UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended December 31, 2002

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-11336

CIPRICO INC.

(Exact name of Registrant as specified in its charter)

DELAWARE		41-1749708
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

17400 Medina Road Plymouth, Minnesota 55447
(Address of principal executive offices)

Registrant’s telephone number, including area code: (763) 551-4000

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

The number of shares outstanding of the registrant’s Common Stock, $.01 par value, as of February 10, 2003 was 4,662,953 shares.

CIPRICO INC. AND SUBSIDIARIES

FORM 10-Q

INDEX

PART I	Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets at December 31, 2002 and September 30, 2002

	Condensed Consolidated Statements of Operations for Three Months Ended December 31, 2002 and 2001

	Condensed Consolidated Statements of Cash Flows for Three Months Ended December 31, 2002 and 2001

	Notes to Condensed Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition

Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Item 4.	Controls and Procedures

PART II	Other Information

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURES

Certifications by CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications by CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

EXHIBIT INDEX

Exhibit 99.1	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CIPRICO INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

	*December 31,*			*September 30,*
	*2002*			*2002*
ASSETS
Current assets:
Cash and cash equivalents	$	3,775		$	6,413
Marketable securities	21,028			18,071
Accounts receivable, less allowance	4,473			3,590
Inventories	3,295			3,145
Income taxes receivable	789			789
Other current assets	438			898
Total current assets	33,798			32,906

Property and equipment, net	2,395			2,608
Marketable securities	1,031			2,547
Other assets	37			54
	$	37,261		$	38,115

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,337		$	2,724
Accrued expenses	2,401			2,755
Deferred revenue	422			398
Total current liabilities	6,160			5,877

Shareholders’ equity:
Capital stock	47			48
Additional paid-in capital	34,736			35,188
Retained deficit	(3,649		)	(2,966		)
Deferred compensation from restricted stock	(33		)	(32		)
Total shareholders’ equity	31,101			32,238
	$	37,261		$	38,115

See accompanying notes to condensed consolidated financial statements.

CIPRICO INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands except
per share amounts)

	Three Months Ended
	December 31,
	2002			2001

NET SALES	$	8,112		$	7,215
Cost of sales	5,162			4,496

GROSS PROFIT	2,950			2,719

OPERATING EXPENSES:
Research and development	1,448			2,475
Sales and marketing	1,678			2,397
General and administrative	672			641
Total operating expenses	3,798			5,513

LOSS FROM OPERATIONS	(848		)	(2,794		)
Other income, primarily interest	165			302

LOSS BEFORE INCOME TAXES	(683		)	(2,492		)
Income tax benefit	—			—
NET LOSS	$	(683	)	$	(2,492	)

Shares used to calculate net loss per share:
Basic and diluted	4,722			4,935

NET LOSS PER COMMON SHARE:
Basic and diluted	$	(.14	)	$	(.50	)

See accompanying notes to condensed consolidated financial statements.

CIPRICO INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	December 31,
	2002			2001

Cash flows for operating activities:
Net loss	$	(683	)	$	(2,492	)
Depreciation and amortization	493			580
Changes in operating assets and liabilities	(265		)	(792		)

NET CASH FLOWS USED IN OPERATING ACTIVITIES	(455		)	(2,704		)

Cash flows from investing activities:
Equipment purchases	(272		)	(318		)
Purchases of marketable securities	(7,477		)	(9,931		)
Proceeds from sale or maturity of marketable securities	6,036			9,970

NET CASH FLOWS USED IN INVESTING ACTIVITIES	(1,713		)	(279		)

Cash flows from financing activities:
Repurchase of common stock	(470		)	(341		)

NET CASH FLOWS USED IN FINANCING ACTIVITIES	(470		)	(341		)

Net decrease in cash and cash equivalents	(2,638		)	(3,324		)

Cash and cash equivalents at beginning of period	6,413			6,377

Cash and cash equivalents at end of period	3,775			3,053

Marketable securities, current	21,028			18,491
Marketable securities, long-term	1,031			5,108

Total cash and marketable securities	$	25,834		$	26,652

See accompanying notes to condensed consolidated financial statements.

