STOCKREPORTS

Pinnacle Micro, Inc.

NASDAQ Symbol PNCL

Recent Price 0.75 52 Wk Range 8.38 - 0.69

Yield Nil 12-Mo. P/E NM

Quantitative Evaluation: Outlook (1 Lowest - 5 Highest) NA Fair Value NA Risk HIGH Earn/Div Rank NR
Technical Evaluation: NEUTRAL since 02/97 Rel. Strength Rank (1 Lowest - 99 Highest) 0 Insider Activity NA

Business Profile 08-JUL-97

Pinnacle is focusing on its Apex technologies and related applications and is implementing steps designed to lower operating expenses, including additional work force reductions and the consolidation of its operations at its Colorado Springs facility. The company has also hired an investment banking firm to assist it in evaluating alternatives, including locating a financial or industry partner or other transaction. The company has also had difficulty paying trade debt on time. The company expects to report a revenue shortfall in the second quarter of 1997, as a result of the continuing slow demand for its Apex hard drive through distribution channels. Revenues are anticipated to be approximately $11 million, which is lower than the $14.1 million reported in the first quarter. Pinnacle projects a loss of about $5 million for the period.

Operation Review 08-JUL-97

Net sales in the first quarter of 1997 fell 19%, year to year, reflecting a product mix change away from mature product lines and reduced unit sales from older generation RCD products. Gross margins widened, on an improved mix from the sale of Apex drives and Apex-based optical library systems. Total operating expenses declined 16%, and the operating loss narrowed. However, following significantly higher interest expense and taxes of $22,000, versus $3,000, the net loss increased to $4,063,000 ($0.39 a share, based on 34% more shares) from $3,915,000 ($0.50).

Stock Performance 18-JUL-97n

In the past 30 trading days, PNCL's shares have declined 49%, compared to a 7% rise in the S&P 500. Average trading volume for the past five days was 67,380 shares, compared with the 40-day moving average of 188,361 shares.

Key Stock Statistics

Fiscal Year Ending Dec. 31

Dividend Data: No cash dividends have been paid.

Business Summary 08-JUL-97

Pinnacle Micro, Inc. designs, makes and supplies optical storage systems for data-intensive applications. Its products combine proprietary software, firmware, electronics design and application-specific integrated circuits (ASICs) with technologically advanced mechanical optical storage subassemblies. Product offerings include optical storage systems, network optical library systems, image storage and retrieval systems and recordable CD-ROM systems.

Optical storage systems, based on magneto-optical technology, range in capacity from 230 megabyte 3.5-inch systems to 5 terabyte multiple disk systems, and are designed to be complete "plug and play" systems, compatible with most PC and workstation operating systems, including Macintosh OS, DOS, Windows, OS/2 and UNIX. The systems are used in data-intensive applications such as digital audio/video editing, multimedia, desktop publishing and pre-press and network storage systems.

Pinnacle's network optical library systems, which have storage capacity of 20 gigabytes to five terabytes, are typically used in client/server or other networked environments and are freestanding, fully enclosed units with robotic arms that move multiple 5.25-inch optical disks to and from one or more internally mounted drives. The company's network optical library software, the Pinnacle Virtual File System, allows users to access and store information and track the location of files and data stored on disks.

The company's recordable CD-ROM system is a 5.25-inch half-height, user-friendly CD mastering system that allows users to make their own CDs. The system is used to create custom CDs for low-volume data reproduction and distribution in a cost- and time-effective manner.

In 1996, Ingram Micro, Pinnacle's largest distributor, accounted for 18% of net sales (15% in 1995.) International sales accounted for 19% of net sales in 1996 (22% in 1995).

Important Developments

Jul. '97 The company expects to report a revenue shortfall in the second quarter of 1997, as a result of the continuing slow demand for its Apex hard drive through distribution channels. Revenues are anticipated to be approximately $11 million, which is lower than the $14.1 million reported in the first quarter. Pinnacle projects a loss of about $5 million for the period. Additionally, PNCL hired the investment banking firm of Houlihan, Lokey, Howard & Zukin to assist it in the evaluate alternatives, including possibly locating a financial or industry partner or other transaction.

Capitalization

Long Term Debt: $3,788,000 (3/97).

Curr. Ratio	1.5	2.1	2.7	3.7	1.6	1.6	NA	NA	NA	NA
% LT Debt of Cap.	43.1	Nil	0.1	0.2	5.6	5.6	NA	NA	NA	NA
% Net Inc.of Revs.	NM	NM	4.2	6.8	3.8	5.6	6.3	3.3	9.2	NA
% Ret. on Assets	NM	NM	10.7	15.7	14.5	21.6	NA	NA	NA	NA
% Ret. on Equity	NM	NM	15.7	24.7	33.2	45.1	NA	NA	NA	NA

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--19 Technology Dr., Irvine, CA 92718. Tels--(714) 789-3000; (800) 553-7070. Fax--(714) 727-1913. Website--http://www.pinnaclemicro.com Pres--K. Campbell. EVP & CFO--R. Hay. Dirs--W. Blum, K. Campbell, R. Hay, H. Imhof, J. E. Koehler. Transfer Agent & Registrar--U.S. Stock Transfer Corp., Glendale, CA. Incorporated--in California in 1987; reincorporated in Delaware in 1993. Empl-- 166. S&P Analyst: P.D.W.

This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P nor any other party guarantee its accuracy or make warranties regarding results from its usage. Redistribution is prohibited without written permission. Copyright © 1997