CIPRICO INC, 424B1, 1996-05-31

CIPRICO INC
424B1, 1996-05-31
COMPUTER COMMUNICATIONS EQUIPMENT

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<PAGE> 1

PROSPECTUS

1,500,000 Shares
CIPRICO logo
Common Stock
------------------------

All of the 1,500,000 shares of Common Stock offered hereby are being sold
by Ciprico Inc. ("Ciprico" or the "Company"). The Company's Common Stock is
traded on the Nasdaq National Market under the symbol "CPCI." On May 30, 1996,
the last reported sale price for the Company's Common Stock on the Nasdaq
National Market was $24.750 per share. See "Price Range of Common Stock."
------------------------

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share......................... $22.000 $1.265 $20.735
- -------------------------------------------------------------------------------------------------
Total(3).......................... $33,000,000 $1,897,500 $31,102,500
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company, estimated at $330,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
225,000 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Company will be
$37,950,000, $2,182,125, and $35,767,875, respectively. See "Underwriting."
------------------------

The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them and subject to the right of the Underwriters to reject any
order in whole or in part. It is expected that delivery of the shares will be
made in New York, New York on or about June 5, 1996.
------------------------

Needham & Company, Inc. Dain Bosworth
Incorporated

The date of this Prospectus is May 30, 1996
<PAGE> 2

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE> 3

HIGH SPEED DISK ARRAYS FOR VISUAL COMPUTING MARKETS.

FILM AND VIDEO

[PHOTOGRAPH OF COMPUTER-GENERATED FIGURE]

- Real-time
uncompressed storage
and playback
- Format independent
- Single array capacity
of over 20 minutes
- Built-in redundancy
features provide
continuous operation
to keep production
schedules on track

SATELLITE TELEMETRY

[PHOTOGRAPH OF SATELLITE IN ORBIT]

- Fast transfer
rates for data
capture, image
extraction and
mission planning
- Flexible capacities,
from gigabytes
to terabytes
- Fault-tolerant
features for
continuous
system and data
availability

BROADCAST AND
VIDEO SERVICES

[PHOTOGRAPH OF VIDEO CAMERA OPERATOR]

- Supports many video
streams
- No performance
degradation after
drive failure
- Scalable capacity
- Multiple redundancy
features
<PAGE> 4

MEDICAL IMAGING

[PHOTOGRAPH OF CT SCAN
OF BRAIN LOBE]

- Real-time image
acquisition and
display
- Scalable capacities
- System and data
availability
- Best price/performance
value available

DIGITAL PREPRESS

[PHOTOGRAPH OF DIGITAL IMAGE OF BUTTERFLY]

- High performance
to retrieve
data/image files
- Large storage
capacity increases
print flexibility
- Availability
(up-time) features
for on-time
schedules

OIL AND GAS

[PHOTOGRAPH OF CROSS-SECTION SCHEMATIC OF OFFSHORE OIL EXPLORATION RIG]

- High speed playback
of 3D images
- Storage capacities
from 8 GB
to terabytes
of seismic data
- Hot swap disk
drives and power
supplies for
uninterrupted data
availability

[ABOVE-DESCRIBED PHOTOGRAPHS SURROUND SKETCH OF IMAGING WORKSTATION
WITH A CIPRICO DISK ARRAY CONNECTION]

20, 40 or 100 MB/sec.
Interface
Ciprico-Designed Controller
5 or 9 Hot Swap Disk
Drives

CIPRICO LOGO
<PAGE> 5

PROSPECTUS SUMMARY

This summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus (i) assumes no exercise
of the Underwriters' over-allotment option and (ii) gives effect to a 3-for-2
stock split of the Common Stock distributed on April 12, 1996.

THE COMPANY

Ciprico designs, manufactures, markets and services high performance RAID
disk arrays that provide storage solutions for the domestic and international
visual computing markets. Ciprico's RAID (Redundant Array of Independent Disks)
products typically consist of five or nine industry standard disk drives linked
together by proprietary hardware, firmware and software. The array of disks
performs as one large disk drive with superior performance characteristics
compared to a single disk drive. Ciprico's RAID disk arrays are designed to
provide fast data transfer rates of up to 100 megabytes per second, redundancy
to ensure the integrity of the stored data, and large storage capacities of up
to 72 gigabytes. All of the Company's disk arrays transfer data using industry
standard data transfer protocols which enable them to interface with the primary
open architecture computing platforms found in the visual computing market
designed by Silicon Graphics, Inc. ("Silicon Graphics"), Sun Microsystems, Inc.,
Hewlett-Packard Company, IBM Corporation and Apple Computer, Inc.

Visual computing refers to the digital representation and complex image
processing of film, video, graphics, photographs, animation, special effects,
three dimensional images and other images. Like many other computer
applications, the trend in visual computing is toward random access, digital
data storage and away from traditional analog tape storage or film methods.
Digital image processing offers numerous benefits when compared to traditional
analog and film methods, including the ability to achieve higher quality images,
process and edit data faster, access data remotely over networks, and create
images and special effects not previously possible. Based on industry sources,
the Company believes that sales of digital image processing equipment into the
film/video production market segment of the visual computing market have grown
from less than $1 million in 1991 to approximately $900 million in 1995, with
sales projected to continue to grow at an average annual rate of 45% over the
next several years.

The Company's disk arrays, which use a RAID-3 storage methodology, are
designed to meet the demanding data transfer rate, storage capacity and data
redundancy needs of the visual computing market. The Company's targeted market
segments are film/video production, satellite telemetry, oil and gas
exploration, medical imaging, digital prepress, and broadcast and video
services. RAID-3 is generally considered the optimal RAID methodology for visual
computing applications because it achieves the fastest data transfer rates for
sequentially stored data such as graphics and video, while providing large
storage capacities and data redundancy. A primary benefit of RAID-3 is that no
decrease in performance results from the failure of a disk drive, a feature
which is critical to real-time visual computing applications.

Ciprico has its origins as a manufacturer of tape and disk controller board
products in the 1980s. The Company successfully leveraged its controller board
expertise by introducing its first RAID-3 disk array in 1990 and now offers four
series of RAID-3 disk arrays. Since 1990, Ciprico has focused on designing
leading edge, high performance disk arrays specifically for use in the Company's
targeted market segments, delivering high quality service through extensive
customer training and support programs, and building a sales organization
capable of supporting increased demand for the Company's products. Ciprico was
the first RAID-3 disk array manufacturer to achieve real-time playback of
uncompressed video data, the first to receive ISO 9001 certification, the first
and only to receive Silicon Graphics' "Gold Seal Approval," and the first to
introduce a RAID-3 Fibre Channel disk array.

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<PAGE> 6

Company with a competitive advantage in developing leading edge high performance
disk array products for its markets.

The Company was incorporated under the name Computer Products Corporation
in Minnesota in February 1978 and changed its name to Ciprico Inc. in May 1983,
and reincorporated in Delaware in January 1988. The Company's executive offices
are located at 2800 Campus Drive, Suite 60, Plymouth, Minnesota 55441 and its
telephone number is (612) 551-4000.

THE OFFERING

Common Stock Offered................. 1,500,000 shares

Common Stock Outstanding after this
Offering............................. 4,987,525 shares(1)

Use of Proceeds...................... Working capital and general corporate
purposes.
See "Use of Proceeds."

Nasdaq National Market Symbol........ CPCI

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
--------------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales..................... $10,675 $13,415 $ 9,214 $13,121 $15,966 $6,776 $12,783
Gross profit.................. 6,234 7,219 4,604 6,273 7,468 3,108 6,075
Earnings (loss) from
operations................. (749) 24 (2,026) (422) 106 (164) 1,542
Earnings (loss) before income
taxes...................... (387) 460 (1,754) (300) 424 (18) 1,775
Net earnings (loss)........... $ (376) $ 427 $(1,778) $ (321) $ 396 $ (27) $ 1,615
Earnings (loss) per common
share...................... $ (0.12) $ 0.14 $ (0.58) $ (0.10) $ 0.12 $(0.01) $ 0.43
Weighted average number of
common and common
equivalent shares
outstanding................ 3,010 3,125 3,068 3,094 3,394 3,164 3,776
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents........................................... $ 6,041 $ 36,814
Working capital..................................................... 8,026 38,799
Total assets........................................................ 13,964 44,737
Long-term installments of obligations under capital leases.......... 22 22
Total stockholders' equity.......................................... 9,468 40,241
</TABLE>

- ------------
(1) Based on the number of shares outstanding as of March 31, 1996. Does not
include 596,539 shares issuable upon exercise of outstanding stock options.

(2) Adjusted to reflect the sale of the 1,500,000 shares of Common Stock offered
by the Company hereby at a public offering price of $22.00 per share, and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

The discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business," as well as those discussed elsewhere
in this Prospectus.

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<PAGE> 7

RISK FACTORS

In addition to the other information in this Prospectus or incorporated
herein by reference, the following risk factors should be considered carefully
in evaluating the Company and its business before purchasing the shares offered
in this Prospectus.

DEPENDENCE ON RAID DISK ARRAY PRODUCTS

Sales of the Company's RAID disk array products accounted for 65.0% of the
Company's net sales in fiscal 1994, 73.8% in fiscal 1995 and 86.7% in the first
six months of fiscal 1996. The Company's RAID disk array products are used
principally by the visual computing market and the success of the Company is
dependent in part upon the growth of this market and of applications in this
market requiring the performance attributes of the Company's disk array
products. There can be no assurance that another technology will not replace
RAID technology in the disk array marketplace or that there will be widespread
acceptance or continuing growth of the use of RAID disk array products in
general, or the Company's products in particular, in the visual computing
market.

UNCERTAINTY OF MARKET ACCEPTANCE BEYOND FILM/VIDEO APPLICATIONS

Currently, the Company has targeted six specific segments of the visual
computing market. Certain of these segments, most notably the film/video
production segment, have been quicker than others to embrace RAID technology and
the Company's disk array products. The Company expects in excess of a third of
its fiscal 1996 revenues to be derived from the film/video production segment of
the visual computing market. Continued success in the film/video production
market segment is critical to the Company's success in the foreseeable future.
There can be no assurance that the Company will be able to achieve substantial
market acceptance in the other identified segments of the visual computing
market. See "Business--Visual Computing Market Segments."

DEPENDENCE ON SILICON GRAPHICS RELATIONSHIP

The Company's relationship with Silicon Graphics, a leading developer of
high performance visual computing systems, has been instrumental to the
Company's success even though it has no development or marketing agreements with
Silicon Graphics. The Company's marketing and engineering departments have
worked closely with Silicon Graphics, focusing a portion of their disk array
product development efforts on the connectivity and performance with Silicon
Graphics computer platforms. While the Company's RAID disk arrays are compatible
with other computer platforms, sales of products developed by the Company
specifically designed for Silicon Graphics platforms accounted for approximately
half of the Company's disk array sales during the past 18 months. There can be
no assurance that Silicon Graphics' leadership position in the visual computing
market will continue or that the close working relationship between Silicon
Graphics and the Company will continue or that the Company can develop
comparable working relationships with other visual computing system developers.
A decrease in the demand for Silicon Graphics platforms, a deterioration in the
Company's relationship with Silicon Graphics, or the development of
relationships between Silicon Graphics and other disk array suppliers could have
a material adverse effect on the Company's business and operating results. In
addition, there can be no assurance that other disk array manufacturers might
not create interface technology compatible with Silicon Graphics platforms or
that Silicon Graphics might not develop its own interface that would allow
compatibility with other vendors of disk arrays. See "Business--Marketing and
Sales."

CUSTOMER CONCENTRATION

For the six-month period ended March 31, 1996, three customers, Sony
Trading International Corp. ("Sony"), Avid Technology, Inc. and R-Squared
Vanguard, accounted for 16.7%, 13.9% and 8.4% of the Company's net sales,
respectively. Two of these customers are new to the Company in the last 12
months. For fiscal 1995, no one customer accounted for more than 10% of the
Company's net sales but Eastman Kodak Company, Sony and Autometric Incorporated
collectively accounted for 22.8% of net sales. Net sales to

5
<PAGE> 8

customers outside the United States accounted for approximately 42.4% of net
sales in fiscal 1995 and 41.8% of net sales in the six-month period ended March
31, 1996. Sony accounted for approximately 40% of the Company's sales outside
the United States for the six-month period ended March 31, 1996. The Company has
no long-term purchase commitments from its customers and customers generally may
cancel their orders on 30 days' notice. Accordingly, there can be no assurance
that orders from existing customers, including the Company's principal
customers, will continue at their historical levels, or that the Company will be
able to obtain orders from new customers. In addition, there can be no assurance
that existing customers, including the Company's principal customers, will not
develop their own storage solutions internally and as a result reduce or
eliminate purchases from the Company. Loss of one or more of the Company's
current customers, particularly a principal customer, or cancellation or
rescheduling of orders already placed, could materially and adversely affect the
Company's operating results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

COMPETITION

The market for all levels of RAID disk arrays is highly competitive. The
Company competes with other disk array manufacturers, with manufacturers of
proprietary integrated computer systems and with systems integrators that market
computer systems which contain general purpose RAID disk arrays. Such
competitors often offer systems at lower prices than those offered by the
Company and the Company must compete on the basis of product performance in
specific applications. Many of these competitors have greater financial,
manufacturing and marketing resources than those of the Company.

The Company's ability to compete successfully depends upon its ability to
continue to develop high performance products that obtain market acceptance and
can be sold at increasingly competitive prices. Although the Company believes
that its RAID-3 disk array products have certain competitive advantages, there
can be no assurance that the Company will be able to compete successfully in the
future or that other companies may not develop products with greater performance
and thus reduce the demand for the Company's products. Furthermore, as more
companies enter the RAID disk array market, the Company may encounter increased
price competition for such products which could materially and adversely affect
the Company's operating results. Also, the Company's OEM customers and other
manufacturers could develop their own disk arrays or could integrate competitive
RAID disk arrays into their systems rather than the Company's products, which
could materially and adversely affect the Company's operating results. See
"Business--Competition."

NEW PRODUCTS AND TECHNOLOGICAL CHANGES

The markets for the Company's products are characterized by rapidly
changing technology, evolving industry standards and relatively short product
life cycles. The Company's ability to compete successfully will depend on its
ability to enhance its existing products and introduce new products on a timely
and cost-effective basis. There can be no assurance that the Company will be
successful in introducing such new products or enhancements. Delays in product
enhancements and developments or the failure of the Company's new products or
enhancements to gain market acceptance would have an adverse effect on the
Company's business and operating results. In addition, there can be no assurance
that new products or technologies developed by others, or the emergence of new
industry standards, will not render the Company's products or technologies
noncompetitive or obsolete. Despite testing, new products may be affected by
quality, reliability or interoperability problems, which could result in
returns, delays in collecting accounts receivable, unexpected service or
warranty expenses, reduced orders and a decline in the Company's competitive
position. See "Business--Products" and "Business--Research and Development."

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The Company has experienced and expects to continue to experience
significant fluctuations in its quarterly operating results due to a variety of
factors, including the cost of disk drives, the timing of receipt and shipment
of significant orders, the cost and timing of new product releases and product
enhancements by the Company and its competitors, variations in the Company's
product mix, market acceptance of new or enhanced versions of the Company's
products, changes in pricing and promotion policies by the Company and

6
<PAGE> 9

its competitors and general economic conditions. Quarterly sales depend on the
volume and timing of orders received during a quarter, which are difficult to
forecast. The Company's expenses during a quarter are based, in part, on its
expectations as to customer demand for its products. Demand falling below
expectations in any quarter could have a material adverse effect on operating
results. In addition, the need for continued expenditures for research and
development, marketing and customer service and support would make it difficult
for the Company to reduce its expenses in a particular quarter if the Company's
sales forecasts for such quarter were not met. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

SUPPLIER AND COMPONENT DEPENDENCE

The Company depends heavily on its suppliers to provide high quality
materials on a timely basis and at reasonable prices. Although many of the
components for the Company's products are available from numerous sources at
competitive prices, certain of the disk drives used in its products are
presently purchased by the Company from a single source. Furthermore, because of
increased industry demand for many of those components, their manufacturers may,
from time to time, not be able to make delivery on orders on a timely basis. In
addition, manufacturers of components on which the Company relies may choose,
for numerous reasons, not to continue to make those components, or the next
generation of those components, available to the Company.