CIPRICO INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002

(Unaudited)

NOTE A – BASIS OF PRESENTATION

The principal business activity of Ciprico Inc. and subsidiaries (the Company) is the design, manufacture, and marketing of high performance, direct attached and networked storage solutions, including intelligent disk array hardware, software and services for digital media applications. The Company markets its products worldwide through a direct sales force and various distribution channels.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all necessary adjustments, consisting only of a recurring nature, and disclosures to present fairly the financial position as of December 31, 2002 and the results of operations and cash flows for the three-month periods ended December 31, 2002 and 2001. The results of operations for the three months ended December 31, 2002 are not necessarily indicative of the results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Form 10-K filed on November 5, 2002.

In preparation of the Company’s consolidated financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the estimates used by management.

NOTE B – MARKETABLE SECURITIES

The Company has invested its excess cash in commercial paper and U.S. government agencies. These investments are classified as held-to-maturity given the Company’s intent and ability to hold the securities to maturity and are carried at amortized cost. Investments that have maturities of less than one year have been classified as current marketable securities.

At December 31, 2002 and September 30, 2002, amortized cost approximates fair value of held-to-maturity investments, which consist of the following (in thousands):

	December 31,		September 30,
	2002		2002
Current marketable securities:
Commercial Paper	$	17,020	$	15,568
U.S. Government Agencies	4,008		2,503
	21,028		18,071
Non-current marketable securities:
Commercial Paper	1,031		1,509
U.S. Government Agencies	—		1,038
	1,031		2,547

	$	22,059	$	20,618

NOTE C – INVENTORIES

Inventory is stated at the lower of cost or replacement market. Cost is determined using the first-in, first-out method. Inventory costs include outside assembly charges, allocated manufacturing overhead and direct material costs. As of December 31, 2002 and September 30, 2002 inventory consists of the following (in thousands).

	December 31, 2002		September 30, 2002

Finished Goods	$	1,030	$	1,158
Work-in-Process	288		292
Raw Materials	1,977		1,695
	$	3,295	$	3,145

NOTE D – WARRANTY COSTS

The Company provides a three-year warranty on its products. The Company estimates future warranty claims based on historical experience and anticipated costs to be incurred. Warranty expense is accrued at the time of sale with an additional accrual for specific items after the sale when their existence is known and amounts are determinable.

The following represents a reconciliation of changes in the Company’s accrued warranty as of December 31, 2002 (in thousands):

Balance at September 30, 2002		Charged to Costs and Expenses		Deductions		Balance at December 31, 2002
$	502	$	38	$	4	$	536

NOTE E – SHAREHOLDERS’ EQUITY

Stock Repurchase

During 1998, the Company initiated a stock buyback program of up to $6.0 million, which was increased by $6.0 million in 2001, bringing the total amount allowed to be expended under the plan to $12.0 million. As of December 31, 2002, 983,850 shares of common stock have been repurchased for approximately $7.6 million.

Stock Option Exchange

On December 4, 2002 the Company accepted for exchange stock options to purchase 159,500 shares of common stock granted under the Ciprico Inc. 1999 Amended and Restated Stock Option Plan pursuant to a Tender Offer Statement on Schedule TO dated November 4, 2002 (“Schedule TO”) offered to certain eligible employees (the “exchange”). The exchange was offered to non-management employees who held stock options effective October 25, 2002 with an exercise price of $7.00 per share or more and expiring after January 1, 2004, who were option holders that had not received options after May 1, 2002. Subject to the terms and conditions of the exchange, the Company will grant options to purchase an aggregate of 127,600 shares of common stock for such tendered options on or after June 6, 2003. There will be no compensation expense recognized as a result of this exchange.

Shareholder Rights Plan

On January 8, 2003, the Board of Directors adopted a shareholder rights plan under which the Board declared a dividend distribution of one right for each outstanding share of Ciprico common stock as of January 14, 2003. Upon becoming exercisable, each right would entitle its holder to buy one one-hundredth of a share of a new series of preferred stock at an exercise price of $32.00 per right. Subject to certain allowable actions by the Board, the rights will become exercisable if a person or group acquires 15% or more of the Company’s common stock or announces a tender offer for 15% or more of its common stock. Unless the Board exercises certain other rights, if such a person acquires 15% or more of the Company’s common stock, each right would enable a Ciprico shareholder to acquire Ciprico stock having a market value of twice the right’s exercise price. The rights are redeemable at the option of the Company in certain instances.

NOTE F – NET EARNINGS PER SHARE

The Company’s basic net earnings per share amounts have been computed by dividing net earnings by the weighted average number of outstanding common shares. The Company’s diluted net earnings per share is computed by dividing net earnings by the weighted average number of outstanding common shares and common share equivalents relating to stock options, when dilutive. For the three month period ended December 31, 2002 and 2001, the Company reported a net loss and as such, no common share equivalents were included in the computation of diluted net loss per share.

