OTG Software Announces Third Quarter Results; Record Revenues and Continuing Growth Highlights:

* Record consolidated revenues of $16.6 million; 4% sequential

quarterly revenue growth, 15% year-over-year revenue growth

* Financially strong with $93 million in cash and cash equivalents

* UniTree Software integration on track and spurring OTG's penetration

of UNIX market

* OTG's storage virtualization and data access technology taking hold

in NAS market through new partnerships with industry leaders



    ROCKVILLE, Md., Oct. 24 /PRNewswire/ -- OTG Software, Inc. (Nasdaq:   OTGS),
 a leading provider of online data storage, data access and email management
 software, today announced financial results, including record revenues for its
 third quarter ended September 30, 2001.  Total consolidated revenues for the
 third quarter were $16.6 million, representing a 4% sequential increase over
 second quarter 2001 revenue of $15.9 million, and an increase of 15% over
 third quarter 2000 consolidated results of $14.4 million.  On a consolidated
 pro forma basis, excluding certain merger related expenses and the
 amortization of certain acquired assets, the net loss for the third quarter
 was $489,000, or ($0.01) per share, compared with a profit of $2.8 million, or
 $0.09 per share on a fully diluted basis, for the same period last year.
     For the nine-month period ending September 30, 2001, OTG had consolidated
 total revenue of $46.4 million, a 25% increase over the nine-month period of
 2000 of $37.2 million.  On a consolidated pro forma basis, excluding certain
 merger related expenses and the amortization of certain acquired assets, the
 net loss for the nine-month period was $879,000, or ($0.03) per share,
 compared with a profit of $3.8 million, or $0.13 per share on a fully diluted
 basis, for the same period last year.
     "OTG delivered record revenue results despite the difficult market
 conditions.  We continued to execute on our proven strategy to deliver
 growth," stated Richard Kay, Chairman and CEO of OTG Software.
 "Fundamentally, our growth is driven by our ability to sell from the
 department level to the enterprise level, our strong sales channel, and our
 proven solutions that better access, manage and protect data with a measurable
 return on investment.  We continue to add new products, new partners, tap new
 markets and win new customers.  In particular, this quarter we continued our
 penetration of the UNIX space by offering petabyte scalability for our data
 access and virtualization solutions."
     Ron Kaiser, OTG's Chief Financial Officer said, "OTG's core strengths
 enabled the Company to continue its growth and report pro forma revenues and
 expenses that met or exceeded analyst consensus estimates despite being a very
 difficult third quarter.  Two quarters of sequential quarterly revenue growth
 demonstrates the breadth of our solutions and our ability to expand in the
 face of tough economic times."
     For the third quarter, on a GAAP basis, which includes merger related
 expenses and amortization adjustments, the Company incurred a net loss of $2.4
 million, or ($0.07) per share as compared to a profit of $2.1 million, or
 $0.07 per share on a fully diluted basis, in the same period last year.  For
 the nine month period ending September 30, 2001, on a GAAP basis, which
 includes merger related expenses and amortization adjustments, the Company
 incurred a net loss of $3.8 million, or ($0.12) per share as compared to a
 profit of $2.3 million, or $0.08 per share on a fully diluted basis, in the
 same period last year.
 
     INVESTOR'S NOTE:  Investors can listen to a teleconference of OTG's
 management's review of the third quarter financial results at approximately
 5:00 p.m. EDT.  The call may be accessed through the website at
 http://www.otg.com or by calling 800-288-8968 (for domestic callers) and
 612-332-1210 (for international callers).  A recording of the conference call
 will be available beginning at approximately 10:15 p.m. EDT on October 24,
 2001 and remain available until midnight, October 31, 2001.  The replay can be
 accessed through the website or by dialing 800-475-6701 (for domestic callers)
 and 320-365-3844 (for international callers) the access code for the replay is
 608218.
 
     About OTG Software
     OTG Software provides next-generation data management and collaboration
 solutions that virtualize storage for any type of data, including files,
 messages and databases, while providing easy and transparent access.  OTG's
 application-oriented approach supports virtually all platforms with open
 architecture solutions that scale from the department to the enterprise, and
 integrate almost seamlessly to store, track and retrieve information.
 Headquartered in Rockville, Maryland, the company has a customer base of over
 15,000 organizations and a global network of VARs, distributors, and OEMs.
 Infinite Storage. Immediate Access.(TM)  http://www.otg.com
 