The Company has no long-term supply contracts. There can be no assurance
that the Company will be able to obtain, on a timely basis, all of the
components it requires. If the Company cannot obtain essential components as
required, the Company could be unable to meet demand for its products, thereby
materially adversely affecting its operating results and allowing competitors to
gain market share. In addition, scarcity of such components could result in cost
increases and adversely affect the Company's operating results. See
"Business--Manufacturing."

SUSTAINING AND MANAGING GROWTH

The Company is currently undergoing a period of rapid growth and there can
be no assurance that such growth can be sustained or managed successfully. This
growth has resulted in, and is expected to continue to create, the need for
additional capacity, new and increased responsibilities for management
personnel, and added pressures on the Company's operating and financial systems.
The Company's ability to manage future growth effectively and accomplish its
overall goals will depend on its ability to hire and retain qualified
management, sales and technical personnel. Competition for such personnel in the
Company's industry is high. The Company has commenced a number of programs in
response to its growth, including the expansion of its manufacturing space and
the upgrading of its internal computer systems. If the Company is unable to
manage growth effectively or hire and retain qualified personnel, the Company's
business and operating results could be materially and adversely affected. See
"Use of Proceeds," "Business--Employees" and "Business--Facilities."

INTERNATIONAL OPERATIONS

Net sales to customers outside the United States accounted for
approximately 42.4% of net sales in fiscal 1995 and 41.8% of net sales in the
six-month period ended March 31, 1996. The Company expects that international
sales will continue to represent a significant portion of the Company's net
sales. Sales to customers outside the United States are subject to risks,
including the imposition of governmental controls, the need to comply with a
wide variety of foreign and United States export laws, political and economic
instability, trade restrictions, changes in tariffs and taxes, longer payment
cycles typically associated with international sales, and the greater difficulty
of administering business overseas. In addition, fluctuations in the value of
foreign currencies relative to the U.S. dollar could make the Company's products
less price competitive and, if the Company in the future denominates any of its
sales in foreign currencies, losses could result from foreign currency
transactions. Furthermore, although the Company endeavors to meet technical
standards established by foreign regulatory bodies, there can be no assurance
that the Company will be able to comply with changes in foreign standards in the
future. The inability of the Company to design products to

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<PAGE> 10

comply with foreign standards could have a material adverse effect on the
Company. In addition, the laws of certain foreign countries may not protect the
Company's intellectual property to the same extent as do the laws of the United
States.

PROPRIETARY TECHNOLOGY CLAIMS

Ciprico believes its extensive disk array expertise, proprietary
technology, and close customer and vendor relationships provide the Company with
a competitive advantage in developing leading edge high performance disk array
products. However, the Company does not presently hold any patents applicable to
its RAID disk array products and relies on a combination of trade secret,
copyright and trademark laws and employee and third-party nondisclosure
agreements to protect its intellectual property rights. There can be no
assurance that the steps taken by the Company to protect its rights will be
adequate to prevent misappropriation of the Company's technology or to preclude
competitors from developing products with features similar to the Company's
products. Furthermore, there can be no assurance that, in the future, third
parties will not assert infringement claims against the Company or with respect
to its products for which the Company has indemnified certain of its customers.
Asserting the Company's rights or defending against third-party claims could
involve substantial expense, thus materially and adversely affecting the
Company's operating results. In the event a third party were successful in a
claim that one of the Company's products infringed its proprietary rights, the
Company may have to pay substantial damages or royalties, remove that product
from the marketplace or expend substantial amounts in order to modify the
product so that it no longer infringes such proprietary rights, any of which
could have a material adverse effect on its operating results. See
"Business--Proprietary Technology."

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant degree upon the continued
contributions of key personnel, many of whom would be difficult to replace and
are not subject to employment or noncompetition agreements. If any of these
employees were to leave the Company, the Company's operating results could be
materially adversely affected. The Company believes its future success will also
depend, in large part, upon its ability to hire and retain highly skilled
engineering, managerial, sales and marketing personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
successful in attracting and retaining such personnel. See "Business--Employees"
and "Management."

POSSIBLE VOLATILITY OF STOCK PRICE

The Company's Common Stock has experienced in the past, and could
experience in the future, substantial price volatility as a result of a number
of factors, including quarter to quarter variations in the actual or anticipated
financial results of the Company, announcements by the Company, its competitors
or its customers, government regulations, and developments in the industry. In
addition, the stock market has experienced extreme price and volume fluctuations
which have affected the market price of many technology companies in particular
and which have at times been unrelated to the operating performance of the
specific companies whose stock is traded. Broad market fluctuations and general
economic conditions may adversely affect the market price of the Company's
Common Stock. See "Price Range of Common Stock" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

FUTURE ACQUISITIONS

The Company may pursue acquisitions of complementary technologies, product
lines or businesses. Future acquisitions by the Company could result in the use
of proceeds of this offering, dilutive issuances of equity securities, and the
incurrence of additional debt and amortization expenses related to goodwill and
intangible assets that could adversely affect the Company's operating results.
In addition, gross margins of acquired products, necessary product or technology
development expenditures and other factors that may be involved in any such
acquired business could result in dilution to the Company's earnings.
Acquisitions also may involve numerous other risks, including difficulties in
the assimilation of the operations and products of the acquired business,
dependence on new products and processes, the diversion of management's
attention

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<PAGE> 11

from other business concerns, risks of entering markets in which the Company has
no or limited direct prior experience, the potential loss of key employees of
the acquired business and difficulties in attracting additional key employees
necessary to absorb added management responsibilities. Although there are
currently no agreements with respect to any acquisition, no assurance can be
given as to the effect of any future acquisition on the Company's business or
operating results.

CONTROL BY PRINCIPAL SHAREHOLDER

Upon completion of this offering, Perkins Capital Management, Inc.
("Perkins"), an investment management firm, will beneficially own 28.0% of the
Company's outstanding Common Stock. As a result, Perkins may be able to control
matters requiring approval by the shareholders of the Company, including the
election of Directors and the amendment of the Company's Certificate of
Incorporation. As a shareholder, Perkins will not be prohibited from acting in
its own interest in respect of, among other things, the voting or disposition of
its shares of Common Stock. Perkins is not subject to any agreement restricting
the sale of the Company shares it beneficially holds. Sales of substantial
amounts of shares of Common Stock in the public market after the offering hereby
could adversely affect the market price of the Company's Common Stock. See
"Principal Shareholders."

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of Preferred Stock. The Company's Board of Directors has the
power to issue any or all of the shares of Preferred Stock, including the
authority to establish one or more classes or series and to fix the powers,
preferences, rights and limitations of such class or series, without seeking
shareholder approval. Furthermore, as a Delaware corporation, the Company is
subject to Section 203 of the Delaware General Corporation Law regarding
"business combinations." This section and the power to issue Preferred Stock
may, in certain circumstances, deter or discourage takeover attempts and other
changes in control of the Company not approved by management and the Board of
Directors. As a result, the Company's shareholders may lose opportunities to
dispose of their shares at the higher prices generally available in takeover
attempts or that may be available under a merger proposal. In addition, the
statutory provision and the existence of Preferred Stock may have the effect of
permitting the Company's current management to retain its position and place it
in a better position to resist changes that shareholders may wish to make if
they are dissatisfied with the conduct of the business. See "Description of
Securities--State Law Provisions with Potential Anti-Takeover Effect."

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<PAGE> 12

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered to the public hereby are estimated to be $30.8 million,
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company.

The Company intends to use the net proceeds for general corporate purposes,
including additions to working capital and for capital expenditures. The Company
expects to use approximately $1.2 million to improve its internal computer
systems and software and approximately $300,000 to fund expansion of the
manufacturing space at its existing facility. A portion of the net proceeds may
also be used to acquire technologies, products or businesses that complement the
Company's current business, as such opportunities may arise. Currently, there
are no commitments or agreements with respect to any such acquisitions. Pending
their use, the proceeds will be invested in short-term, United States Government
or investment grade interest-bearing securities.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock trades on the Nasdaq National Market under the
symbol "CPCI." The following table sets forth for the periods indicated the high
and low sales prices for the Common Stock as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1994
First Quarter.......................................................... $ 3.84 $ 2.83
Second Quarter......................................................... 4.34 2.83
Third Quarter.......................................................... 3.34 2.83
Fourth Quarter......................................................... 3.17 2.33
FISCAL YEAR ENDED SEPTEMBER 30, 1995
First Quarter.......................................................... 3.42 2.58
Second Quarter......................................................... 4.00 3.00
Third Quarter.......................................................... 5.42 3.42
Fourth Quarter......................................................... 7.67 4.00
FISCAL YEAR ENDING SEPTEMBER 30, 1996
First Quarter.......................................................... 12.08 5.83
Second Quarter......................................................... 15.83 10.67
Third Quarter (through May 30, 1996)................................... 28.50 12.92
</TABLE>

On May 30, 1996, the last reported sale price for the Common Stock on the
Nasdaq National Market was $24.75 per share. As of May 30, 1996, there were
approximately 1,850 beneficial holders of the Common Stock.

DIVIDEND POLICY

The Company has not paid cash dividends on its Common Stock since fiscal
1991. The Company currently intends to retain any earnings for use in the
operation and expansion of its business and therefore does not anticipate paying
any cash dividends in the foreseeable future.

10
<PAGE> 13

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1996 and as adjusted to reflect the sale by the Company of the
1,500,000 shares offered hereby at a public offering price of $22.00 per share
and the anticipated application of the estimated net proceeds therefrom, after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company. See "Use of Proceeds."

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term installments of obligations under capital leases..... $ 22 $ 22
------ -------
Stockholders' equity:
Preferred Stock, $0.01 par value; 1,000,000 shares
authorized; none issued and outstanding................... -- --
Common Stock, $0.01 par value; 9,000,000 shares authorized;
3,487,525 shares issued and outstanding; 4,987,525 shares
issued and outstanding, as adjusted(1).................... 35 50
Additional paid-in capital................................... 6,843 37,601
Retained earnings............................................ 2,612 2,612
Accumulated translation adjustments.......................... (22) (22)
------ -------
Total stockholders' equity................................ 9,468 40,241
------ -------
Total capitalization.................................... $9,490 $40,263
====== =======
</TABLE>

- ------------
(1) Based on the number of shares outstanding as of March 31, 1996 and as
adjusted for the offering. Does not include 596,539 shares issuable upon
exercise of outstanding options.

11
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below for, and as of the
end of, each of the years in the five-year period ended September 30, 1995, are
derived from the Company's consolidated financial statements, which have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements as of September 30, 1994 and 1995, and for
each of the years in the three-year period ended September 30, 1995, and the
auditors' report thereon, are included elsewhere in this Prospectus. Selected
consolidated financial information as of March 31, 1996 and for the six-month
periods ended March 31, 1995 and 1996 have been derived from unaudited
consolidated financial statements of the Company included elsewhere herein and
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of results for such periods. The results for
the six months ended March 31, 1996 are not necessarily indicative of the
results to be expected for the entire fiscal year. The data set forth in the
following tables should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
CONSOLIDATED STATEMENTS OF --------------------------------------------------- ------------------
OPERATIONS DATA: 1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $10,675 $13,415 $ 9,214 $13,121 $15,966 $ 6,776 $12,783
Cost of sales............... 4,441 6,196 4,610 6,848 8,498 3,668 6,708
------- ------- ------- ------- ------- ------ -------
Gross profit........... 6,234 7,219 4,604 6,273 7,468 3,108 6,075
Sales and marketing
expenses.................. 4,043 4,225 3,593 3,693 4,130 1,807 2,329
General and administrative
expenses.................. 1,290 1,377 1,386 1,308 1,432 656 1,088
Research and development
expenses.................. 1,650 1,593 1,651 1,694 1,800 809 1,116
------- ------- ------- ------- ------- ------ -------
Earnings (loss) from
operations........... (749) 24 (2,026) (422) 106 (164) 1,542
Other income, net........... 362 436 272 122 318 146 233
------- ------- ------- ------- ------- ------ -------
Earnings (loss) before
income taxes......... (387) 460 (1,754) (300) 424 (18) 1,775
Income tax expense
(benefit)................. (11) 33 24 21 28 9 160
------- ------- ------- ------- ------- ------ -------
Net earnings (loss).... $ (376) $ 427 $(1,778) $ (321) $ 396 $ (27) $ 1,615
======= ======= ======= ======= ======= ====== =======
Earnings (loss) per
common share......... $ (0.12) $ 0.14 $ (0.58) $ (0.10) $ 0.12 $ (0.01) $ 0.43
======= ======= ======= ======= ======= ====== =======
Weighted average number
of common and common
equivalent shares
outstanding.......... 3,010 3,125 3,068 3,094 3,394 3,164 3,776
Dividends per share.... $ 0.13 -- -- -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
CONSOLIDATED BALANCE ----------------------------------------------------------- ---------
SHEETS DATA: 1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............. $ 2,816 $ 2,341 $ 1,826 $ 2,176 $ 3,425 $ 6,041
Marketable securities..... 1,323 1,426 1,311 1,300 1,267 --
Working capital........... 6,379 6,534 4,930 5,244 6,573 8,026
Total assets.............. 9,033 9,682 7,963 8,583 10,920 13,964
Long-term installments of
obligations under
capital leases.......... 16 -- 22 48 40 22
Total stockholders'
equity.................. 7,985 8,506 6,759 6,474 7,696 9,468
</TABLE>

12
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Ciprico has its origins as a manufacturer of tape and disk controller board
products in the 1980s. In the early 1990s, as the controller market weakened,
the Company transitioned its focus to the RAID-3 disk array markets. While the
Company continues to sell controller boards, it expects such sales to represent
a decreasing percentage of net sales in the future. The following table shows
Ciprico's transition from board-level controller products to disk arrays.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, SIX MONTHS
---------------------------------------------------- ENDED
1993 1994 1995 MARCH 31, 1996
-------------- -------------- -------------- --------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Disk Arrays..................... $ 1,737 18.9% $ 8,527 65.0% $11,787 73.8% $11,089 86.7%
Controllers..................... 7,006 76.0 4,138 31.5 3,186 20.0 1,299 10.2
Miscellaneous Products and
Services...................... 471 5.1 456 3.5 993 6.2 395 3.1
------- ----- ------- ----- ------- ----- ------- -----
$ 9,214 100.0% $13,121 100.0% $15,966 100.0% $12,783 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual operating results could differ materially from the operating results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this Prospectus.

RESULTS OF OPERATIONS

The following table sets forth certain consolidated statements of
operations data as a percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER SIX MONTHS ENDED
30, MARCH 31,
--------------------------- ----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of sales................................ 50.0 52.2 53.2 54.1 52.5
----- ----- ----- ----- -----
Gross profit............................. 50.0 47.8 46.8 45.9 47.5
Sales and marketing expenses.................. 39.0 28.1 25.8 26.7 18.2
General and administrative expenses........... 15.1 10.0 9.0 9.7 8.5
Research and development expenses............. 17.9 12.9 11.3 11.9 8.7
----- ----- ----- ----- -----
Earnings (loss) from operations.......... (22.0) (3.2) 0.7 (2.4) 12.1
Other income, net............................. 3.0 0.9 2.0 2.1 1.8
----- ----- ----- ----- -----
Earnings (loss) before income taxes...... (19.0) (2.3) 2.7 (0.3) 13.9
Income tax expense............................ 0.3 0.1 0.2 0.1 1.3
----- ----- ----- ----- -----
Net earnings (loss)...................... (19.3)% (2.4)% 2.5% (0.4)% 12.6%
===== ===== ===== ===== =====
</TABLE>

13
<PAGE> 16

SIX MONTHS ENDED MARCH 31, 1995 AND 1996

Net Sales. Net sales for the six-month period ended March 31, 1996
increased 88.7% to $12.8 million when compared to $6.8 million for the same
period last year. The increase in net sales was attributed to strong product
acceptance for disk arrays in the visual computing market and the film/video
production market segment in particular. New customers in other visual computing
market segments, such as digital prepress, also contributed to the sales growth.

