ENGINEERING

SAN DIEGO, CA -- nStor Technologies, Inc. (Amex: NSO), a leader in the data storage marketplace, 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. "Through our reorganization efforts, we have reduced our operating expenses by approximately 50% and will realize the full results beginning in the third quarter," stated Tom Makmann, president, nStor Technologies. "With an anticipated increase in revenues from our enhanced marketing efforts, nStor is positioned to achieve improved results for the balance of 2001." Mr. Makmann, a 30-year industry veteran, was appointed President and COO in June 2001. Prior to his appointment, he served as nStor's Vice President of Business Development. Mr. Makmann has held senior management positions in various high tech start-ups and turnarounds in the storage hardware, software and video industries. For further information visit www.nstor.com