Overland Storage Reports Fiscal 2010 First Quarter Results

SAN DIEGO, Nov. 12 /PRNewswire-FirstCall/ -- Overland Storage, Inc. (Nasdaq:
OVRL) today reported first quarter results for its fiscal quarter ended
September 30, 2009.

"While these remain difficult economic times, Overland is focused on what will
enable us to succeed in the long term - rightsizing our operations to bring
them more in line with expectations and innovating for future growth," said
Eric L. Kelly CEO of Overland Storage. "We have completed a successful
fundraising effort and launched a new product with our recently announced
strategic manufacturing partner Foxconn. With these actions and the capital
we have raised, we now have the flexibility to continue to execute on a
business strategy that will allow us to succeed in the long term.

Net revenue for the fiscal 2010 first quarter was $19.3 million, compared with
$32.3 million for the same period a year ago, a decrease of 40.2 percent. The
company reported a net loss of $3.7 million, or $0.29 per share, for the
fiscal 2010 first quarter, compared with a net loss of $6.9 million, or $0.54
per share, for the same period a year earlier.

Compared to the prior-year quarter, branded-product sales declined 48.8
percent and service-related sales were constant at $5.7 million, while sales
to OEM customers declined 50.5 percent. The declines noted are consistent
with the company's expectations during the realignment of Overland's sales
organization to focus on branded products and a change in product mix.

Gross-profit margin percentage of 27.0 percent remained unchanged compared to
the same period a year ago due primarily to cost-saving initiatives and
improved operational efficiencies implemented during fiscal 2009.

Operating expenses decreased for the fiscal 2010 first quarter to $8.4 million
from $15.6 million in the fiscal 2009 first quarter. The decrease in operating
expenses is primarily attributable to Overland's fiscal 2009 restructuring
activities. Operating expenses increased slightly on a sequential basis from
$8.2 million in the fiscal 2009 fourth quarter. The increase was primarily
attributable to $0.2 million in excess severance expenses associated with
fiscal 2009 fourth quarter restructuring activities and $0.2 million in legal
expenses associated with the 2010 restructuring activities and strategic
planning. As adjusted to exclude these net charges of $0.4 million in the
fiscal 2010 first quarter, operating expenses were $8.0 million, showing a
decrease of 2.4 percent compared to operating expenses of $8.2 million in the
fiscal 2009 fourth quarter. Adjusted operating expense is a non-GAAP measure,
which management believes facilitates a better understanding of the impact of
our restructuring activities on Overland's results.

Cash at September 30, 2009 was $4.0 million, a 27.3 percent decrease from $5.5
million as of June 30, 2009. During the fiscal 2010 first quarter, the
company made $0.4 million in payments toward the Adaptec note, and as of
September 30, 2009, the balance on the Adaptec note was $0.7 million. Current
liabilities associated with the company's non-OEM accounts receivable
financing arrangements, including interest, remained constant at $4.2 million
as of September 30, 2009 compared to June 30, 2009.

About Overland Storage

As a leading, global specialist in backup, recovery and archive, Overland
Storage is focused on helping IT departments address data protection and data
retention challenges by incorporating innovative solutions with world-class
service and support. Overland provides smart, affordable, end-to-end data
protection solutions that are engineered to store smarter, protect faster and
extend anywhere.

Overland Storage products include award-winning Snap Server® network attached
storage products, NEO SERIES® tape libraries, and REO SERIES® disk-based
backup and recovery appliances. Overland sells its products exclusively
through a select network of value-added-resellers, system integrators and
OEMs. The company has shipped more than 300,000 units to small and
medium-sized businesses, as well as large enterprises in over 60 countries
across the globe. For more information, visit www.overlandstorage.com.

Except for the factual statements made herein, the information contained in
this news release consists of forward-looking statements that involve risks,
uncertainties and assumptions that are difficult to predict. Words and
expressions reflecting optimism, satisfaction or disappointment with current
prospects, as well as words such as "believes," "hopes," "intends,"
"estimates," "expects," "projects," "plans," "anticipates" and variations
thereof, or the use of future tense, identify forward-looking statements, but
their absence does not mean that a statement is not forward-looking. Such
forward-looking statements are not guarantees of performance and our actual
results could differ materially from those contained in such statements.
Factors that could cause or contribute to such differences include: our
ability to maintain and increase sales volumes of our products; our ability to
continue to aggressively control costs; the continued availability of our
non-OEM accounts receivable financing arrangements; our ability to achieve the
intended cost savings and maintain quality with our new manufacturing partner;
our ability to generate cash from operations or raise outside capital to
service and repay debt as it comes due; our ability to introduce new
competitive products and the degree of market acceptance of such new products;
the timing and market acceptance of new products introduced by our
competitors; our ability to maintain strong relationships with branded channel
partners; customers', suppliers' and creditors' perceptions of our continued
viability; rescheduling or cancellation of customer orders; loss of a major
customer; general competition and price measures in the market place;
unexpected shortages of critical components; worldwide information technology
spending levels; and general economic conditions. Reference is also made to
other factors detailed from time to time in the company's periodic reports
filed with the Securities and Exchange Commission. These forward-looking
statements speak only as of the date of this release and the company
undertakes no obligation to publicly update any forward-looking statements to
reflect new information, events or circumstances after the date of this
release.

Overland, Overland Storage, REO Series, REO, NEO Series, NEO, ARCvault,
ULTAMUS, Snap Server, GuardianOS and Snap Enterprise Data Replicator are
trademarks of Overland Storage, Inc.

- Financial Tables Follow -

OVERLAND STORAGE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)

Three Months Ended
September 30,
-------------
2009 2008
---- ----
(Unaudited)
Net revenue $19,313 $32,303
Cost of revenue 14,105 23,581
------ ------
Gross profit 5,208 8,722
----- -----

Operating expenses:
Sales and marketing 4,274 9,425
Research and development 1,457 3,177
General and administrative 2,679 3,027
Impairment of long-lived assets -
----- ---
Total expenses 8,410 15,629
----- ------

Operating loss (3,202) (6,907)
Interest (expense) income, net (384) 64
Other expense, net (34) (187)
--- ----
Loss before income taxes (3,620) (7,030)
Income taxes 72 (124)
--- ----
Net loss $(3,692) $(6,906)
======= =======

Net loss per share:
Basic and Diluted $(0.29) $(0.54)
====== ======

Shares used in computing net loss per share:
Basic and Diluted 12,778 12,768

OVERLAND STORAGE, INC.
SELECTED BALANCE SHEET INFORMATION
(In thousands)

September 30, June 30,
2009 2009
---- ----
(unaudited)
ASSETS
--------
Cash $3,997 $5,456
Accounts receivable, net 12,155 12,690
Inventories 11,742 12,492
Other current assets 7,366 7,410
----- -----
Total current assets 35,260 38,048
Property, plant and equipment, net 952 1,107
Other assets 7,788 7,897
----- -----
Total assets $44,000 $47,052
======= =======

LIABILITIES & EQUITY
----------------------
Current liabilities, excluding debt $34,421 $33,647
Debt, current portion 7,332 7,025
Long-term debt, net of current portion - 693
Other long-term liabilities 5,681 5,802
Shareholders' equity (3,434) (115)
------ ----
Total liabilities and equity $44,000 $47,052
======= =======

SOURCE Overland Storage, Inc.

Kurt L. Kalbfleisch, VP Finance and CFO of Overland Storage, Inc.,
+1-858-571-5555, kkalbfleisch@overlandstorage.com; or Sue Hetzel of
HetzelMeade Communications, +1-760-434-9927, sue@hetzelmeade.com, for Overland
Storage, Inc.