The Company's continued international focus resulted in sales outside North
America of $4.8 million or 37.7% of net sales during the six-month period ended
March 31, 1996 compared to $2.1 million or 31.0% of net sales for the same
period last year. Sales to Sony accounted for over 40% of sales outside North
America for the current six-month period. See Note 10 to the Consolidated
Financial Statements.

Gross Profit. Gross profit was $6.1 million or 47.5% of net sales for the
six-month period ended March 31, 1996 compared to $3.1 million or 45.9% of net
sales for the same period last year. Gross profit margin for the current
six-month period was higher than the same period last year due to a reduction in
disk drive costs and strong sales of the Company's new 6900 Series disk array
product, which carries a higher gross profit margin. Management anticipates
gross profit margins for the remainder of fiscal 1996 should approximate the
level attained during the first six months of fiscal 1996; however, gross profit
margins are highly dependent on a number of factors, including customer and
product mix and disk drive costs. Disk drives are a significant cost component
of total disk array costs and there is no assurance the Company can sustain the
current gross margin levels given the price fluctuations of new generation disk
drives.

Sales and Marketing Expenses. Sales and marketing expenses were $2.3
million or 18.2% of net sales for the six-month period ended March 31, 1996
compared to $1.8 million or 26.7% of net sales for the same period last year.
The percentage decrease was due primarily to the increased sales volume when
compared to the same period last year. The actual dollar spending for the
current six-month period was higher than the same period last year due primarily
to commission expense associated with higher sales levels and an increase in the
number of sales and marketing people hired to address the growing market
segments.

General and Administrative Expenses. General and administrative expenses
were $1.1 million or 8.5% of net sales for the six-month period ended March 31,
1996 compared to $657,000 or 9.7% of net sales for the same period last year.
The percentage decrease was due to the higher sales volume in the current
six-month period compared to the same period last year. Actual dollar spending
for the current six-month period was higher than the same period last year due
primarily to an increase in management and employee bonuses of $190,000 and bad
debt expense of $95,000.

Research and Development Expenses. Research and development expenses were
$1.1 million or 8.7% of net sales for the six-month period ended March 31, 1996
compared to $809,000 or 11.9% of net sales for the same period last year. The
percentage decrease was primarily due to the higher sales volume in the current
six-month period compared to the same period last year. Actual dollar spending
during the current six-month period was higher than the same period last year
due to increases in development expenses for the Fibre Channel disk array
recently announced, other product development expenses and engineering staff.
Research and development costs are expensed as incurred.

Other Income, Net. Other income, net for the six-month period ended March
31, 1996 was $233,000 compared to $146,000 for the same period last year. The
increase in the current six-month period was due primarily to an increase in
interest and dividend income of $33,000 and a realized gain of $60,000 from the
sale of marketable securities.

Income Tax Expense. Income tax expense for the six-month period ended March
31, 1996 was $160,000 compared to $9,000 for the same period last year. This
increase reflects the change in operating results of $1.8 million of pre-tax
earnings for the first six months of fiscal 1996 compared to a pre-tax loss of
$18,000 for the same period last year. In the second quarter of fiscal 1996, the
Company began to accrue income tax expense based on an estimated tax liability
for fiscal 1996 resulting in an effective tax rate for the first six months of
fiscal 1996 of 9% due to utilization of $1.7 million net operating loss
carryforwards. The effective tax

14
<PAGE> 17

rate for fiscal 1996 is estimated to be 10% due to the utilization of the net
operating loss carryforwards. The Company expects that its net loss
carryforwards will be fully exhausted during fiscal 1996.

FISCAL YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995

Net Sales. Net sales increased by 21.7% to $16.0 million in 1995 and 42.4%
to $13.1 million in 1994. Net sales were $9.2 million in 1993. The increase in
net sales was attributed to wider acceptance of the Company's disk arrays in the
visual computing markets. For the year ended September 30, 1995, no one customer
accounted for 10% or more of net sales. For the year ended September 30, 1994,
sales to Eastman Kodak Company represented approximately 13.7% of net sales. For
the year ended September 30, 1993, sales to Data General, Eastman Kodak Company
and GE Medical represented approximately 12.9%, 11.8% and 10.4%, respectively,
of net sales.

As a result of increased focus on international markets, sales outside
North America grew to $5.6 million or 35.2% of net sales in 1995, compared to
$2.8 million or 21.4% of net sales and $1.2 million or 12.9% of net sales in
1994 and 1993, respectively.

Gross Profit. Gross profit was $7.5 million or 46.8% of net sales in 1995,
compared to $6.3 and $4.6 million, or 47.8% and 50.0% of net sales, in 1994 and
1993, respectively. The decrease in gross profit margin was attributed to the
lower margins associated with disk array sales and reduced sales of higher
margin controller products. Disk drives are a significant cost component of
total disk array costs and there is no assurance the Company can sustain the
current gross profit margin levels given the price fluctuations of new
generation disk drives. Costs of raw materials other than disk drives held
relatively steady over the three years.

Sales and Marketing Expenses. Sales and marketing expenses totaled $4.1
million or 25.8% of net sales in 1995, compared to $3.7 million or 28.1% of net
sales in 1994, and $3.6 million or 39.0% of net sales in 1993. These expenses,
as a percentage of net sales, decreased during each of last three years due to
the increased sales volume. Actual dollar spending during these periods
increased due to additional costs incurred in connection with increased sales
staff and promotion expenses associated with higher sales levels.

General and Administrative Expenses. General and administrative expenses
totaled $1.4 million or 9.0% of net sales in 1995, compared to $1.3 and $1.4
million, or 10.0% and 15.1% of net sales, for 1994 and 1993, respectively.
Spending for 1993 included one-time expenses for preparation of new product
manuals for disk arrays and costs associated with achieving ISO 9001
certification.

Research and Development Expenses. Research and development expenses
totaled $1.8 million or 11.3% of net sales in 1995, compared to $1.7 million or
12.9% of net sales in 1994, and $1.7 million or 17.9% of net sales in 1993. The
growth in research and development expenses was primarily due to increased
technology development efforts related to new generation disk array products.

Other Income, Net. Other income, net increased by $196,000 in 1995.
Interest and dividend income increased $47,000 and no additional charges for
marketable security valuations occurred in 1995, compared to prior years.
Interest and dividend income decreased $50,000 in 1994 due to lower short-term
interest rates and lower average cash balances. Royalty income decreased $30,000
in 1995 and $52,000 in 1994 due to decreased usage of the licensed technology.
In 1994 and 1993, there were charges of $193,000 and $45,000, respectively, for
a cost-to-market adjustment for investments.

Income Tax Expense. Income tax expense incurred for 1995, 1994 and 1993 was
minimal as a result of the application of net operating loss carryforwards
during those periods.

NEW ACCOUNTING PRONOUNCEMENTS

Beginning in fiscal 1997, the Company will be required to adopt the
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation" ("SFAS No. 123"). Under SFAS No. 123, companies
are permitted to adopt a new method of accounting for stock compensation awards
which is based on recognition of a charge equal to the estimated fair value of
the award on the date of grant. Alternatively, companies may continue using the
methodology specified in Accounting Principles Board

15
<PAGE> 18

Opinion No. 25, "Accounting for Stock Issued to Employees" to account for stock
based compensation, with expanded disclosure in the notes to the financial
statements of the pro forma effects on net earnings and earnings per share,
assuming application of the new accounting method outlined in SFAS No. 123. The
Company plans to implement the disclosure requirements for SFAS No. 123 in
fiscal 1997 and retain its current accounting method for stock-based employee
compensation.

QUARTERLY INFORMATION

The following tables present selected quarterly consolidated financial
information for the periods indicated in both dollars and as a percentage of net
sales. This information was derived from unaudited consolidated financial
statements which have been prepared on a basis consistent with the Company's
audited Consolidated Financial Statements and Notes thereto included elsewhere
in this Prospectus and, in the opinion of management, reflects all normal
recurring adjustments necessary to fairly present the information. The Company
has experienced and expects to continue to experience significant fluctuations
in its quarterly operating results due to a variety of factors, including the
cost of disk drives, the timing of receipts and shipments of significant orders,
the cost and timing of new product releases and product enhancements by the
Company and its competitors, variations in the Company's product mix, market
acceptance of new or enhanced versions of the Company's products, changes in
pricing and promotion policies by the Company and its competitors and general
economic conditions. The operating results for any quarter do not necessarily
indicate the results to be expected for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------------------
FISCAL 1994 FISCAL 1995 FISCAL 1996
--------------------------------------- --------------------------------------- ------------------
DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $ 3,229 $2,987 $ 3,407 $ 3,498 $ 3,669 $3,107 $ 3,877 $ 5,313 $ 6,087 $6,696
Cost of sales............. 1,739 1,493 1,844 1,772 2,017 1,650 1,974 2,857 3,304 3,404
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Gross profit............ 1,490 1,494 1,563 1,726 1,652 1,457 1,903 2,456 2,783 3,292
Sales and marketing
expenses................ 867 873 902 1,051 917 890 1,095 1,227 1,155 1,174
General and administrative
expenses................ 304 334 359 311 323 333 396 380 538 550
Research and development
expenses................ 408 397 471 418 378 431 449 542 513 603
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Earnings (loss) from
operations............ (89) (110) (169) (54) 34 (197) (37) 307 577 965
Other income (expense),
net..................... 108 (25) (68) 107 66 80 78 94 134 99
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Earnings (loss) before
income taxes.......... 19 (135) (237) 53 100 (117) 41 401 711 1,064
Income tax expense........ 4 5 5 7 5 4 6 13 5 155
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net earnings (loss)..... $ 15 $ (140) $ (242) $ 46 $ 95 $ (121) $ 35 $ 388 $ 706 $ 909
======= ======= ======= ======= ======= ======= ======= ======= ======= ======
Earnings (loss) per
common share.......... $ 0.01 $(0.05) $ (0.08) $ 0.02 $ 0.03 $(0.04) $ 0.01 $ 0.11 $ 0.19 $ 0.24
======= ======= ======= ======= ======= ======= ======= ======= ======= ======
Weighted average number
of common and common
equivalent shares
outstanding........... 3,253 3,092 3,098 3,099 3,222 3,218 3,467 3,543 3,721 3,831
</TABLE>

16
<PAGE> 19

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------------------
FISCAL 1994 FISCAL 1995 FISCAL 1996
----------------------------------------- ---------------------------------------- ------------------
DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.......... 53.8 50.0 54.1 50.6 55.0 53.1 50.9 53.8 54.3 50.8
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit......... 46.2 50.0 45.9 49.4 45.0 46.9 49.1 46.2 45.7 49.2
Sales and marketing
expenses............. 26.9 29.2 26.5 30.0 25.0 28.6 28.2 23.1 19.0 17.6
General and
administrative
expenses............. 9.4 11.2 10.6 8.9 8.8 10.7 10.2 7.2 8.8 8.2
Research and
development
expenses............. 12.6 13.3 13.8 12.0 10.3 13.9 11.6 10.2 8.4 9.0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) from
operations......... (2.7) (3.7) (5.0) (1.5) 0.9 (6.3) (0.9) 5.7 9.5 14.4
Other income (expense),
net.................. 3.3 (0.8) (2.0) 3.0 1.8 2.5 2.0 1.8 2.2 1.5
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss)
before income
taxes.............. 0.6 (4.5) (7.0) 1.5 2.7 (3.8) 1.1 7.5 11.7 15.9
Income tax expense..... 0.1 0.2 0.1 0.2 0.1 0.1 0.2 0.2 0.1 2.3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net earnings
(loss)............. 0.5% (4.7)% (7.1)% 1.3% 2.6% (3.9)% 0.9% 7.3% 11.6% 13.6%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

The Company's operating results over the ten quarters ended March 31, 1996
reflect generally increasing net sales, excluding the second quarters of fiscal
1994 and 1995. Net sales in the second quarters of fiscal 1994 and 1995 were
affected by reduced shipments to film/video production customers who postponed
purchase decisions in order to view new products at a key tradeshow for that
industry. Gross profit was higher in some quarters due to cost reductions for
disk drives or new product introductions of higher margin products. There can be
no assurance that future cost reductions for disk drives will occur or that new
product introductions will be at favorable gross profit margins when compared to
historical levels.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and marketable securities totaled $6.0 million at
March 31, 1996, compared to $4.7 million at September 30, 1995. The Company's
working capital was $8.0 million at March 31, 1996 compared to $6.6 million at
September 30, 1995.

Cash flows provided by operating activities of $1.9 million during the
six-month period ended March 31, 1996 were largely attributed to net earnings of
$1.6 million and the non-cash expense of depreciation and amortization of
$439,000. Increases in accounts receivable of $300,000 and inventories of $1.1
million occurred due to the increase in net sales. These increases were
partially offset by increases in accounts payable of $471,000 and income taxes
payable of $454,000.

Cash flows provided by investing activities of $538,000 for the six-month
period ended March 31, 1996 were mainly from the $1.3 million in proceeds from
the sale of marketable securities during that period. These proceeds were
partially offset by equipment purchases of $728,000 during that same period.

Cash flows provided by financing activities of $206,000 during the
six-month period ended March 31, 1996 were largely the result of proceeds from
the issuance of Common Stock sold pursuant to the exercise of employee stock
options.

The Company expects that the net proceeds of this offering, cash provided
by continuing operations and existing cash balances will be sufficient to fund
its operations for the foreseeable future. The Company may acquire technologies,
products or businesses that complement the Company's business, as such
opportunities may arise, and the Company's working capital needs may change as a
result of such acquisitions. Currently, however, there are no commitments or
agreements with respect to any acquisitions.

17
<PAGE> 20

BUSINESS

GENERAL

Ciprico designs, manufactures, markets and services high performance RAID
disk arrays that provide storage solutions for the domestic and international
visual computing markets. Ciprico's RAID (Redundant Array of Independent Disks)
products typically consist of five or nine industry standard disk drives linked
together by proprietary hardware, firmware and software. The array of disks
performs as one large disk drive with superior performance characteristics
compared to a single disk drive. Ciprico's RAID disk arrays are designed to
provide fast data transfer rates of up to 100 megabytes ("MB") per second, large
storage capacity of up to 72 gigabytes ("GB"), and redundancy to ensure the
integrity of the stored data. All of the Company's disk arrays transfer data
using industry standard data transfer protocols which enable them to interface
with the primary open architecture computing platforms found in the visual
computing market designed by Silicon Graphics, Sun Microsystems, Inc.,
Hewlett-Packard Company, IBM Corporation and Apple Computer, Inc.

Ciprico's engineers have extensive knowledge of data transfer interfaces
and many years of cumulative engineering experience which is reflected in the
proprietary hardware, firmware and software incorporated into the Company's disk
arrays. In addition, Ciprico has a close design relationship with Silicon
Graphics which facilitates optimal system compatibility between Ciprico's disk
arrays and Silicon Graphics workstations, which have a leading market share in
the visual computing market. Sales of products developed by the Company
specifically designed for Silicon Graphics platforms accounted for approximately
half of the Company's disk array sales during the past 18 months. Ciprico
believes its extensive disk array expertise, proprietary technology, and close
customer and vendor relationships provide the Company with a competitive
advantage in developing leading edge high performance RAID disk array products.

VISUAL COMPUTING INDUSTRY

Visual computing refers to the digital representation and complex image
processing of film, video, graphics, photographs, animation, special effects,
three dimensional ("3D") images and other images. Like many other computer
applications, the trend in visual computing is toward random access, digital
data storage and away from traditional analog tape storage or film methods which
require substantial processing time and limit the creativity of users. Digital
image processing offers numerous benefits when compared to traditional analog
and film methods, including the ability to achieve higher quality images,
process and edit data faster, access data remotely over networks, and create
images and special effects not previously possible.