For the three month periods ended December 31, 2002 and 2001, common stock equivalents of 9,398 and 41,931, respectively were excluded in the computation of the net loss per share since they were antidilutive. Options to purchase 1,097,620 and 1,111,491 shares of common stock with a weighted average exercise price of $7.90 and $9.60 were outstanding at December 31, 2002 and 2001, but were excluded from the computation of common share equivalents for the three month period because their exercise price exceeds the average share price during the quarter.

NOTE G – SEGMENT INFORMATION

The Company operates in a single reportable segment. The following presents net sales for the three month periods ended December 31, 2002 and 2001 by geographic area. The Company has no material long-lived assets outside of the United States.

The Company’s net sales summarized by geographic area are as follows (in thousands):

	2002		2001
Geographic Area
North America	$	7,829	$	6,173
Europe and other foreign	283		1,042
	$	8,112	$	7,215

Sales to significant customers as a percentage of sales for the period ended December 31 are as follows:

	2002		2001
Customer A	29	%	—	%
Customer B	14		11
Customer C	13		7
Customer D	6		21
	62%		39	%

NOTE H – NEW ACCOUNTING PRONOUNCEMENTS

In December 2002 the FASB issued Statement 148 (FAS 148), Accounting for Stock-Based Compensation—Transition and Disclosure. FAS 148 amends the disclosure and certain transition provisions of Statement 123, Accounting for Stock-Based Compensation. Its disclosure provisions, which apply to all entities with employee stock-based compensation, are effective for fiscal years ending after December 15, 2002. New interim period disclosures are required in financial statements for interim periods beginning after December 15, 2002. Other than the additional disclosure requirements, this pronouncement is not expected to have a material impact on the Company's financial position or results of operation.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 addresses the disclosure requirements of a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. FIN 45 also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for the Company for its quarter ended December 31, 2002. The liability recognition requirements will be applicable prospectively to all guarantees issued or modified after December 31, 2002. This pronouncement is not anticipated to have a material effect on the Company’s consolidated financial position or results of operations. See Note D for disclosure information related to the Company’s warranty program.

In January 2003, the FASB issued Interpretation 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 is an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, and addresses consolidation by business enterprises of variable interest entities. FIN 46 applies immediately to variable interest entities created or obtained after January 31, 2003 and it applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that is acquired before February 1, 2003. This pronouncement is currently not anticipated to have a material effect on the Company’s consolidated financial position or results of operations.

CIPRICO INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Critical Accounting Policies and Estimates

Financial Reporting Release No. 60 of the Securities and Exchange Commission, requests that all companies include a discussion of critical accounting policies or methods used in the preparation of financial statements. Note 1 of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K includes a summary of the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements. The following is a brief discussion of the more significant accounting policies and methods used by Ciprico Inc. (“the Company, we and our”).

General

Management’s discussion and analysis of Ciprico’s financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The most significant estimates and assumptions relate to the recoverability of receivables and inventories. Actual amounts could differ significantly from these estimates.

Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Products sold are generally covered by a warranty for periods up to three years. We accrue a warranty reserve within cost of sales for estimated costs to provide warranty services. We estimate the costs to service our warranty obligations based on historical experience and expectation of future conditions. Revenue from the sale of extended warranty and maintenance agreements is deferred and recognized on a straight-line basis over the term of the related agreement.

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations and the provisions established, we can not guarantee that we will continue to experience the same credit loss rates that we have in the past. Since our accounts receivable are concentrated in a relatively few number of customers, a significant change in the liquidity or financial position of any one of these customers could have a material adverse impact on the collectibility of our accounts receivable and our future operating results.

Inventories

We value our inventory at the lower of the actual cost to purchase and/or manufacture the inventory or the current estimated market value of the inventory. We regularly review inventory quantities on hand and record a provision to reduce excess and obsolete inventory so estimated market value based primarily on our estimated forecast of product demand and production requirements for the next twelve months or expected life of the representative product. A significant decrease in demand could result in an increase in the

amount of excess inventory quantities on hand. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. If our inventory is determined to be overvalued, we would be required to recognize such costs in our cost of goods sold at the time of such determination. We do not adjust our lower of cost or market adjustment to inventory components upward once a reduction was determined to be necessary.

