Gresham, nStor's president and CEO. He further commented that the pending merger agreement with Xyratex is complementary to nStor's business initiatives and brings additional value to its customers, providing resources, volume procurement capabilities and customer acquisition possibilities. Mr. Gresham added, "This transaction allows us to better serve our customers, giving us the means to significantly expand our market reach and our product development capabilities by providing the financial stability that will afford us the opportunities in this dynamic market segment." Mr. Gresham explained, "Xyratex's tender offer commenced on August 5, 2004 and expires on September 2, 2005 and the company expects the merger to become final shortly thereafter." Business Highlights * Recently introduced, OneStor(TM) family of industry leading next generation Fibre/SAS/SATA products * Earns industry attention and contribution to strong revenue growth * Market leading SAS product shipments * Initiation of product cost reduction programs * Strong sales of new and traditional offerings to existing and new customers * Announcement of pending acquisition agreement by Xyratex Ltd. (NASDAQ:XRTX) allowing for access to funding, technology and scale About nStor Technologies, Inc. Headquartered in Carlsbad, Calif., nStor Technologies, Inc. (AMEX:NSO) is a developer of data storage solutions that are ideally suited for both large enterprises as well as small to mid-sized businesses. The Company's flagship controller technology and StorView software form the foundation for the OneStor and NexStor family of turnkey solutions that support today's most popular operating environments. Designed for storage-intensive environments and mission-critical applications, nStor's products are offered in various architectures including Fibre Channel, SAS, SCSI and SATA and are focused on addressing customers' business needs and applications. The Company markets its storage solutions through a global network of OEM partners and solutions integrators. For more information, visit http://www.nstor.com/. This press release includes statements that may constitute "forward- looking" statements, usually containing the words "believe," "estimated," "project," "expect," "anticipate," or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, insufficient funding, the Company's inability to increase sales to current customers and to expand its customer base, continued acceptance of the Company's products in the marketplace, the Company's inability to improve the gross margin on its products, competitive factors, dependence upon third-party vendors, outcome of litigation, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release. nStor and StorView are registered trademarks of nStor Technologies, Inc. nStor Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Sales $4,125 $2,009 $7,306 $4,257 Cost of sales 3,040 1,443 5,302 3,184 Gross margin 1,085 566 2,004 1,073 Operating expenses: Selling, general and administrative 2,002 1,467 4,009 2,744 Research and development 976 685 2,088 1,696 Depreciation 61 51 123 103 Total operating expenses 3,039 2,203 6,220 4,543 Loss from operations (1,954) (1,637) (4,216) (3,470) Interest expense, net (113) (238) (162) (412) Loss from continuing operations (2,067) (1,875) (4,378) (3,882) Income (loss) from discontinued operations 41 73 138 (56) Net loss before preferred stock dividends (2,026) (1,802) (4,240) (3,938) Preferred stock dividends (113) -- (211) -- Net loss available to common stock $(2,139) $(1,802) $(4,451) $(3,938) Basic and diluted net loss per common share: Loss from continuing operations $(.01) $(.01) $(.03) $(.02) Income (loss) from discontinued operations .00 .00 .00 (.00) $(.01) $(.01) $(.03) $(.02) Weighted average number of common shares considered outstanding, basic and diluted 165,098 165,070 165,098 165,078 nStor Technologies, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands) June 30, December 31, 2005 2004 (unaudited) ASSETS Current assets: Cash and cash equivalents $58 $1,272 Accounts receivable, net 1,403 1,805 Note receivable -- 626 Inventories 1,548 1,882 Prepaid expenses and other 297 295 Total current assets 3,306 5,880 Property and equipment, net 453 512 Goodwill, net 1,989 1,989 Note receivable -- 417 $5,748 $8,798 LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Borrowings: Affiliate $3,725 $9,100 Other 325 -- Accounts payable and other 3,544 2,543 Total current liabilities 7,594 11,643 Long-term debt -- 3,650 Total liabilities 7,594 15,293 Shareholders' deficit (1,846) (6,495) $5,748 $8,798 DATASOURCE: nStor Technologies, Inc. CONTACT: Veena Raman of nStor Technologies, Inc., +1-760-683-2500, Web site: http://www.nstor.com/

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