Within the visual computing industry, market segments such as film/video
production, satellite telemetry, oil and gas exploration, medical imaging,
digital prepress, and broadcast and video services require large storage
capacity with fast data transfer rates. Disk arrays are designed to meet the
high data transfer rate, storage capacity and data redundancy requirements of
the visual computing market. Based on the large storage requirements of digital
image processing in visual computing, the Company expects growing demand for
storage requirements in the visual computing market. Based on industry sources,
the Company believes that sales of digital image processing equipment into the
film/video production segment of the visual computing market have grown from
less than $1 million in 1991 to approximately $900 million in 1995, with sales
projected to continue to grow at an average annual rate of 45% over the next
several years.

In addition to digital technology, another important industry dynamic in
the visual computing market is open system architecture. With open architecture,
the Silicon Graphics workstations and other computing platforms prevalent in the
visual computing market are designed to be compatible with peripheral storage
equipment using industry standard data transfer protocols. Ciprico's disk arrays
use Fast/Wide SCSI, UltraSCSI or Fibre Channel industry standard data transfer
protocols, enabling them to interface with the primary open architecture
computing platforms found in the visual computing market including Silicon
Graphics, Sun Microsystems, Inc., Hewlett-Packard Company, IBM Corporation and
Apple Computer, Inc.

Only a few computing systems today provide both the graphical and
computational power that are required for visual computing applications. These
systems often lack the high-speed data input/output performance, redundancy and
storage that is necessary for data retrieval and manipulation of images.
Ciprico's

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disk array products complement the graphic and computational power of computer
systems supplied by other vendors by providing high performance disk array
storage solutions. As additional computer systems evolve, the Company believes
it is positioned to address the changing needs of its customers by capitalizing
on its current technology and strategic industry relationships.

RAID TECHNOLOGY

RAID is an emerging storage technology dramatically changing the way
on-line data is stored in computers. The RAID concept was defined by a team of
researchers from the University of California at Berkeley in 1987. A RAID disk
array links together several industry standard disk drives into a single large
disk drive using proprietary hardware, firmware and software to achieve
extremely fast data transfer rates, high levels of redundancy and large storage
capacity. The key characteristics of RAID disk array performance are as follows:

Data Transfer Rate. Disk arrays are able to achieve much faster
data transfer rates than individual disk drives because of their
ability to spread data among all the component disk drives, enabling
the data to be retrieved from all drives simultaneously at very fast
speeds. Ciprico's RAID-3 disk arrays can achieve transfer rates up to
100 MB per second (a MB represents one million bytes of data, or
approximately the amount of data needed to store a single frame of
high quality video). A data transfer rate of approximately 36 MB per
second is needed to deliver uncompressed full motion video.

Redundancy. Redundancy refers to the replication of certain data
within the RAID disk array so that if one disk drive or other
redundant component such as a power supply fail within the disk array,
no data is lost and the application continues uninterrupted.

Storage Capacity. By linking together multiple disk drives, disk
arrays achieve very large storage capacities. Ciprico's disk arrays
achieve storage capacities up to 72 GB (a GB represents one billion
bytes of data or roughly the amount of data needed to store one minute
of uncompressed real-time video).

RAID is available in several levels, the most common of which are 1, 3 and
5. Each RAID level identifies a unique storage methodology, offering different
data transfer rates, redundancy and cost. Therefore, each level should be
evaluated for the application it is intended. The table below summarizes the
different attributes and applications of the three most widely used RAID levels.

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RAID TECHNOLOGY OVERVIEW

<TABLE>
<CAPTION>
RAID LEVEL ATTRIBUTES APPLICATIONS
<S> <C> <C>
RAID-1: Disk Mirroring High data reliability but Applications that value
high cost due to high reliability and data
duplication of disk drives transfer rates more than
and associated hardware. storage capacity and cost.
RAID-3: Parallel Data Access Highest data transfer rate Applications that require
for large block sizes (high high data transfer rates,
bandwidth) such as images. such as film/video
animation or special
effects, medical images,
seismic analysis, satellite
imagery or analysis,
video-on-demand, digital
prepress.
RAID-5: Independent Data Access High data transfer rate for Applications that require
small transaction files. frequent access to small
blocks of data, such as a
reservation system or
office automation.
</TABLE>

Among the RAID levels, RAID-3 is the best technology for visual computing
applications because it achieves the fastest data transfer rates for
sequentially stored data such as graphics and video, while providing large
storage capacities and data redundancy. In a RAID-3 disk array, data is spread
evenly among the "data drives" within the array while one "parity drive" ensures
redundancy. For example, a typical Ciprico RAID-3 drive has eight data disk
drives and one parity disk drive, so that when data is retrieved, each of the
eight data drives provides one byte of data simultaneously, enabling data
transfer up to eight times the speed of a single disk drive with eight times the
storage capacity. A primary benefit of RAID-3 is that no decrease in performance
results from the failure of one disk drive, a feature which is critical to
real-time visual computing applications. With Ciprico's disk arrays, a failed
disk drive or power supply can be "hot swapped" for a new drive without shutting
off the array, allowing the user to keep working at full speed while the failed
component is being replaced. All of Ciprico's disk array products are RAID-3
products designed for visual computing applications.

Certain suppliers of disk arrays focus on RAID-1 and RAID-5 disk arrays. In
contrast to RAID-3 disk arrays, RAID-1 creates exact duplicates of all stored
data, and therefore, it uses one-half of available storage capacity to achieve
redundancy. This methodology makes RAID-1 extremely costly to store large
amounts of data. RAID-5 disk arrays are generally suited for intensive data
processing applications requiring the ability to process large volumes of
transactions simultaneously and store large quantities of data. Examples of
RAID-5 applications include insurance policy holder databases, bank account
transaction processing and airline reservation systems where performance is
typically measured by the number of transactions which can be processed in a
given amount of time (in contrast, performance of RAID-3 disk arrays is measured
by MB per second of sustained data transfer capability). As a result of the
differing performance characteristics, RAID-1 and RAID-5 disk arrays are not
particularly well-suited and are not directly competitive with RAID-3 disk
arrays in the visual computing market segments targeted by Ciprico.

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VISUAL COMPUTING MARKET SEGMENTS

Within the visual computing market, the Company focuses on the film/video
production, satellite telemetry, oil and gas exploration, medical imaging,
digital prepress, and broadcast and video services market segments. Each of
these market segments requires the high data transfer rate performance, large
storage capacity and redundancy provided by the Company's RAID-3 disk arrays.
The following table identifies the application and storage requirements of each
of these market segments as well as some of the current customers and end users
of Ciprico's disk arrays.

CIPRICO'S VISUAL COMPUTING MARKET SEGMENTS

<TABLE>
<CAPTION>
REQUIREMENTS
(IN ORDER OF
SEGMENT APPLICATION SIGNIFICANCE) CUSTOMERS/END USERS
<S> <C> <C> <C>
Film/Video Creation of special - Real-time storage and - Avid Technology, Inc.
Production effects, playback of images - Digital Domain
post-production, digital without compression - DreamWorks, Inc.
character animation - No performance - Eastman Kodak Company
degradation with a - Fox Animation Studios,
failed drive Inc.
- 100% data availability - Industrial Light + Magic
- Pacific Ocean Post
- Walt Disney Studios
- Warner Bros., Inc.

Satellite Capture, process and - Real-time performance - Autometric Inc.
Telemetry manipulate information - 100% data availability - E-Systems, Inc.
and images transmitted - Large storage - NASDA
from satellites capacities - NK-EXA Corp.

Oil and Gas 3D processing and - Large storage - Phillips Petroleum
Exploration interpretation of capacities Company
seismic data to - Fast storage and - Texaco Inc.
determine best drilling retrieval of image files - Unocal Corporation
location - 100% data availability

Medical Digital image - High speed transfers - Camtronics Ltd. Medical
Imaging acquisition and display and display of images Systems
(i.e., CT, MRI, - 100% data availability - CTI/PET Systems
ultrasound); image - InfiMed, Inc.
storage and networking
(i.e., PACs,
teleradiology)

Digital Image storage direct-to- - High performance and - Contex Prepress Systems
Prepress plate and redundancy - DALiM Imaging Software
direct-to-press printing - On-line storage for - Komori America Corp.
without using film fast changes
- 100% data availability

Broadcast and Playback of video in - Deliver video for - Philips Consumer
Video Services real- time; commercial real-time viewing Electronics B.V.
insertion, video-on- - High bandwidth to - Sony Trading
demand, broadcast, in- supply video streams to International Corp.
flight entertainment multiple users
- 100% data availability
</TABLE>

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<PAGE> 24

Film/Video Production. The film/video production market segment includes
companies that create, edit and manipulate images for the entertainment
industry, such as movie studios and post-production facilities. These companies
utilize leading edge graphics workstations and high performance storage systems
to generate and manipulate complex computer-generated images. Applications
within this market include 3D animation, compositing (the digital layering of
two different image sequences), special effects, film restoration and editing.
Film/video production companies require extremely high image resolution because
the final image will be enlarged many times when it is displayed on a movie
screen.

The images created in this market segment represent very large digital data
files. Even a single image, or frame, can require the equivalent storage of one
MB. Since the images are so large, they cannot be stored in the computer's
memory and therefore must be stored on disk drives. However, single disk drives
do not offer data transfer rates of at least 36 MB per second (30 frames per
second), which is the required level of data transfer rate performance to
retrieve images from the disk fast enough to provide smooth motion, or real-time
video.

Ciprico's disk arrays are among the first in the film/video production
market to offer a single disk array that achieves real-time transfer rates. In
addition, Ciprico's disk arrays are designed to provide data transfer rates
ranging up to 100 MB per second which allows the simultaneous transfer of
multiple streams of compressed video images.

Satellite Telemetry. The satellite telemetry market segment consists of
companies and military organizations that capture and extract images from
satellites and transfer them to groundstations for processing. In recent years,
there have been many changes in the satellite telemetry marketplace due to an
improved supply and quality of imagery from new image scanners, the availability
of new software tools that deliver more complex visualization capabilities and
more sharing of technology between military and commercial organizations
domestically and internationally. These changes are all key factors in the
growth of applications which require disk arrays in this market segment.

The satellite telemetry market segment has three primary applications where
Ciprico disk arrays are best suited: data capture, image processing and
extraction, and mission planning. Data capture is the process of collecting the
images that are transmitted from a satellite passing overhead to a groundstation
located on earth. The groundstation must be capable of reading these transmitted
images very fast and be ready to receive them during the small window of
opportunity when the satellite is in position to transmit. In the image
processing and extraction application, the images that are gathered at the
groundstation are bundled into data sets for use by various industries. The data
sets can be hundreds of GBs, thus requiring massive storage. In the mission
planning application, data is used to manage troop deployment, which frequently
requires real-time viewing of 3D images.

Ciprico's disk arrays deliver high performance transfer rates, typically
real-time, that are required by users in the satellite telemetry market segment.
Because the data sets are large, high storage capacities are necessary. In
addition, redundancy is critical in these applications so data can be captured
at the opportune time and made available as needed for processing and mission
planning applications.

Oil and Gas Exploration. The oil and gas exploration market segment is
comprised mainly of the major oil and gas exploration companies. This market
segment has undergone dramatic changes in recent years with the introduction of
3D technology. Seismic data is typically generated by detonating an explosive
charge, sending shock vibrations beneath the earth's surface, which reflect off
underground geological formations. The seismic data, which can be measured in
terabytes (1,000 GB), is recorded, processed to about one-tenth of its original
data size and stored digitally. By using high performance workstations and disk
arrays, the seismic information can be displayed through 3D images representing
underground geological formations, enabling the exploration company to locate
oil fields and determine optimal drilling sites.

The processing and interpretation of the seismic data may take days or even
weeks, during which time a Ciprico disk array's redundancy features are critical
should a disk drive or power supply fail. Without a disk array, if the data were
lost the data would have to be reprocessed or reinterpreted, resulting in
productivity losses. Ciprico's disk arrays provide flexible capacities to store
the ever increasing amounts of data. In

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<PAGE> 25

addition, the high transfer rates of the Company's disk array products improves
geophysicists' productivity by providing fast storage and retrieval of the large
data files.

Medical Imaging. The medical imaging market segment includes medical
equipment manufacturers and end users such as hospitals, clinics and other
diagnostic centers that collect and interpret medical images. Powerful computers
are routinely used to capture digital images for diagnosis both locally at the
site of the examination and at remote locations such as doctors' offices.

The two primary medical imaging application environments in which Ciprico
disk arrays operate best are image acquisition and image storage and
transmission. In image acquisition, a magnetic resonance imaging ("MRI"),
computed tomography ("CT") or ultrasound examination is conducted on a patient
in a radiology lab. The resulting image is stored digitally. A disk array
ensures that the data is stored to avoid repeating the examination, which may be
uncomfortable for the patient as well as costly. Image storage and transmission
applications, such as picture archive and communications systems ("PACs") and
teleradiology, are essentially networks of medical images. The digital image
that is acquired in the radiology laboratory is stored in a central archive and
must be rapidly retrieved and displayed at viewing stations throughout the
hospital or clinic.

Ciprico disk arrays provide the high speed data transfer rates required in
medical imaging applications. The redundancy features of the Company's disk
arrays also ensure that examination images are not lost due to drive failure.

Digital Prepress. The digital prepress market segment consists of companies
such as computer-to-plate or direct-to-press manufacturers that utilize disk
arrays to optimize performance. Digital prepress applications began about ten
years ago. However, the move away from traditional printing presses and printing
plates is a relatively new trend. As the printing industry endorses digital
technology to reduce cost, improve flexibility and shorten production schedules,
new opportunities are developing within the prepress market. RAID-based disk
storage provides many features and benefits for improving the capabilities of
digital prepress applications.

Traditional prepress systems use photographic film images as the basis for
producing printing plates. This method is quickly being replaced as suppliers
are introducing a host of computer-based products which eliminate the material
costs of photographic film, increase the quality and accuracy of image
reproduction, and provide the printer with tools for quick turnaround. Examples
of prepress applications include desktop publishing and page layout,
photo-retouch, large workgroup servers and production management software,
computer-to-plate devices, and digital presses. All of these applications
provide printers with greater control over image quality and the ability to
store jobs on-line, allowing them to respond to last minute changes more
quickly. Computer-based prepress applications create image sizes up to 200 MB
for a single page of printed material.

Ciprico's disk array products provide the high data transfer rates and
redundancy required for these applications.

Broadcast and Video Services. The broadcast and video services market
segment includes companies that demand delivery of high bandwidth video for
real-time viewing at a reasonable cost. In this market segment, video is
digitized and stored on disk subsystems. Video is retrieved from storage, either
on a predetermined schedule or on demand, and transmitted for viewing. Automated
commercial insertion is a good example of a broadcast application. In this
application, the commercials viewed during a television broadcast are actually
being retrieved from a disk array. The disk-based approach replaces videotape
systems, which are less reliable and more expensive to maintain.

Broadcast and video service applications are some of the most demanding for
disk storage and require very high data bandwidth to supply different video
streams to multiple users. Further, there can be no interruptions in service,
which causes dead-air time. Large storage capacity is also required to allow an
adequate selection of content for viewing. Without disk arrays these
applications would not be possible or, at best, would be relegated to the more
expensive and less flexible videotape-based systems.

In other video services markets, the applications may be different, but the
use for RAID disk arrays is similar. For instance, in the hospitality industry,
disk-based systems are used for movies-on-demand in hotels. Another emerging
application is in-flight entertainment, in which in-flight video systems allow
passengers to view movies, on demand, on screens located in seat backs.
Education is also a growth area for disk-based video

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delivery systems. Whether for academic or corporate training, users can watch
training videos on the desktop, at any time. In all these applications,
Ciprico's disk array systems may be used to store the video content and deliver
it for viewing in real-time.

CIPRICO STRATEGY

Ciprico's goal is to expand its leadership position as a provider of high
performance RAID-3 storage solutions to the visual computing market. The
Company's strategy to achieve this goal incorporates the following elements.

