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Storage Computer Announces Second Quarter of 2001 Results

Storage Computer(R) Corporation today announced the Company's results for the second quarter ended June 30, 2001. According to the company, revenue for the quarter was $950,913 versus $2,054,678 for the second quarter of 2000. Revenue for the six months ended June 30, 2001 was $3.010,275 versus $4,149,676 for the six months ended June 30, 2000.

The net loss for the three months ended June 30, 2001 was $4,010,443 compared to a net loss of $497,190 for the three months ended June 30, 2000. The fully diluted net loss per share available to common stockholders was $0.31 for the three months ended June 30, 2001 compared to $0.09 for the three months ended June 30, 2000. Dividends on preferred stock including amortization of the beneficial conversion features were $811,853 ($0.05 per share) for the quarter ended June 30, 2001 compared to $621,350 ($0.05 per share) for the three months ended June 30, 2000. The net loss for the six months ended June 30, 2001 was $6,429,075 compared to a net loss of $648,218 for the six months ended June 30, 2000. The fully diluted net loss per share available to common stockholders was $0.57 for the six months ended June 30, 2001 compared to $0.10 for the six months ended June 30, 2000. Dividends on preferred stock including amortization of the beneficial conversion features were $2,401,220 ($0.15 per share) for the six months ended June 30, 2001 compared to $621,350 ($0.05 per share) for the six months ended June 30, 2000.

"As previously disclosed, beginning in late 2000 and continuing to date we have undertaken strategic initiatives to restructure our corporate and product market positioning, " stated Peter Hood, Chief Financial Officer. "Our worldwide headcount now totals 96 people, up 40 since March 2000. This planned increase continues to impact our short-term cost structure and results for the second quarter of 2001, primarily in the areas of senior management, research and development engineers, and sales and marketing staff. The utilization of outside contractors decreased during the quarter as product development projects near completion as well as number of these engineers joined our permanent staff. Marketing costs for the quarter increased due to greater participation in trade shows, development of new product marketing materials and positioning for new product introductions. Finally, our gross margin was adversely impacted by increased factory costs of enhanced quality assurance programs and higher technical service expenditures both of which have been implemented in anticipation of our planned growth in sales."

"Currently, we are experiencing an extended sales cycle for the receipt of new orders due to the recruiting and introduction of our new sales and marketing team, the training cycles related to new staff and product introductions and the current economic climate in the storage sector," stated John Thonet, Chief Operating Officer. "We have completed a significant portion of the new product development cycles and are now in extended quality assurance programs and beta site acquisition. We have experienced some developmental delays due to incorporating unique market differentiating features, overcoming complex technical challenges and addressing supplier delays and issues. This has caused a slight setback in new product introduction, yet we are looking to a strong year end product launch."



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