Overland: Fiscal 3Q11 Financial Results

in US$ millions)	3Q10	3Q11	9 mo. 10	9 mo. 11
Revenues	18.6	17.2	58.4	52.6
*Growth*		-8%		*-10%*
Net income (loss)	(2.5)	(3.4)	(8.8)	(10.8)

Overland Storage Inc. reported financial results for its fiscal 2011 third quarter ended March 31, 2011.

Third Quarter Highlights:

Revenue from SnapServer and SnapSAN series of disk-based products increased 16.3% over the third fiscal quarter of last year
Gross Margins of 33.8%, an improvement of 870 basis points from the third quarter of fiscal 2010
Strengthened balance sheet with the March 2011 private placement of approximately $15.3 million in gross proceeds
Added two new members to Board of Directors, bringing total board members to six

"We continue to successfully execute on our strategic plan to grow sales of our higher margin branded products and services while expanding our addressable market with new product introductions and additional strategic channel partnerships worldwide," said Eric Kelly, President and CEO of Overland Storage. "Despite being a seasonally weak quarter, gross margins in the third quarter were up significantly year-over-year for the second consecutive quarter. Our continued positive momentum with our branded products and the additional new products we expect to introduce over the next few quarters give us strong confidence in our business going forward."

Net revenue for the third quarter of fiscal 2011 was $17.1 million, compared to $17.9 million for the preceding quarter and $18.6 million for the third quarter of fiscal 2010.

Gross margin for the third quarter of fiscal 2011 improved to 33.8 %, an increase from 31.1% for the preceding quarter and up significantly from 25.1% for the third quarter of fiscal 2010. Operating expenses were $8.6 million, a decline from $9.2 million in the preceding quarter and $9.0 million for the third quarter of fiscal 2010.

Net loss for the third quarter was $3.4 million, or a loss of $0.22 per share, compared to a net loss for the preceding quarter of $0.9 million, or a loss of $0.07 per share, which included other income of $3.0 million from the sale of a minority interest in proceeds we may receive in connection with our current IP litigation (which contributed $0.24 per share) and compared to a net loss of $2.5 million, or a loss of $0.42 per share, in the third quarter of fiscal 2010. In the third quarter of fiscal 2010, the Company reported a one-time $2.0 million tax benefit.

Total cash and cash equivalents at March 31, 2011 increased to $16.7 million, compared to $6.8 million at December 31, 2010. The increase in cash balance is primarily attributable to the Company’s private placement closed in the third fiscal quarter.

Financial Guidance:
Overland Storage is projecting that its combined revenues for the next two fiscal quarters beginning with the fiscal quarter ending June 30, 2011 will be in the range of $34.0 million to $36.0 million, with gross margins during the same period in the range of 33% to 36%.