Provide Leading Edge Disk Array Solutions. Ciprico believes its future
success is largely dependent upon its ability to offer leading edge disk array
solutions. Ciprico was the first RAID-3 disk array manufacturer to achieve
real-time playback of uncompressed video, the first to receive ISO 9001
certification, the first and only to receive Silicon Graphics' "Gold Seal
Approval" and the first to introduce a RAID-3 Fibre Channel disk array. The
Company uses engineering design teams that work cross-functionally with
marketing managers, application engineers and customers to develop products and
product enhancements that address not only the needs of the visual computing
market, but also changing industry standards. Ciprico's engineers have extensive
knowledge of data transfer interfaces which is reflected in the proprietary
hardware, firmware and software incorporated into the Company's disk arrays.
Ciprico believes its extensive disk array expertise, proprietary technology, and
close customer and vendor relationships give the Company a competitive advantage
in continuing to provide leading edge disk array solutions.

Further Penetrate Targeted Market Segments. Ciprico has identified and
targeted six market segments within the visual computing market that have
significant storage requirements: film/video production, satellite telemetry,
oil and gas exploration, medical imaging, digital prepress, and broadcast and
video services. The Company has achieved significant penetration in the
film/video production segment in which it is a leading supplier of high
performance disk arrays. The Company's thorough knowledge of this segment and
its relationship with Silicon Graphics, a leading provider of workstations to
this market segment, have been instrumental to the Company's success in the
film/video production segment of the market. To penetrate further all of the
Company's identified market segments, the Company will continue to study and
learn the unique user applications within each segment so product development
can be appropriately directed. In addition, the Company will attempt to
establish relationships with important software and hardware vendors servicing
each segment so the Company's disk arrays can be part of a total visual
computing solution offered to customers. The Company believes that the
application-specific knowledge gained from these relationships will enable it to
further penetrate its six targeted market segments.

Expand Worldwide Sales Efforts. In anticipation of expected growth in
Ciprico's targeted visual computing market segments, the Company expects to
continue expanding its worldwide sales efforts. In addition, the Company intends
to further expand its geographic presence through association with carefully
selected VARs that have in-depth application knowledge and technical expertise
in the Company's targeted market segments. Ciprico salespeople and value-added
resellers ("VARs") draw upon the expertise of the Company's marketing managers
and application engineers to further enhance the Company's sales efforts. The
Company believes this approach provides the focus and knowledge that is needed
to expand its disk array sales internationally and domestically.

Offer Extensive Support Programs. Ciprico believes that in addition to
providing high performance storage solutions for the visual computing market, it
is also important to provide flexible service and support programs to its
customers. The Company offers its customers a number of training programs and
service plans to accommodate the varying degrees of support required by
customers. In addition, Ciprico uses application engineers who have an in-depth
knowledge of customer requirements and work closely with customers to achieve
optimal disk array performance. Technical support is also available through the
Company's toll-free help line, which has a 99% attainment record of the caller
reaching a support technician on the first call.

PRODUCTS

The Company introduced its first generation RAID-3 disk array product in
1990. Over the next six years, Ciprico introduced several new disk array
products to meet the changing needs of its customers. The Company announced its
newest product, the 7000 Fibre Channel Series disk array, in April 1996 and
expects to

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<PAGE> 27

commence shipments of this product in the fall of 1996. Ciprico now offers
customers a choice of four different series of disk arrays depending on their
needs. Prices for the Company's disk arrays generally range from $20,000 to
$50,000 per disk array depending on the features selected by the customer.
Applications may require one or several disk arrays.

The Company designs, develops and manufactures all of its disk array
products to operate within industry standards and at peak performance levels.
The controller board, internal packaging, component integration and cabinet
design are all results of Ciprico's engineering expertise. Disk drives and power
supplies are mounted on easily removable shuttles which make swap outs simple.
The table below summarizes the maximum interface transfer rate, storage
capacity, features and benefits of each of Ciprico's RAID-3 disk arrays.

CIPRICO'S RAID-3 DISK ARRAYS

<TABLE>
<CAPTION>
MAXIMUM # OF DRIVES/
INTERFACE STORAGE
PRODUCT TRANSFER RATE* CAPACITY** FEATURES BENEFITS
<S> <C> <C> <C> <C>
6700 Series 20 MB/Sec. - 5 or 9 drives - SCSI-2 - No decrease in
- 8 - 72 GB per compatible data transfer
disk array - Hot swap drives rate performance
and power with a failed
supplies drive
- Increased
performance and
capacity with
striping

6900 Series 40 MB/Sec. - 9 drives - SCSI-3 or Ultra- - Provides
- 16 - 72 GB per SCSI compatible real-time speeds
disk array - Hot swap drives using a single
and power disk array
supplies - Bigger images,
higher density

7000 Series 100 MB/Sec. - 9 drives - Fibre Channel - Supports
- 16 - 72 GB per interface multiple
disk array - Supports both uncompressed
point-to-point video streams
and Arbitrated - Delivers dozens
Loop of compressed
- Fast/Wide SCSI-2 video streams
drives - Supports 30
- Hot swap drives, frames per
power supplies second
and fans operations at
very high
resolutions

Spectra Series 20 to 100 MB/Sec. - 5 or 9 drives - Customized 6700, - Spectra 6900,
- 8 - 72 GB per 6900 or 7000 attaining
disk array series for real-time
Silicon Graphics speeds, is
environments unique in the
including industry,
graphical user packaged with
interface, adapter board
drivers and jointly
adapter board developed by
- Gold Seal Ciprico and
Approved by Silicon Graphics
Silicon Graphics - Thorough testing
by Silicon
Graphics assures
compatibility
with Silicon
Graphics systems
</TABLE>

* These are the maximum interface transfer rates theoretically attainable;
however, sustained transfer rates are lower due to limitations of the SCSI
software code.

** Ciprico intends to use higher capacity 9 GB disk drives as soon as they are
available from the drive manufacturers, which will increase storage
capacities from the current maximum, 34 GB, to 72 GB.

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<PAGE> 28

6700 Series. The Company's 6700 Series disk arrays offer customers a
sustained transfer rate of 19 MB per second. These disk arrays are compatible
with SCSI-2 (an industry standard protocol that allows peripheral equipment to
connect with the host computer). Storage capacity on the Company's disk arrays
is limited only by the capacity of the disk drives themselves. With a continual
program of disk drive qualification, the highest performing and highest quality
disk drives are offered with the disk array. The 6700 Series disk arrays consist
of five or nine drives and currently have storage capacities of 8 GB to 34 GB,
which will increase to 72 GB when 9 GB disk drives are available. Ciprico's 6700
Series disk arrays offer several redundancy features, including hot swap drives,
which allow replacement of a failed disk drive without any interruption in
performance while the failed disk drive is being replaced at the convenience of
the user. Hot swap power supplies are available to prevent interruption due to
power supply failure.

6900 Series. Ciprico's 6900 Series disk arrays use a new version of the
SCSI peripheral interface standard, known as UltraSCSI, double-speed or Fast-20.
While maintaining compatibility with SCSI-2, the UltraSCSI interface offers
sustained transfer rates of 36 MB per second. Before the introduction of
UltraSCSI, multiple disk arrays had to be striped together to increase transfer
rates. With one 6900 Series UltraSCSI disk array, a user can retrieve 24-bit
color, uncompressed video images at a real-time speed of 30 frames per second.
The Company's 6900 Series offers customers eight data drives plus one redundant
drive, which together provide a storage capacity of 16 GB to 34 GB, which will
increase to 72 GB when 9 GB disk drives are available. The 6900 Series also
includes several redundancy features, including hot swap drives and power
supplies.

7000 Fibre Channel Series. In April 1996, Ciprico announced its newest RAID
disk array, the 7000 Series, the industry's first disk array to offer a host
interface compatible with full speed Fibre Channel, the fastest interface
currently available. The 7000 Series offers a sustained transfer rate of 76 MB
per second. This disk array is capable of transferring uncompressed video images
in real-time to preserve quality, or simultaneously transferring several dozen
streams of compressed video images.

Ciprico qualifies its 7000 Series disk arrays with popular host adapters
for standard platforms to preserve compatibility with its customer's systems. As
new computer platforms are introduced specifically for Fibre Channel, the
Company intends to integrate the 7000 Series with platforms that deliver the
highest performance possible to take advantage of full speed Fibre Channel which
can offer maximum interface transfer rates of up to 100 MB per second. The 7000
Series is based on SCSI drive technology and consists of nine Fast/Wide SCSI
drives, each connected to a dedicated channel. The storage capacities supported
by the 7000 Series disk arrays range from 16 GB to 34 GB, which will increase to
72 GB when 9 GB disk drives are available. The total system storage capacity can
grow to a terabyte with only fifteen arrays and a single host connection. The
7000 Series has hot swap disk drives, power supplies and fans.

Spectra Series. Ciprico has developed, in cooperation with Silicon
Graphics, the Spectra Series to work with Silicon Graphics platforms. The 6700,
6900 and 7000 Series of disk arrays may all be ordered as a Spectra package.
Included in the Spectra package is a Ciprico disk array, an adapter for certain
models, and a set of software utilities. These graphical user interface-based
utilities were written by Ciprico to facilitate the installation and use of a
Ciprico disk array with a Silicon Graphics platform. Before the Company
developed these utilities, system administrators had to use complex system
commands to configure peripherals, such as disk arrays. Ciprico's utilities
provide an easy-to-use graphical interface using point-and-click commands that
reduces the installation time. In addition, point-and-click commands are
available to monitor the status of the disk array.

Spectra disk arrays have received Silicon Graphics' "Gold Seal Approval,"
which signifies that the products have successfully undergone extensive testing
by Silicon Graphics. Recently, the Company worked with Silicon Graphics to
create an adapter card that allows Silicon Graphics' new Indigo(2) IMPACT
workstation to connect to Ciprico's Spectra 6900 UltraSCSI disk array. The
Company is not aware of any other company that can offer this capability on the
Indigo(2) IMPACT.

Controllers. Prior to 1994, the Company's sales were largely attributed to
controller boards, peripheral input/output connectors for tape and disk drives.
In the early 1990s, as the controller market weakened, the

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<PAGE> 29

Company transitioned its focus to the RAID-3 disk array markets. While the
Company continues to sell controller boards, it expects such sales to represent
a decreasing percentage of net sales.

MARKETING AND SALES

The Company's strategy is one of application selling into the Company's
identified segments of the visual computing market. This strategy requires that
the Company's marketing and sales personnel have an in-depth knowledge of the
various imaging applications and related data storage requirements of end users
in the various segments. Based upon such understanding, the Company's product
managers are responsible for developing a comprehensive marketing plan tailored
to the needs of each market segment, including brochures, trade shows,
advertising and direct mail. In addition, the Company relies on its experienced
application engineers to support the Company's marketing and sales efforts.

Typically, the Company's disk arrays are sold to OEMs for inclusion in
their own computer systems and to systems integrators and VARs who in turn sell
the disk arrays to end users. The initial sales process is complex, requiring
interaction with several layers of the customer's organization and extensive
technical exchanges, product demonstrations and commercial negotiations. As a
result, the Company's typical sales cycle is three to nine months.

As part of the Company's marketing and sales strategy, the Company has from
time to time entered into relationships with companies, primarily hardware and
software suppliers to the visual computing market, that Ciprico believes could
play an important role in the successful marketing of the Company's products.
For example, the Company has developed a strong relationship with Silicon
Graphics, a leading manufacturer of computer platforms in the visual computing
market. The Company's engineering department has worked closely with Silicon
Graphics to understand and provide connectivity and performance solutions
compatible with Silicon Graphics computer platforms. The result of these efforts
is the Company's Spectra Series of disk arrays. In addition to such product
development efforts, the Company's marketing department has engaged in joint
promotions, trade shows and seminars with Silicon Graphics. Sales of products
developed by the Company specifically designed for Silicon Graphics platforms
accounted for approximately half of the Company's disk array sales during the
past 18 months.

The Company's products are sold through a combination of direct sales
people, independent manufacturers' representatives, VARs and other distributors.
Ciprico's direct sales organization, comprised of ten salespeople, coordinates
the activities of the Company's manufacturers' representatives and distributors
and actively participates with them in selling efforts. This enables the Company
to establish strong direct ties with its customers and end users. The Company's
North American sales locations are in Plymouth, Minnesota; Raleigh, North
Carolina; Nashua, New Hampshire; Dallas, Texas; and Santa Clara, California. The
Company has an international sales and service office in Newbury, England and a
sales office in Singapore.

CUSTOMER SUPPORT

The Company believes that its ability to provide prompt and reliable
support is an important element in the marketing of its products. The Company
employs expert application engineers and phone support specialists who provide
technical application support to customers. To develop strong customer
relationships, the application engineers work with potential customers to
understand their applications and ensure that the disk arrays optimally address
their requirements. Ciprico believes it has a competitive advantage with the
added value it provides through its customer support programs.

Ciprico offers several training and service programs including the
Advantage Support Program and the Safety Net Spares Program. The Advantage
Support Program is designed to offer the customer product support flexibility.
Under this program, the customer can choose which spares it will rent for its
disk array support. One Advantage Support Program contract can cover all of the
different disk array configurations and locations a customer may have now or in
the future. This program also offers training for service technicians, priority
telephone support and parts repair and updates at no additional charge.

27
<PAGE> 30

With the Safety Net Spares Program, customers receive support for up to
five disk arrays at one location. Critical spare parts are located at the
customer's site on a consignment basis. Other spare parts are available upon
request with next-day delivery. Under this program, the customer's technicians
are provided with training, a training manual, service guide and a software
diagnostic application. Telephone support specialists are also available through
the Company's toll-free help line, which has a 99% attainment record of
customers reaching a technical support specialist on the first call.
International customers have critical and non-critical spare parts on location.

The Company also provides a return-to-factory parts and labor warranty
against defects in materials and workmanship covering a period from one to three
years from the date of shipment to customers. Extended warranty and maintenance
services are also offered to customers as the primary warranty expires. All
repair work for the Company's products is presently done at the Company's
Plymouth, Minnesota, manufacturing facility.

MANUFACTURING

The Company typically assembles its products from components and
prefabricated parts manufactured and supplied by others, such as controllers,
cabinets, multiple disk drives, one or more power supplies and other
miscellaneous parts. Certain of the items manufactured by others are made to the
Company's specifications. The Company has established strategic relationships
with certain of its suppliers to manage inventory in such a manner that the
Company is better able to fulfill changing customer needs. For example, the
Company receives disk drives on a consignment basis, which allows the Company to
have access to the drives as needed without having to carry substantial amounts
of inventory. The Company's principal suppliers are Anthem Electronics, Inc.,
Manufacturers' Services Limited and Fabrico, Inc. The Company is also ISO 9001
certified, an international quality standard.

Assembly operations for the Company's products are performed in Plymouth,
Minnesota. The sophisticated nature of the Company's products requires extensive
testing by skilled personnel. The Company utilizes specialized testing equipment
and maintains an internal test engineering group to provide this product
support.

RESEARCH AND DEVELOPMENT

The Company operates in an industry which is subject to rapid technological
change. Its goals in research and development are to develop leading edge
products that adhere to industry standards. The Company's ability to achieve
this goal is largely dependent upon its ability to anticipate and respond to
change. The Company uses engineering design teams that work cross-functionally
with marketing managers, application engineers and customers to develop products
and product enhancements. Computer input/output interface standards are
maintained and an extensive disk drive qualification program is in place to
monitor off-the-shelf disk drives to ensure the quality and performance of the
disk drives integrated into the Company's disk arrays. As part of its
development strategy, the Company actively seeks available, cooperative and
co-development activities with industry leaders in the hardware, software and
systems businesses, such as Silicon Graphics.

Ciprico's research and development efforts have been successful as
demonstrated by such accomplishments as offering the first RAID-3 disk array to
achieve real-time playback of uncompressed video, and the first and only RAID-3
provider to receive Silicon Graphics' "Gold Seal Approval." In April 1996, the
Company announced its newest product, which utilizes the new Fibre Channel
interface. The Company has invested significant resources in the development of
its Fibre Channel disk array and is the first manufacturer to introduce a disk
array integrating this new interface. The Company expects to begin shipments of
this new Fibre Channel product in the fall of 1996. The Company is one of 60
companies that are members of the Fibre Channel Association, which is committed
to providing connectivity to standard computing platforms.