We make every effort to ensure the accuracy of our forecasts of future product demand, however any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reported operating results. In the fourth quarter of fiscal 2002, we recorded an adjustment of $700,000 to reduce certain legacy product inventory to market value due to excess estimated inventory levels of certain legacy products discontinued during fiscal 2002 and planned product migration of new product introductions released in fiscal 2002 or scheduled for release in early fiscal 2003.

Warranty

Our warranty reserve is established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of each balance sheet date. While we believe that our warranty reserve is adequate and that our estimate is appropriate, such amounts estimated to be due and payable could differ materially from what will actually transpire in the future. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, we would increase our warranty accrual resulting in decreased gross profit. Similarly, if the opposite occurs and we experience better than expected results, we would decrease our warranty accrual.

Deferred Taxes

We record a valuation allowance to reduce our net deferred tax assets to the amount that is more likely than not to be realized. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review the deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income or loss, projected future taxable income or loss, and the expected timing of the reversals of existing temporary differences.

The following discussion and analysis of the financial condition and results of operations of Ciprico Inc. and its subsidiaries should be read in conjunction with the Condensed Consolidated Financial Statements and the Notes thereto, included elsewhere in this Report.

OVERVIEW

Ciprico Inc. designs, manufactures and markets storage and system solutions for digital media applications. Our solutions combine storage, networking and computing technologies to simplify and accelerate digital media workflows. Our primary markets are broadcast and entertainment, which include applications in digital broadcast and film and video production and military and government which include applications involving the data capture, processing and dissemination of surveillance images. In addition, we have historically sold in other markets with high-performance storage requirements such as geosciences, digital prepress and medical imaging.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2002 Compared to Three Months Ended December 31, 2001

Comparative information on sales by market for the period ended December 31, are shown in the chart below (in millions).

	*2002*				*2001*
*Market*	*Sales*		*% of Total*		*Sales*		*% of Total*
Broadcast & Entertainment	$	4.7	58	%	$	2.3	32	%
Military & Government	3.2		40		4.5		63
Other	0.2		2		0.4		5
Total	$	8.1	100	%	$	7.2	100	%

	*2002*				*2001*
*Geographic Location*	*Sales*		*% of Total*		*Sales*		*% of Total*
Domestic	$	7.8	96	%	$	6.2	86	%
International	0.3		4		1.0		14
Total	$	8.1	100	%	$	7.2	100	%

Net sales for the three month period ended December 31, 2002 increased 12% to $8.1 million compared to $7.2 million for the same period last year. Sales from customers in the United States increased 26% and sales from international customers decreased 70% for the period. The overall decline in international sales primarily reflects lower demand from Silicon Graphics Inc. (“SGI”) within our military segment.

The 104% increase in sales in the Broadcast segment between the periods includes approximately $2.8 million of increased sales in our domestic operations from our three largest OEM customers, one of which is a new account added during the second fiscal quarter of 2002. We believe this increase reflects higher demand in the broadcast media industry between years. This was partially offset by decreased sales from legacy post-production customers, particularly in Europe due primarily to lower demand. We believe our sales in the Broadcast segment for fiscal 2003 will be higher than the previous year. However, this could be adversely impacted due to an uncertain sustained economic recovery or the potential impacts from a possible war in the Middle East.

The 29% decrease in sales in the Military segment reflects the cyclical spending patterns of this program-oriented business. In addition, we believe our military sales for fiscal 2002 reflect increased spending in certain programs in response to the September 11, 2001 attack on the United States. Due to the timing of the implementation and funding of defense-related programs, sales in the Military segment have historically fluctuated within periods and are expected to continue to fluctuate in future periods. The decline in sales in the other market segment primarily reflects reduced demand from a medical imaging integrator and a geosciences customer.

Our revenue growth in fiscal 2003 is dependent on market acceptance of new products, expansion of products into new applications within its targeted market segments, and success of programs which specify Ciprico products. During 2002, we released three new products including the TALONä, FibreSTOREâ 2210 and DiMedaä 2400. Total sales of these new products for period ended December 31, 2002 were approximately $1.1 million. Sales of our NETarray product attributed to approximately $3.9 million of sales for the period.

(more)

Gross profit, as a percentage of net sales, was 36.4% for the three months ended December 31, 2002, compared to 37.7% for the same prior year period. This decline primarily reflects the higher sales mix of the NETarray product, which carries lower margins than our other products.

