NSO Nstor Technologies

nStor Technologies Reports Second Quarter Results Company Revenues Grow 40 Percent Year-Over-Year CARLSBAD, Calif., Aug. 16 /PRNewswire-FirstCall/ -- nStor Technologies, Inc. (AMEX:NSO) today announced operating results for the second quarter and six-months ended June 30, 2004. The Company, through its wholly owned subsidiary, nStor Corporation, develops data storage solutions that are designed for the small and medium-size business markets. During the second quarter and six-months ending June 30, 2004, the Company's data storage solutions revenues rose by $391,000 or 24 percent and $1,453,000 or 52 percent, respectively, compared to last year's corresponding periods. Revenues from Stonehouse Technologies, the Company's telemanagement solutions subsidiary, increased by 62 percent and 53 percent, respectively. The Company's second quarter net loss was $1,802,000 or $.01 per common share, on revenues of $3,906,000, compared to a net loss of $1,587,000 or $.01 per common share, on revenues of $2,791,000 during the second quarter of 2003. The six-month net loss was $3,938,000 or $.02 per common share, on revenues of $7,808,000, compared to a net loss of $3,222,000 or $.02 per common share, on revenues of $5,125,000 during the corresponding period in 2003. According to nStor's president and CEO, Todd Gresham, the continuing acceptance of the Company's 4700 series SATA products has resulted in a 90 percent increase in new product sales this quarter as compared to first quarter 2004. Gresham continued to state, "We've added a number of strategic customers in the video, medical and geophysical markets, which reinforces the strength of our SATA systems. In addition, we continue to sign up new OEM and Solutions Integrator partners to meet the escalating demand for powerful, reliable and economical storage solutions." nStor has increased its total customer base by more than 35 percent over the past year. "We are well positioned to execute on our plans and achieve significant traction for our entire portfolio of highly integrated systems, resulting in continued growth through the second half of the year," concluded Gresham. Jack Jaiven, the Company's treasurer and interim CFO, further addressed the Company's net loss, which he attributed to increased selling, marketing, management transition and other operating costs as the Company ramps up in anticipation of strong revenue growth. Jaiven added, "This remains consistent with adhering to our strategy and continuing to execute on our plans in addressing the needs of the small to mid-size business market." About nStor Technologies, Inc. Headquartered in Carlsbad, California, nStor Technologies, Inc. operates in two business segments: nStor Corporation develops integrated data storage solutions that are ideally suited for small and mid-tier enterprises and small-to-medium business applications. The company's flagship controller technology and StorView management software form the foundation for the NexStor family of turnkey solutions that support a wide range of operating systems. Designed for storage-intensive environments and mission-critical applications, nStor's products are available in Fibre Channel, SCSI and SATA configurations. The company markets its storage solutions through leading OEM partners and a global network of systems integrators. For more information, visit http://www.nstor.com/. Stonehouse Technologies, Inc., headquartered in Dallas, Texas, is a provider of telecommunication software and services that help large enterprises and state and local governments manage their communications expenses, assets and processes. These solutions include a suite of modular applications and consulting services, which allow enterprises to manage voice, data and wireless services by providing a systematic approach to automate order processing, monitor expenses, manage vendor invoices, track asset inventory and allocate costs. Additional information can be found by visiting Stonehouse's web site at http://www.stonehouse.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, 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, insufficient funding 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 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, 2004 2003 2004 2003 Sales $3,906 $2,791 $7,808 $5,125 Cost of sales 2,624 1,624 5,394 3,097 Gross margin 1,282 1,167 2,414 2,028 Operating expenses: Selling, general and administrative 1,957 1,329 3,869 2,668 Research and development 685 622 1,696 1,212 Stock-based compensation (1) 41 542 44 775 Depreciation and amortization 155 123 315 245 Total operating expenses 2,838 2,616 5,924 4,900 Loss from operations (1,556) (1,449) (3,510) (2,872) Interest expense (246) (158) (432) (398) Other income, net -- 20 4 48 Net loss $(1,802) $(1,587) $(3,938) $(3,222) Basic and diluted net loss per common share $(.01) $(.01) $(.02) $(.02) Weighted average number of common shares considered outstanding, basic and diluted 165,070 155,301 165,078 148,969 (1) If stock-based compensation were not reported separately, this non-cash compensation expense would be included in selling, general and administrative. nStor Technologies, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands) June 30, December 31, 2004 2003 (unaudited) ASSETS Current assets: Cash and cash equivalents $472 $203 Accounts receivable, net 1,842 1,371 Inventories 1,340 1,589 Prepaid expenses and other 389 358 Total current assets 4,043 3,521 Property and equipment, net 581 443 Goodwill and other intangible assets, net 11,008 11,256 $15,632 $15,220 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Borrowings: Affiliate $10,744 $6,941 Other 858 896 Accounts payable and other 3,424 2,944 Deferred revenue 1,230 1,178 Total current liabilities 16,256 11,959 Shareholders' equity (624) 3,261 $15,632 $15,220 DATASOURCE: nStor Technologies, Inc. CONTACT: Jack Jaiven - Treasurer of nStor Technologies, Inc., +1-760-683-2500; or Michael Porter, President/Investor Relations, or Cheryl Schneider, V.P./Investor Relations, or Jeff Myhre, V.P./Editorial, all of Porter, Le Vay & Rose, Inc., +1-212-564-4700, for nStor Technologies, Inc. Web site: http://www.stonehouse.com/ Web site: http://www.nstor.com/

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