Research and development expenses during the first six months of fiscal
1996 and during fiscal 1995 and 1994 were $1.1 million, $1.8 million and $1.7
million, respectively. All of the Company's research and development
expenditures are expensed as incurred. As of March 31, 1996, the Company had 22
full-time employees engaged in research and development activities, 20 of whom
are engineers.

28
<PAGE> 31

COMPETITION

The market for all levels of RAID disk arrays is highly competitive. The
Company competes with disk array manufacturers, with manufacturers of
proprietary, integrated computer systems and with systems integrators that
market computer systems which contain general purpose RAID disk arrays. Such
competitors often offer systems at lower prices than those offered by the
Company and the Company must compete on the basis of product performance in
specific applications. Many of these competitors have greater financial,
manufacturing and marketing resources than those of the Company. The Company's
ability to compete successfully depends upon its ability to continue to develop
high performance products that obtain market acceptance and can be sold at
increasingly competitive prices.

PROPRIETARY TECHNOLOGY AND TRADEMARKS

The Company has no patents, and does not consider ownership of patents to
be material to its business. The Company believes that the rapidly changing
technology in the computer industry makes the Company's future success dependent
more on the technical competence and creative skills of its personnel than on
any patents it may be able to obtain. However, protection of the Company's
proprietary hardware, firmware and software is very important to the Company. It
relies upon trade secrecy and confidentiality agreements with its employees and
customers, rather than on patent or copyright protection, to preserve its
intellectual property rights.

The Company has obtained federal registrations for the trademark Ciprico(R)
and has filed a federal application to register the trademark Spectra 6000(TM).

EMPLOYEES

At March 31, 1996, the Company had 87 full-time employees, of which 15 were
engaged in manufacturing, 22 in engineering and research and development, 39 in
sales, sales support and marketing and 11 in general management and
administration. None of the Company's employees is represented by a labor union.
The Company has experienced no work stoppages and believes that its employee
relations are good.

Management believes that the future success of the Company will depend in
part on its ability to attract and retain qualified technical, management and
marketing personnel. Such experienced personnel are in great demand, and the
Company must compete for their services with other firms which may be able to
offer more favorable benefits.

FACILITIES

The Company's administrative headquarters, manufacturing and research and
development operations are located in one building in Plymouth, Minnesota,
totaling approximately 32,000 square feet. The Company's rent and maintenance
costs for this space are approximately $28,000 per month. The lease for this
space expires in October 1997. The Company believes that its existing facilities
and equipment are adequate for its current needs. The Company owns most of the
equipment used in its operations. Such equipment consists primarily of
manufacturing and test equipment, tools and fixtures.

LEGAL PROCEEDINGS

The Company is not a party to nor is any of its property subject to any
material pending legal proceedings.

29
<PAGE> 32

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The Directors, executive officers and certain key employees of the Company
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
Robert H. Kill(1)............. 49 Chairman of the Board, President and Chief Executive
Officer
Cory J. Miller................ 42 Vice President of Finance, Chief Financial Officer and
Secretary
Stephen R. Hansen............. 44 Vice President of Operations and Development
Susan A. Leenerman............ 42 Director of Marketing
Stuart A. Reile............... 55 Director of Sales for North America
Christopher Gerrard........... 44 Director of International Operations
Ronald B. Thomas(2)........... 52 Director
Gary L. Deaner(2)............. 56 Director
Peyton Gannaway(1)............ 56 Director
Donald H. Soukup(1)........... 56 Director
William N. Wray(2)............ 68 Director
</TABLE>

- ------------
(1) Member of Audit Committee

(2) Member of Compensation Committee

All Directors hold office until the next annual meeting of shareholders or
until their successors have been duly elected and qualified. Executive officers
of the Company are appointed by and serve at the discretion of the Board of
Directors. The Board of Directors has a Compensation Committee which provides
recommendations concerning salaries and other compensation to be paid to
executive officers of the Company and administers the Company's employee stock
plans. The Board also has an Audit Committee which is responsible for reviewing
the Company's audit process.

Robert H. Kill has been President and Chief Executive Officer of the
Company since March 1988, a Director since September 1987 and was elected
Chairman of the Board in January 1996. Mr. Kill was Executive Vice President of
the Company from September 1987 to March 1988, Secretary from September 1987 to
July 1988 and from November 1989 to October 1993, and Vice President and General
Manager from August 1986 to September 1987. Mr. Kill held several marketing and
sales positions at Northern Telecom Inc. from 1979 to 1986, his last position
being Vice President, Terminals Distribution.

Cory J. Miller was elected Vice President of Finance and Chief Financial
Officer in October 1992 and Secretary in October 1993. Mr. Miller served as the
Company's Controller and Chief Financial Officer from December 1989 to October
1992 and as Controller from October 1987 to December 1989. Mr. Miller was
Director of Finance at VTC Inc., a semiconductor manufacturer, from 1985 to 1987
prior to joining Ciprico.

Stephen R. Hansen has been Vice President of Operations and Development
since March 1996. Mr. Hansen served as Vice President of Engineering since
joining the Company in 1989. From 1983 to 1989, Mr. Hansen was employed by Zycad
Corporation in various engineering and product development management roles.
Prior to his employment with Zycad, Mr. Hansen was with Control Data Corporation
from 1974 to 1983.

Susan A. Leenerman has served as Director of Marketing for the Company
since 1992. She joined the Company as the Marketing Communications Manager in
1991. Prior to her positions with Ciprico, Ms. Leenerman was Market Development
Manager at Tricord Systems, Inc., a personal computer server manufacturer, from
1989 to 1991. She also held several marketing management positions with Lee Data
Corporation prior to 1989.

30
<PAGE> 33

Stuart A. Reile has been Director of Sales for North America for Ciprico
since December 1992. He has been with the Company since April 1981, holding
various positions in marketing and sales. Prior to his employment by the
Company, Mr. Reile held technical and sales positions for companies including GE
Computer Service, Tally Mannesman Corporation, Centronics, Electronic Marketing
Specialists and Datum Computer Service, Inc.

Christopher Gerrard has served as Director of International Operations of
the Company since November 1992. He joined the Company in 1990 primarily to
assist in the formation of the Company's European subsidiary. Prior to joining
the Company, Mr. Gerrard held various senior positions with computer companies
including Hitachi, Fujitsu and Control Data Corporation.

Ronald B. Thomas has been a Director of the Company since its incorporation
in February 1978 and served as its Chairman of the Board from March 1988 to
January 1996. He has been a private investor since March 1988. Mr. Thomas served
as President and Treasurer of the Company from February 1978 to March 1988 and
was the sole proprietor of the Company's unincorporated predecessor.

Gary L. Deaner was elected a Director of the Company in May 1995. Since
January 1995, Mr. Deaner has been Vice President and General Manager, Lan
Connect, a division of Digi International, Inc., a manufacturer of computer
communications products. From August 1991 to January 1995 Mr. Deaner served as
President of Arnet Corporation, then a subsidiary of Digi International, and
from 1985 to 1991 he was Vice President of Marketing for Digi International.

Peyton Gannaway was elected a Director of the Company in January 1996. Mr.
Gannaway was President, Chief Operating Officer and a director of Anthem
Electronics from 1984 until his retirement in 1994. Prior to that time, Mr.
Gannaway was Vice President and Senior Vice President of Anthem from 1975 to
1984. Mr. Gannaway is a director of Aptos Semiconductor Corporation, a
semiconductor manufacturer.

Donald H. Soukup became a Director of the Company in March 1982. Mr. Soukup
has been an independent venture capitalist for more than five years. Mr. Soukup
is also a director of MinnTech Corporation, a medical device company, and
several privately held companies.

William N. Wray has been a Director of the Company since July 1993. Prior
to his retirement in 1988, Mr. Wray held various management positions at
Honeywell, Inc., the most recent being Executive Vice President of Honeywell
Information Systems (from 1985 to 1989) and Executive Vice President of
Corporate Marketing (from 1987 to 1988). Mr. Wray is currently employed by
Honeywell Consultants, Ltd., an organization comprised of retired Honeywell
executives who are now involved in civic and nonprofit organizations.

31
<PAGE> 34

PRINCIPAL SHAREHOLDERS

The following table sets forth as of March 31, 1996, and as adjusted to
reflect the sale of the shares offered hereby, certain information regarding
beneficial ownership of the Company's Common Stock by (i) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each Director of the Company, (iii) each executive officer and (iv)
all executive officers and Directors of the Company as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING(1) OWNED AFTER OFFERING(1)
----------------------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT PERCENT
- ------------------------------------------------ --------- ------- -----------------------
<S> <C> <C> <C>
Robert H. Kill(2)............................... 74,076 2.1% 1.5%
Ronald B. Thomas(3)............................. 43,270 1.2% *
Cory J. Miller(4)............................... 15,600 * *
Gary L. Deaner(5)............................... 4,500 * *
Peyton Gannaway................................. 0 * *
Donald H. Soukup(3)............................. 47,250 1.3% *
William N. Wray(5).............................. 15,000 * *
Perkins Capital Management, Inc.(6)............. 1,395,975 40.0% 28.0%
All executive officers and Directors as a group
(7 persons)(7)................................ 199,696 5.5% 3.9%
</TABLE>

- ------------
* Less than one percent.

(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of March 31, 1996, or within 60 days
of such date, are treated as outstanding when determining the percent of the
class owned by such individual and when determining the percent owned by the
group. For purposes of calculating the percent of class owned after this
offering, it was assumed that the officers, Directors and principal
shareholders will not be purchasing shares in this offering. Unless
otherwise indicated, each person named or included in the group has sole
voting and investment power with respect to the shares of Common Stock set
forth opposite his name.

(2) Includes 45,000 shares purchasable upon exercise of currently exercisable
options.

(3) Includes 30,000 shares purchasable upon exercise of currently exercisable
options.

(4) Includes 8,400 shares purchasable upon exercise of currently exercisable
options.

(5) Represents shares purchasable upon exercise of currently exercisable
options.

(6) Perkins has indicated that as of March 31, 1996 it beneficially owns
1,395,975 shares, that it has no voting power as to 991,350 of such shares,
has sole voting power as to the remainder, and has sole dispositive power
over all of such shares. The address of Perkins is 730 East Lake Street,
Wayzata, MN 55391.

(7) Includes 132,900 shares purchasable upon exercise of currently exercisable
options.

32
<PAGE> 35

DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of 10,000,000 shares
of capital stock, $0.01 per share par value, of which 9,000,000 shares are
Common Stock and 1,000,000 shares are Preferred Stock.

COMMON STOCK

As of March 31, 1996, the Company had 3,487,525 shares of Common Stock
issued and outstanding. The holders of the Common Stock: (i) have equal ratable
rights to dividends from funds legally available therefor, when, as and if
declared by the Board of Directors of the Company; (ii) are entitled to share
ratably in all the assets of the Company available for distribution to holders
of the Common Stock upon liquidation, dissolution or winding up of the affairs
of the Company; (iii) do not have preemptive, subscription or conversion rights
and there are no redemption or sinking fund provisions applicable thereto; and
(iv) are entitled to one vote per share on all matters which shareholders may
vote on at all meetings of shareholders. All shares of Common Stock now
outstanding are fully paid and nonassessable.

The holders of the Common Stock do not have cumulative voting rights, which
means that the holders of more than 50% of such outstanding shares voting for
the election of directors can elect all of the directors of the Company to be
elected, if they so choose. In such event, the holders of the remaining shares
will not be able to elect any of the Company's directors.

PREFERRED STOCK

No shares of Preferred Stock are currently outstanding. The Board of
Directors is empowered to establish, and to designate the name of, each class or
series of the Preferred Stock and to set the terms of such shares (including
terms with respect to redemption, sinking fund, dividend, liquidation,
preemptive, conversion and voting rights and preferences). Accordingly, the
Board of Directors, without shareholder approval, may issue Preferred Stock with
terms (including terms with respect to redemption, sinking fund, dividend,
liquidation, preemptive, conversion and voting rights and preferences) that
could adversely affect the voting power and other rights of holders of the
Common Stock.

STATE LAW PROVISIONS WITH POTENTIAL ANTI-TAKEOVER EFFECT

The Company is subject to Section 203 of the Delaware General Corporation
Law. In general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the date the person became an interested
stockholder, unless (with certain exceptions) the "business combination" or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the interested stockholder. Generally, an "interested stockholder" is a person
who, together with affiliates and associates, owns (or, in the case of
affiliates or associates of the corporation, within three years prior to the
determination of interested stockholder status, did own) 15% or more of a
corporation's voting stock. The existence of this provision would be expected to
have anti-takeover effects with respect to transactions not approved in advance
by the board of directors, such as discouraging takeover attempts that might
result in a premium over the market price of the Common Stock.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar with respect to the Company's Common Stock
is Norwest Bank Minnesota, N.A.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Certificate of Incorporation, as amended, limits the
liability of Directors in their capacity as Directors of the Company or its
shareholders to the full extent permitted by Delaware law. The Certificate of
Incorporation provides that a Director shall not be liable to the Company or its
shareholders for monetary

33
<PAGE> 36

damages for breach of fiduciary duty as a Director, except (i) for any breach of
the Director's duty of loyalty to the Company or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for dividends, stock repurchases and other
distributions made in violation of Delaware law or for violations of the
Delaware securities laws, (iv) for any transaction from which the Director
derived an improper personal benefit or (v) for any act or omission occurring
prior to the effective date of the provision in the Company's Certificate of
Incorporation, as amended, limiting such liability. These provisions do not
affect the availability of equitable remedies, such as an action to enjoin or
rescind a transaction involving a breach of fiduciary duty, although, as a
practical matter, equitable relief may not be available. The above provisions
also do not limit the liability of the Directors for violations of, or relieve
them from the necessity of complying with federal securities laws.

The Certificate of Incorporation of the Company, as amended, also provides
that the Company will exercise, to the extent permitted by law, its power of
indemnification, and that the foregoing right of indemnification shall not be
exclusive of other rights to which a person shall be entitled as a matter of
law. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission (the "Commission")
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

34
<PAGE> 37

UNDERWRITING

Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Needham & Company, Inc. and
Dain Bosworth Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company, and the
Company has agreed to sell to each Underwriter, the aggregate number of shares
of Common Stock set forth opposite their respective names in the table below.
The Underwriting Agreement provides that the obligations of the Underwriters to
pay for and accept delivery of the shares of Common Stock are subject to certain
conditions precedent, and that the Underwriters are committed to purchase and
pay for all shares if any shares are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Needham & Company, Inc........................................................... 377,500
Dain Bosworth Incorporated....................................................... 377,500
Bear, Stearns & Co. Inc. ........................................................ 50,000
Donaldson, Lufkin & Jenrette Securities Corporation.............................. 50,000
A.G. Edwards & Sons, Inc. ....................................................... 50,000
Hambrecht & Quist LLC............................................................ 50,000
Lehman Brothers Inc. ............................................................ 50,000
Merrill Lynch & Co. ............................................................. 50,000
Morgan Stanley & Co. Incorporated................................................ 50,000
Robertson, Stephens & Company, L.P. ............................................. 50,000
William Blair & Company.......................................................... 35,000
First Albany Corporation......................................................... 35,000
Morgan Keegan & Company, Inc. ................................................... 35,000
Raymond James & Associates, Inc. ................................................ 35,000
SoundView Financial Group, Inc. ................................................. 35,000
Unterberg Harris................................................................. 35,000
Wessels, Arnold & Henderson...................................................... 35,000
Arizona Securities Group, Inc. .................................................. 20,000
Crowell, Weedon & Co. ........................................................... 20,000
Cruttenden Roth Incorporated..................................................... 20,000
John G. Kinnard and Company, Incorporated........................................ 20,000
Rodman & Renshaw, Inc. .......................................................... 20,000
---------
Total....................................................................... 1,500,000
=========
</TABLE>

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the offering price
set forth on the cover page of this Prospectus and to certain dealers (who may
include the Underwriters) at such price less a concession not in excess of $0.67
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers (who may
include the Underwriters). After the offering to the public, the offering price
and other selling terms may be changed by the Representatives.