Research and development expenses decreased $1.0 million or 41% to $1.4 million, compared to the same quarter last year. Expenses as a percentage of sales were 18% compared to 34% in the prior year period. This 16% reduction primarily reflects reduced prototype spending due to the timing of development projects, our shift towards integrated software development activities and decreased headcount due to our restructuring efforts in the prior year. We expect that quarterly research and development expense levels for the remainder of the year will increase as a result of new prototype spending related to our new product development activities.

Sales and marketing expenses decreased $719,000 or 30% to $1.7 million, compared to the same quarter last year. Expenses as a percentage of sales were 21% compared to 33% in the prior year period. This 12% decrease is primarily the result of reduced headcount between years resulting from our restructuring efforts implemented during the second half of fiscal 2002. General and administrative expenses increased $31,000 or 5% to $672,000 for the three months ended December 31, 2002, as compared to the same quarter of last year, which primarily reflects legal and advisory costs related to the implementation of the shareholder rights plan.

Other income decreased approximately $137,000 due primarily to overall lower investment yields and lower cash and marketable securities balances between periods.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2002, we had cash, cash equivalents and marketable securities totaling $25.8 million compared to $27.0 million at the end of fiscal 2002.

Cash flows used in operating activities was $455,000 for the three months ended December 31, 2002 compared to $2.7 million for the same period last year. The decrease primarily reflects a reduced operating loss for the period compared to the prior year period. Capital expenditures of approximately $270,000 for the three months ended December 31, 2002 includes approximately $150,000 of spending related to our new facility and $120,000 of new equipment and upgrades to engineering and production test equipment. We anticipate that capital expenditures for fiscal 2002 will approximate $1.7 million to $2.0 million. During the three months ended December 31, 2002, we purchased 144,810 shares of common stock for approximately $470,000. The remaining authorization as of December 31, 2002 under our stock buyback program is $4.4 million.

FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q are forward-looking and are subject to various risks and uncertainties, which may cause actual results to differ from the expectations set forth in these forward-looking statements. Such forward-looking statements, which reflect our current view of future events and financial performance, involve known and unknown risks, which include, but are not limited to, the risk factors set forth in Exhibit 99 on Form 10-K filed on November 5, 2002. Some of these reasons include the impact on revenues and earnings of the timing of product enhancements and new product releases; market acceptance of new products; sales and distribution issues; competition; dependence on suppliers; dependence on the cost of disk drives; limited backlog and the historic and recurring pattern of a disproportionate percentage of total quarterly sales occurring the last month and weeks of a quarter. Investors should take such risks into account when making investment decisions. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Ciprico undertakes no obligation to update publicly or revise any forward-looking statements.

CIPRICO INC. AND SUBSIDIARIES

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company invests its excess cash in commercial paper and highly rated U.S. government agencies. All investments are held-to-maturity. The market risk on such investments is minimal. Receivables from sales to foreign customers are denominated in U.S. Dollars. If the currencies of these countries were to fall significantly against the U.S. Dollar, there can be no assurance that such companies would be able to repay the receivables in full. Transactions at the Company’s foreign subsidiary, Ciprico International Limited, are denoted in pounds sterling. The Company has historically had minimal exposure to changes in foreign currency exchange rates and, as such, has not used derivative financial instruments to manage foreign currency fluctuation risk.

CIPRICO INC. AND SUBSIDIARIES

ITEM 4. CONTROLS AND PROCEDURES

Ciprico management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this annual report has been made known to them in a timely fashion. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.

CIPRICO INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

None.

(b) Reports of form 8-K

None.

CIPRICO INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CIPRICO INC.

Dated: February 14, 2003	/s/ Robert H. Kill
	Robert H. Kill, President and Chief Executive Officer
	(Chief Executive Officer)

Dated: February 14, 2003	/s/ Thomas S. Wargolet
	Thomas S. Wargolet, Vice President of
	Finance/Chief Financial Officer
	(Principal Financial and Accounting Officer)

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert H. Kill, Chief Executive Officer of Ciprico Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ciprico Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function);

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: February 14, 2003	Signature:	/s/ Robert H. Kill
		Robert H. Kill
		Chief Executive Officer

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas S. Wargolet, Chief Financial Officer of Ciprico Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ciprico Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Dated: February 14, 2003	Signature:	/s/ Thomas S. Wargolet
		Thomas S. Wargolet
		Chief Financial Officer

CIPRICO INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit Number		Description

99.1		Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2		Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002