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nStor Reports Status of Proposed Financing

nStor Technologies, Inc. today announced that in connection with the previously announced $16.4 million financing proposal, nStor's Board of Directors and the investor, Maurice Halperin, have jointly commenced negotiations for modifying the terms of the proposal. Mr. Halperin, a current investor in nStor and retired executive, has agreed to extend the deadline for acceptance of the offer during the period that the negotiations continue. As part of the negotiations, a company controlled by Mr. Halperin has provided nStor with interim financing in the form of a $3.1 million, short-term 8% loan.

In addition, the Board has elected Mr. Halperin as Chairman of the Board, replacing current Chairman H. Irwin Levy, who has become Vice Chairman and will continue to serve as Chief Executive Officer.

The company also announced that for the second quarter 2001, its net loss applicable to common stock was $4.3 million, or $0.12 per share, on revenues of $4 million, compared to a net loss of $3.1 million, or $0.10 per share, on revenues of $10.9 million for the second quarter of 2000. Net loss applicable to common stock for the first six months of 2001 was $8 million, or $0.22 per share, on revenues of $10.2 million, compared to a net loss of $649,000, or $0.02 per share, on revenues of $23.4 million for the same period one year earlier. The 2000 six months results included a one-time $5.6 million gain on the sale of certain assets. Results for the 2001 periods include an extraordinary loss on debt extinguishments of $362,000, or $0.01 per share.