The Company has granted the Underwriters a 30-day option to purchase up to
an additional 225,000 shares solely to cover over-allotments, if any, at the
public offering price per share, less the underwriting discounts and commissions
set forth on the cover page of this Prospectus. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
Common Stock offered hereby. To the extent the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares of Common Stock to be purchased by such
Underwriters as shown in the above table bears to the total shown.

35
<PAGE> 38

In connection with this offering, certain of the Underwriters and selling
group members may engage in passive market making transactions in the Common
Stock of the Company on the Nasdaq National Market immediately prior to the
commencement of sales in this offering, in accordance with Rule 10b-6A under the
Exchange Act. Passive market making consists of displaying bids on the Nasdaq
National Market which are limited by the bid prices of independent market makers
and making purchases limited by such prices and effected in response to order
flow. Net purchases by passive market makers on each day are generally limited
to a specified percentage of the passive market maker's average daily trading
volume in the Company's Common Stock during a specified prior period and must be
discontinued when such limit is reached. Passive market making may stabilize the
market price of the Common Stock of the Company at a level above that which
might otherwise prevail in the open market and, if commenced, may be
discontinued at any time.

In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection with
this offering, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.

The Company's officers and directors have agreed that, without the prior
written consent of Needham & Company, Inc., they will not, directly or
indirectly, offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exchangeable for Common Stock
for 180 days after the date of this Prospectus. The Company has agreed in the
Underwriting Agreement not to offer, sell, contract to sell or otherwise dispose
of any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock, other than the shares of Common Stock being offered
hereby, for a period of 180 days after the date of this Prospectus without the
prior written consent of Needham & Company, Inc., provided that the Company may
issue securities pursuant to its stock option plans and upon the exercise of
outstanding options.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject any order for the purchase of shares in whole or in part.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Fredrikson & Byron, P.A., 1100 International Centre, 900 Second
Avenue South, Minneapolis, Minnesota 55402. Certain legal matters for the
Underwriters will be passed upon by Faegre & Benson LLP, 2200 Norwest Center, 90
South Seventh Street, Minneapolis, Minnesota 55402.

EXPERTS

The consolidated financial statements of Ciprico as of September 30, 1994
and 1995 and for each of the years in the three-year period ended September 30,
1995, included herein and elsewhere in the Registration Statement, have been
included herein and elsewhere in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

36
<PAGE> 39

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-2 under the Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is hereby
made to such Registration Statement, exhibits and schedules. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement or such other document, each such statement being
qualified in all respects by such reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy or information statements and other information
with the Commission. Such reports, proxy or information statements and other
information, as well as the Registration Statement of which this Prospectus is a
part and the exhibits and schedules thereto, may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the
following Regional Offices: 7 World Trade Center, 13th Floor, New York, New York
10048, and Northwestern Atrium Center, 500 W. Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can also be obtained from the
Public Reference Section of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, by mail at prescribed rates.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated herein by reference: (1) the Company's Annual Report on Form 10-KSB
for the fiscal year ended September 30, 1995 and (2) the Company's interim
reports on Form 10-QSB for the fiscal quarters ended December 31, 1995 and March
31, 1996. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. The Company will provide
without charge to each person to whom this Prospectus is delivered, upon a
written request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to the Chief
Financial Officer of the Company, 2800 Campus Drive, Suite 60, Plymouth,
Minnesota 55441, Telephone: (612) 551-4000.

37
<PAGE> 40

CIPRICO INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

INDEX

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Financial Statements:
Consolidated Balance Sheets as of September 30, 1994 and 1995, and
March 31, 1996 (Unaudited)....................................................... F-3
Consolidated Statements of Operations:
Years Ended September 30, 1993, 1994, and 1995, and Six Months
Ended March 31, 1995 and 1996 (Unaudited)...................................... F-4
Consolidated Statements of Stockholders' Equity:
Years Ended September 30, 1993, 1994, and 1995, and Six Months
Ended March 31, 1996 (Unaudited)............................................... F-5
Consolidated Statements of Cash Flows:
Years Ended September 30, 1993, 1994, and 1995, and Six Months
Ended March 31, 1995 and 1996 (Unaudited)...................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 41

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND STOCKHOLDERS
CIPRICO INC.:

We have audited the accompanying consolidated balance sheets of Ciprico
Inc. and subsidiaries as of September 30, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended September 30, 1995. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ciprico Inc.
and subsidiaries as of September 30, 1994 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1995, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
November 3, 1995, except as to note 6(b)
which is as of March 27, 1996

F-2
<PAGE> 42

CIPRICO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,176,125 $ 3,425,471 $ 6,041,025
Marketable securities............................................ 1,300,412 1,267,482 --
Trade accounts receivable, less allowance for doubtful accounts
of $249,000 in 1994, $180,000 in 1995 and $285,000 at March 31,
1996........................................................... 2,335,847 3,227,535 3,467,836
Related party receivable......................................... 106,737 -- --
Other receivables................................................ 14,335 87,751 47,256
----------- ----------- -----------
Total accounts receivable...................................... 2,456,919 3,315,286 3,515,092
Inventories:
Finished goods................................................. 459,026 949,044 962,292
Work-in-process................................................ 261,097 231,622 714,563
Raw materials.................................................. 423,521 397,172 775,609
----------- ----------- -----------
Total inventories.............................................. 1,143,644 1,577,838 2,452,464
Deferred income taxes............................................ -- -- 308,000
Other current assets............................................. 161,990 115,490 140,389
----------- ----------- -----------
Total current assets........................................... 7,239,090 9,701,567 12,456,970
Furniture and equipment, at cost:
Furniture and fixtures......................................... 316,890 332,418 332,811
Equipment...................................................... 4,520,663 4,665,683 5,338,055
----------- ----------- -----------
4,837,553 4,998,101 5,670,866
Less accumulated depreciation.................................. (3,495,258) (3,785,667) (4,171,873)
----------- ----------- -----------
Net furniture and equipment.................................... 1,342,295 1,212,434 1,498,993
Other assets..................................................... 1,835 6,066 7,840
----------- ----------- -----------
Total assets................................................... $ 8,583,220 $10,920,067 $13,963,803
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under capital leases......... $ 20,880 $ 27,330 $ 28,976
Accounts payable................................................. 1,480,645 2,346,639 2,817,254
Accrued compensation............................................. 228,754 354,611 424,157
Warranty accrual................................................. 53,000 65,000 292,880
Income taxes payable............................................. 72,991 76,454 530,285
Other accrued expenses........................................... 82,822 169,297 169,311
Deferred revenue................................................. 56,202 89,548 167,913
----------- ----------- -----------
Total current liabilities...................................... 1,995,294 3,128,879 4,430,776
Long-term installments of obligations under capital leases....... 48,140 40,102 22,399
Deferred rent.................................................... 66,264 54,822 42,646
----------- ----------- -----------
Total liabilities.............................................. 2,109,698 3,223,803 4,495,821
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized;
none issued and outstanding.................................... -- -- --
Common stock, $0.01 par value; 9,000,000 shares authorized;
issued and outstanding 3,099,924 shares in 1994, 3,398,919
shares in 1995 and 3,487,525 shares at March 31, 1996.......... 30,999 33,989 34,875
Additional paid-in capital....................................... 5,857,638 6,621,704 6,842,553
Retained earnings................................................ 601,432 997,509 2,612,383
Unrealized gain on marketable securities......................... -- 60,400 --
Accumulated translation adjustments.............................. (16,547) (17,338) (21,829)
----------- ----------- -----------
Total stockholders' equity..................................... 6,473,522 7,696,264 9,467,982
----------- ----------- -----------
Commitments (note 11)............................................
Total liabilities and stockholders' equity..................... $ 8,583,220 $10,920,067 $13,963,803
=========== =========== ===========
</TABLE>

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these Consolidated Financial Statements.

F-3
<PAGE> 43

CIPRICO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
----------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales...................... $ 9,213,626 $13,120,610 $15,966,203 $6,775,835 $12,782,879
Cost of sales.................. 4,609,314 6,847,643 8,498,374 3,667,349 6,707,711
----------- ----------- ----------- ----------- ----------
Gross profit................. 4,604,312 6,272,967 7,467,829 3,108,486 6,075,168
Sales and marketing expenses... 3,592,686 3,693,255 4,129,493 1,806,615 2,328,483
General and administrative
expenses...................... 1,386,675 1,307,632 1,432,373 656,531 1,088,403
Research and development
expenses...................... 1,651,277 1,693,619 1,799,547 809,094 1,116,102
----------- ----------- ----------- ----------- ----------
Earnings (loss) from
operations................... (2,026,326) (421,539) 106,416 (163,754) 1,542,180
Other income (expense):
Interest expense............. (10) (5,736) (7,101) (3,437) (4,249)
Interest and dividend
income.................... 206,298 156,542 203,309 93,566 126,479
Royalty income............... 173,950 122,200 91,950 62,950 49,000
Gain (loss) on investments... (45,221) (148,920) 4,093 -- 60,424
Gain (loss) on sale of fixed
assets...................... (79,970) 1,030 27,476 217 (1,419)
Other, net................... 17,188 (3,200) (2,066) (7,173) 2,459
----------- ----------- ----------- ----------- ----------
272,235 121,916 317,661 146,123 232,694
Earnings (loss) before income
taxes......................... (1,754,091) (299,623) 424,077 (17,631) 1,774,874
Income tax expense............. 24,000 21,000 28,000 9,000 160,000
----------- ----------- ----------- ----------- ----------
Net earnings (loss)............ $(1,778,091) $ (320,623) $ 396,077 $ (26,631) $ 1,614,874
=========== =========== =========== =========== ==========
Earnings (loss) per common
share......................... $ (0.58) $ (0.10) $ 0.12 $ (0.01) $ 0.43
=========== =========== =========== =========== ==========
Weighted average number of
common and common equivalent
shares outstanding............ 3,067,884 3,093,872 3,394,079 3,164,270 3,775,938
</TABLE>

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these Consolidated Financial Statements.

F-4
<PAGE> 44

CIPRICO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED SEPTEMBER 30, 1993, 1994, 1995 AND
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
COMMON STOCK ACCUMULATED SECURITIES
AND ADDITIONAL RETAINED TRANSLATION AVAILABLE
SHARES PAID-IN CAPITAL EARNINGS ADJUSTMENTS FOR SALE TOTAL
--------- ---------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992..... 3,058,224 $5,806,219 $2,700,146 $ (435) $ -- $8,505,930
Stock issued in connection
with exercise of employee
stock options................ 23,403 44,186 -- -- -- 44,186
Net loss...................... -- -- (1,778,091) -- -- (1,778,091)
Foreign currency adjustment... -- -- -- (12,538) -- (12,538)
--------- ---------- ---------- -------- -------- ----------
Balance, September 30, 1993..... 3,081,627 5,850,405 922,055 (12,973) -- 6,759,487
Stock issued in connection
with exercise of employee
stock options................ 18,297 38,232 -- -- -- 38,232
Net loss...................... -- -- (320,623) -- -- (320,623)
Foreign currency adjustment... -- -- -- (3,574) -- (3,574)
--------- ---------- ---------- -------- -------- ----------
Balance, September 30, 1994..... 3,099,924 5,888,637 601,432 (16,547) -- 6,473,522
Stock issued in connection
with exercise of employee
stock options................ 297,416 702,588 -- -- -- 702,588
Restricted stock issued....... 1,579 5,002 -- -- -- 5,002
Net earnings.................. -- -- 396,077 -- -- 396,077
Foreign currency adjustment... -- -- -- (791) -- (791)
Excess of fair value over
option price for stock
options exercised............ -- 59,466 -- -- -- 59,466
Change in unrealized gain on
securities available for
sale......................... -- -- -- -- 60,400 60,400
--------- ---------- ---------- -------- -------- ----------
Balance, September 30, 1995..... 3,398,919 6,655,693 997,509 (17,338) 60,400 7,696,264
Stock issued in connection
with exercise of employee
stock options (unaudited).... 88,664 222,516 -- -- -- 222,516
Net earnings (unaudited)...... -- -- 1,614,874 -- -- 1,614,874
Foreign currency adjustment
(unaudited).................. -- -- -- (4,491) -- (4,491)
Change in unrealized gain on
securities available for sale
(unaudited).................. -- -- -- -- (60,400) (60,400)
Fractional shares, related to
stock split (unaudited)...... (58) (781) -- -- -- (781)
--------- ---------- ---------- -------- -------- ----------
Balance, March 31, 1996
(unaudited).................... 3,487,525 $6,877,428 $2,612,383 $ (21,829) $ -- $9,467,982
========= ========== ========== ======== ======== ==========
</TABLE>

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these Consolidated Financial Statements.

F-5
<PAGE> 45

CIPRICO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
-------------------------------------- ----------------------------
1993 1994 1995 1995 1996
----------- ----------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................... $(1,778,091) $ (320,623) $ 396,077 $ (26,631) $ 1,614,874
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Depreciation and amortization........... 724,852 690,969 712,476 361,089 439,268
Provision for inventory obsolescence.... 195,000 142,418 307,380 90,500 223,221
Provision for warranty expense.......... -- -- 12,000 -- 285,000
Provision for bad debt expense.......... 38,000 63,303 36,029 4,000 100,517
Deferred income taxes................... -- -- -- -- (308,000)
(Gain) loss on retirement of furniture
and equipment.......................... 79,970 (1,030) (27,476) (217) 1,658
Gain on sale of marketable securities... -- (1,103) (4,093) -- (60,424)
Security valuation adjustment to market
value.................................. 45,221 192,779 -- -- --
Excess of fair value over option price
for stock options exercised............ -- -- 59,466 -- --
Changes in operating assets and
liabilities:
Accounts receivable..................... 662,943 (1,077,421) (894,396) 974,703 (300,323)
Inventories............................. 83,440 50,795 (741,574) (318,802) (1,097,847)
Other current assets.................... 9,731 (43,493) 46,500 31,432 (24,899)
Accounts payable........................ 39,025 812,916 865,994 (566,201) 470,615
Accrued expenses........................ (17,341) 14,709 212,332 (146,325) 12,440
Income taxes payable.................... (31,707) (4,029) 3,463 3,299 453,831
Deferred revenue........................ -- 56,202 33,346 21,902 78,365
Deferred rent........................... 19,541 (10,151) (11,442) (5,721) (12,176)
Other, net.............................. (14,628) (1,514) (790) 1,176 (5,272)
----------- ----------- ---------- ----------- ----------
Net cash flows provided by operating
activities........................... 55,956 564,727 1,005,292 424,204 1,870,848
----------- ----------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Furniture and equipment purchases......... (718,738) (611,997) (682,616) (344,779) (728,365)
Proceeds from sale of furniture and
equipment................................ 28,854 100,569 146,145 41,871 880
Decrease in restricted cash............... -- 450,000 -- -- --
Other assets, net......................... 9,782 1,706 (4,231) (440) (1,774)
Investment in marketable securities....... (25,348) (288,412) -- -- --
Proceeds from sale of marketable
securities............................... 95,000 107,000 97,422 -- 1,267,506
----------- ----------- ---------- ----------- ----------
Net cash flows provided by (used in)
investing activities................. (610,450) (241,134) (443,280) (303,348) 538,247
----------- ----------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease
obligations.............................. (4,585) (11,575) (20,256) (8,786) (16,057)
Proceeds from issuance of common stock.... 44,186 38,232 707,590 285,790 222,516
----------- ----------- ---------- ----------- ----------
Net cash flows provided by financing
activities........................... 39,601 26,657 687,334 277,004 206,459
----------- ----------- ---------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents............................... (514,893) 350,250 1,249,346 397,860 2,615,554
Cash and cash equivalents at beginning of
period..................................... 2,340,768 1,825,875 2,176,125 2,176,125 3,425,471
----------- ----------- ---------- ----------- ----------
Cash and cash equivalents at end of
period..................................... $ 1,825,875 $ 2,176,125 $3,425,471 $2,573,985 $ 6,041,025
=========== =========== ========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest................................ $ 10 $ 5,736 $ 7,101 $ 3,811 $ 4,249
Income taxes............................ $ 55,707 $ 25,029 $ 24,537 $ 3,777 $ 13,044
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING
ACTIVITY:
During fiscal 1993, 1994 and 1995, the
Company entered into capital leases for
equipment and incurred obligations of
$37,078, $59,480 and $68,208,
respectively.
</TABLE>

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these Consolidated Financial Statements.

F-6
<PAGE> 46

CIPRICO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1993, 1994 AND 1995

(Information as of March 31, 1996 and for the Six Months Ended
March 31, 1995 and 1996 is Unaudited.)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business:

The principal business activity of Ciprico Inc. and subsidiaries (the
Company) is the design, manufacture, marketing and service of disk array
solutions for use in high performance computer systems for the visual computing
markets.

Unaudited Interim Information:

The accompanying unaudited consolidated financial statements as of March
31, 1996 and for the six months ended March 31, 1995 and 1996 have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal,
recurring accruals) considered necessary for a fair presentation have been
included. Results for the interim periods are not necessarily indicative of the
results for an entire year.

Consolidation:

The accompanying consolidated financial statements include the accounts of
Ciprico Inc. and its wholly owned subsidiaries, Ciprico International Limited
and Ciprico FSC, Inc. (a foreign sales corporation). All significant
intercompany balances and transactions have been eliminated.

Revenue Recognition:

Revenue is recognized upon shipment of products. Revenue from extended
warranty and maintenance agreements are recognized on the straight-line basis
over the term of the agreement.

Product Warranty Costs:

Estimated future warranty costs are provided at the time of revenue
recognition.

Royalty Income:

Royalties are recognized when payment is received.

Statements of Cash Flows:

For purposes of reporting cash flows, all temporary cash investments having
initial maturities of three months or less are considered cash equivalents.

Marketable Securities:

Marketable securities at September 30, 1994 and 1995 consist of mutual
funds investing in mortgage backed debt securities. The Company adopted the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS No. 115) at
September 30, 1994. Under SFAS No. 115, the Company's marketable securities are
classified as available-for-sale and recorded at fair value. Unrealized holding
gains and losses on available-for-sale securities are excluded from operations
and are reported as a separate component of stockholders' equity until realized.
A decline in the market value of any available-for-sale security that is below
cost and deemed other than temporary, results in a charge to operations and the
establishment of a new cost basis for the security.

Prior to adoption of SFAS No. 115, unrealized losses resulted in a charge
to operating results. Adoption of this statement did not impact the Company's
financial position or results of operation for the fiscal year

F-7
<PAGE> 47

CIPRICO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ended September 30, 1994. The previously recorded decline in the fair value of
the Company's investments has been deemed other than temporary.

Inventories:

Inventories are stated at the lower of cost or replacement market. Cost is
determined using the first-in, first-out (FIFO) method. Inventory costs include
outside assembly charges, allocated manufacturing overhead and direct material
costs. The allocated overhead component totaled $30,000 in 1994 and $58,810 in
1995.

Furniture and Equipment:

Furniture and equipment is carried at cost, less accumulated depreciation.
Depreciation is provided using the straight line method over estimated useful
lives of three to seven years. Major replacements and improvements are
capitalized; repairs and maintenance are expensed as incurred.

Income Taxes:

Deferred income taxes are recognized for income and expense items that are
reported in different years for financial reporting purposes and income tax
purposes. The Company's method of accounting for income taxes conforms with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes"(SFAS No. 109).

Research and Development Costs:

Research and development costs are charged to expense as incurred.

Foreign Currency:

The financial statements of Ciprico International Limited have been
translated into U.S. dollars in accordance with the provisions of Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation" (SFAS No.
52). Under SFAS No. 52, assets and liabilities are translated into U.S. dollars
at the year-end exchange rate, while income and expenses are translated at the
average exchange rates during the year. The resulting translation adjustments
are reflected as a separate component of stockholders' equity.

Reclassification:

Certain 1994 amounts have been reclassified to conform to the 1995
presentation.

2. MARKETABLE SECURITIES

The cost, gross unrealized gain, and fair market value from the sale of
available-for-sale securities were as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
Cost................................................................. $1,300,412 $1,207,082
Gross unrealized gain................................................ -- 60,400
Fair value........................................................... 1,300,412 1,267,482
</TABLE>

Proceeds from the sale of marketable securities in 1993, 1994 and 1995 and
for the first six months of fiscal 1995 and 1996 were $95,000, $107,000,
$97,422, $0 and $1,267,506, respectively. Net realized gains included in income
in 1993, 1994, 1995 and for the first six months of fiscal 1995 and 1996 were
$0, $1,103, $4,093, $0 and $60,424, respectively.

F-8
<PAGE> 48

CIPRICO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. OTHER ACCRUED EXPENSES

Other accrued expenses consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
------------------- --------
1994 1995 1996
------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Marketing expenses............................................. $ -- $ 64,220 $ 48,475
Commission expense............................................. 24,832 39,044 36,452
Employee benefits.............................................. 26,952 21,895 70,254
Professional fees.............................................. 12,000 21,194 6,416
Payroll taxes.................................................. 12,653 17,443 3,714
Miscellaneous, other........................................... 6,385 5,501 4,000
------- -------- --------
Total........................................................ $82,822 $169,297 $169,311
======= ======== ========
</TABLE>

4. INCOME TAXES

Effective for the year ended September 30, 1993, the Company adopted SFAS
No. 109. The provisions for income tax expense consist of:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $ -- $ -- $ 5,000
State............................................... 5,000 -- 5,000
Foreign............................................. 19,000 21,000 18,000
------- ------- -------
Total current.................................... 24,000 21,000 28,000
------- ------- -------
Deferred.............................................. -- -- --
------- ------- -------
Total............................................ $24,000 $21,000 $28,000
======= ======= =======
</TABLE>

The actual tax expense differs from the expected tax expense computed by
applying the U.S. federal corporate rate to earnings (loss) before income taxes
as follows:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Computed expected tax expense (benefit)......... $(596,400) $(101,900) $ 148,100
State taxes, net of federal income tax effect... 3,300 -- 3,700
Limitation of net operating loss
carryforwards................................. 616,300 119,800 --
Change in valuation allowance................... -- -- (130,100)
Other, net...................................... 800 3,100 6,300
--------- --------- ---------
Actual tax expense......................... $ 24,000 $ 21,000 $ 28,000
========= ========= =========
</TABLE>

F-9
<PAGE> 49

CIPRICO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the Company's deferred tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1994 1995
----------- ---------
<S> <C> <C>
U.S. and State net operating loss and tax credit
carryforward............................................... $ 932,500 $ 657,000
Reserve for inventory obsolescence........................... 55,500 79,600
Depreciation................................................. (64,700) (22,000)
Marketable securities........................................ -- 85,100
Allowance for doubtful accounts.............................. 92,100 66,600
Accrued vacation pay......................................... 52,900 64,800
Warranty accrual............................................. 19,600 24,100
Other........................................................ 7,400 10,000
----------- ---------
Total gross deferred tax asset............................. 1,095,300 965,200
Valuation allowance.......................................... (1,095,300) (965,200)
----------- ---------
Net deferred tax asset (liability)......................... $ -- $ --
=========== =========
</TABLE>

The Company has net operating loss carryforwards at September 30, 1995, for
income tax purposes of approximately $1,700,000 and tax credit carryforwards of
$30,000. If not used, these carryforwards will begin to expire in 2002.

5. EARNINGS (LOSS) PER COMMON SHARE

For the years ended September 30, 1993 and 1994 and for the first six
months of fiscal 1995, loss per common share was computed using the weighted
average number of common shares outstanding. Stock options were excluded due to
their antidilutive effect. For the year ended September 30, 1995 and for the
first six months of fiscal 1996, earnings per common share were computed using
the weighted average number of common and common equivalent shares outstanding.
Common equivalent shares result from dilutive stock options.

6. CAPITAL STOCK

(a) Stock Options

The Company has four stock option plans under which the officers, directors
and employees have been or may be granted incentive and nonqualified stock
options to purchase the Company's common stock at fair market value on the date
of grant. The options become exercisable over varying periods and expire up to
10 years from date of grant.

Summarized information at September 30, 1995, regarding stock option plans
is as follows:

<TABLE>
<CAPTION>
PLAN YEARS
------------------------------------------------------------------
1983 1986 1992 1994 TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total reserved for under the plan... 300,000 450,000 225,000 375,000 1,350,000
Exercised........................... 96,195 203,434 60,677 38,297 398,603
Outstanding......................... 117,750 23,438 114,651 323,208 579,047
Exercisable......................... 65,250 23,062 87,735 38,438 214,485
Exercise price...................... $2.09-2.92 $2.00-2.17 $2.39-3.97 $2.72-4.42 $2.00-4.42
Available for grant................. -- -- 49,672 13,496 63,168
</TABLE>

F-10
<PAGE> 50

CIPRICO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. CAPITAL STOCK (CONTINUED)
Summarized information at March 31, 1996, regarding stock option plans is
as follows:

<TABLE>
<CAPTION>
PLAN YEARS (UNAUDITED)
---------------------------------------------------------------------
1983 1986 1992 1994 TOTAL
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total reserved for under the
plan........................... 300,000 450,000 375,000 750,000 1,875,000
Exercised........................ 131,333 224,434 72,761 59,084 487,612
Outstanding...................... 82,613 2,438 155,067 356,421 596,539
Exercisable...................... 131,333 224,435 73,136 57,293 486,197
Exercise price................... $2.00-2.92 $2.00-2.25 $2.08-11.75 $2.68-12.68 $2.00-12.68
Available for grant.............. -- -- 147,173 337,835 485,008
</TABLE>

(b) Stock Split

On March 27, 1996, the Company declared a three-for-two stock split which
was distributed on April 12, 1996. Share and per share data for all periods
presented have been restated to reflect the stock split.

7. 401(K) PLAN

The Company participates in a 401(k) savings plan covering substantially
all of its employees. Minimum contributions to the plan by the Company are 50
percent of the first 2 percent of participants' salaries. The Company's
contributions to this plan in 1993, 1994 and 1995 were $24,261, $27,881 and
$29,854, respectively.

8. RELATED PARTY TRANSACTIONS

In 1994, the Company cancelled its distributor and international sales
representative agreements with Diamond Point International, Inc. (DPI), a
company owned by a former director of the Company. Total sales to DPI under the
distributor agreement for the years ended September 30, 1993, 1994 and 1995 were
$230,538, $100,940 and $0, respectively. Trade accounts receivable relating to
these sales as of September 30, 1993, 1994 and 1995, were $160,867, $106,737 and
$0, respectively. Commission expense under the sales representative agreement in
1993 and 1994 totaled $3,407 and $19,680 respectively. There were no outstanding
commissions payable as of September 30, 1993, 1994 and 1995.

9. NET SALES

The consolidated statements of operations included net sales to significant
customers as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER SIX MONTHS ENDED
30, MARCH 31,
------------------------------ -----------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Customer A................................. 11.8% 13.7% 8.6% 8.4% 2.0%
Customer B................................. 12.9 3.0 -- -- --
Customer C................................. 10.4 1.6 -- -- --
Customer D................................. -- -- 7.8 -- 16.7
Customer E................................. -- -- 0.9 -- 13.9
Customer F................................. -- -- 3.8 2.5 8.4
Customer G................................. -- -- 6.4 6.3 1.6
---- ---- ---- ---- ----
Total.................................... 35.1% 18.3% 27.5% 17.2% 42.6%
==== ==== ==== ==== ====
</TABLE>

F-11
<PAGE> 51

CIPRICO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. FINANCIAL INFORMATION BY GEOGRAPHIC AREA (UNAUDITED)

The Company's net sales, earnings (loss) from operations and total assets
summarized by geographic area is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales
North America................... $ 8,023,853 $10,306,793 $10,341,928 $4,678,650 $ 7,965,846
UK Subsidiary................... 870,021 1,622,584 2,781,651 1,146,823 1,054,281
Other foreign................... 319,752 1,191,233 2,842,624 950,362 3,762,752
----------- ----------- ----------- ---------- -----------
Total........................ $ 9,213,626 $13,120,610 $15,966,203 $6,775,835 $12,782,879
=========== =========== =========== ========== ===========
Earnings (Loss) From Operations
North America and other
foreign...................... $(1,874,645) $ (498,869) $ (499,231) (384,602) $ 1,396,114
UK Subsidiary................... (151,681) 77,330 605,647 220,848 146,066
----------- ----------- ----------- ---------- -----------
Total........................ $(2,026,326) $ (421,539) $ 106,416 $ (163,754) $ 1,542,180
=========== =========== =========== ========== ===========
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
--------------------------------------- -----------
1993 1994 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total Assets
North America.............................. $ 7,884,353 $ 8,400,215 $10,738,735 $13,778,720
UK Subsidiary.............................. 262,435 354,585 436,764 380,848
Eliminations............................... (183,680) (171,580) (255,432) (195,765)
----------- ----------- ----------- -----------
Total................................... $ 7,963,108 $ 8,583,220 $10,920,067 $13,963,803
=========== =========== =========== ===========
</TABLE>

11. COMMITMENTS

Leases Commitments

The Company has operating and capital leases for office and manufacturing
space and equipment which expire through September 1998. Future minimum payments
under these leases are $293,220, $258,381 and $33,159 for 1996, 1997 and 1998,
respectively. For the years ended September 30, 1993, 1994, and 1995, operating
lease expenses were $243,650, $231,379 and $237,579, respectively. For the first
six months of fiscal year 1995 and 1996, operating lease expenses were $117,340
and $119,600, respectively.

F-12
<PAGE> 52

CIPRICO'S WORLDWIDE DISTRIBUTION

[IMAGE OF EARTH FROM SPACE]

[FLAGS OF LISTED COUNTRIES]

VARS
Argentina
Australia
Austria
Brazil
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Ecuador
Finland
France
Germany
Greece
Hong Kong
India
Ireland
Israel
Italy
Japan
Jordan
Korea
Lebanon
Mexico
Netherlands
New Zealand
Norway
Pakistan
Panama
Poland
Russia
Singapore
South Africa
Spain
Sweden
Switzerland
Taiwan
Thailand
Ukraine
United Kingdom
United States
Venezuela
CORPORATE
HEADQUARTERS
Ciprico Inc.
2800 Campus Drive
Plymouth, MN 55441
voice: (612)551-4000
(800)727-4669
fax: (612)551-4002
http://www.ciprico.com

U.S. SALES REGIONS

North-Central Region:
Plymouth, MN

South-Central Region:
Houston, TX

North-East Region:
Nashua, NH

South-East Region:
Raleigh, NC

South-West Region:
Los Angeles, CA

North-West Region:
Santa Clara, CA
CIPRICO
INTERNATIONAL LTD.
7 Clerewater Place
Lower Way
Newbury
Berkshire RG19 3RF
England
voice: (44)1635-873666
fax: (44)1635-871996

INTERNATIONAL
SALES REGIONS

U.K., Europe, Israel:
Berkshire, England

Central Asia,
Middle East, Africa:
Singapore

PAC RIM, Central and
South America:
Plymouth, MN
<PAGE> 53

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH THIS PROSPECTUS RELATES, OR AN
OFFER IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 10
Price Range of Common Stock........... 10
Dividend Policy....................... 10
Capitalization........................ 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 18
Management............................ 30
Principal Shareholders................ 32
Description of Securities............. 33
Underwriting.......................... 35
Legal Matters......................... 36
Experts............................... 36
Available Information................. 37
Incorporation of Certain Documents By
Reference........................... 37
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

1,500,000 Shares
Ciprico logo
Common Stock

------------------------

PROSPECTUS
------------------------

Needham & Company, Inc.

Dain Bosworth
Incorporated

------------------------

May 30, 1996
- ------------------------------------------------------
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