     This press release contains forward-looking statements within the meaning
 of the federal Private Securities Litigation Reform Act of 1995.  Statements
 contained herein that are not statements of historical fact may be deemed to
 be forward-looking information.  Without limiting the foregoing, references to
 future growth or expansion are forward-looking, and words such as
 "anticipates," "believes," "could," "estimate," "expect," "intend," "may,"
 "might," "should," "will," and "would" and other forms of these words or
 similar words are intended to identify forward-looking information.  You
 should read statements that contain these words carefully because they discuss
 our future expectations, contain projections of our future results of
 operations or of our financial position or state other forward-looking
 information. There may be events in the future that we are not able to predict
 or control accurately, and any forward-looking statements are subject to risks
 and uncertainties that could cause our actual results to differ materially.
 These risks and uncertainties include:  (i) the ability to recruit and retain
 qualified technical and other personnel in a highly competitive market, (ii)
 market acceptance of our new and future products, (iii) the growth and
 adoption rate of Windows NT, Windows 2000, UNIX and Linux (iv) growing
 competition and (v) our ability to maintain and manage our growth. We
 undertake no obligation to update or supplement this information.  For
 additional information regarding risk factors that could affect our future
 results, please refer to the discussions of "Risk Factors" in our Annual
 Report on Form 10-K for the year ended December 31, 2000, filed with the SEC
 on March 7, 2001, and our Quarterly Report on Form 10-Q for the quarter ended
 June 30, 2001, filed with the SEC on August 13, 2001.
 
 
                                 OTG Software, Inc.
                         Pro Forma Statements of Operations
                      (in thousands, except per share amounts)
 
                                         Three months ended   Nine months ended
                                            September 30,      September 30,
                                             2001     2000     2001     2000
                                              (unaudited)       (unaudited)
 
     Revenues
        Software licenses                   $11,877  $11,168  $33,259  $28,719
        Services                              4,692    3,267   13,159    8,469
     Total revenues                          16,569   14,435   46,418   37,188
 
     Cost of revenues
        Software licenses                     1,964      713    3,960    1,867
        Services                              1,684    1,161    4,989    3,446
           Total cost of revenues             3,648    1,874    8,949    5,313
     Gross profit                            12,921   12,561   37,469   31,875
 
     Operating expenses
        Sales and marketing                   7,746    5,708   22,128   15,876
        Research and development              4,269    3,305   12,786    8,552
        General and administrative            2,603    1,834    7,146    5,305
        Merger-related costs                      -        -        -        -
        Amortization of acquired
         intangible assets                        -        -        -        -
        Write-off of acquired in-process
         research and development                 -        -        -        -
           Total operating expenses          14,618   10,847   42,060   29,733
     Income (loss) from operations           (1,697)   1,714   (4,591)   2,142
 
     Other income (expense)
        Interest income                         814    1,111    3,305    2,384
        Interest expense                        (15)     (16)     (46)    (656)
        Foreign exchange gain (loss)             84      (48)     (18)     (52)
        Other income (expense)                    -        -     (152)       -
           Total other income (expense)         883    1,047    3,089    1,676
     Income (loss) before income taxes         (814)   2,761   (1,502)   3,818
 
     Provision (credit) for income taxes       (325)       -     (623)      21
 
     Net income (loss)                        $(489)  $2,761    $(879)  $3,797
 
     Net income (loss) per common share
        Basic                                $(0.01)   $0.10   $(0.03)   $0.14
        Diluted                              $(0.01)   $0.09   $(0.03)   $0.13
 
     Shares used for computation
        Basic                                32,630   28,837   31,707   26,374
        Diluted                              32,630   32,084   31,707   29,604
 
     The pro forma statements of operations exclude merger-related costs
     related to the Company's acquisition of Smart Storage in the first quarter
     of 2001, amortization expenses associated with certain intangible assets
     and the write-off of in-process research and development resulting from
     the Company's acquisition of xVault in the second quarter of 2000,
     amortization expenses associated with Smart Storage's acquisition of
     certain intangible assets in the first quarter of 2000, and amortization
     expenses associated with certain intangible assets and other expenses
     resulting from the Company's acquisition of Unitree Software, Inc. in the
     third quarter of 2001.
 
 
                                OTG Software, Inc.
                             Statements of Operations
                     (in thousands, except per share amounts)
 
                                         Three months ended   Nine months ended
                                             September 30,      September 30,
                                             2001     2000     2001     2000
                                              (unaudited)       (unaudited)
 
     Revenues
       Software licenses                   $11,877  $11,168  $33,259  $28,719
       Services                              4,692    3,267   13,159    8,469
         Total revenues                     16,569   14,435   46,418   37,188
 
     Cost of revenues
       Software licenses                     2,102      851    4,166    2,051
       Services                              1,684    1,161    4,989    3,446
         Total cost of revenues              3,786    2,012    9,155    5,497
     Gross profit                           12,783   12,423   37,263   31,691
 
     Operating expenses
       Sales and marketing                   7,746    5,708   22,128   15,876
       Research and development              4,510    3,305   13,027    8,552
       General and administrative            2,603    1,834    7,146    5,305
       Merger-related costs                      -        -    1,585        -
       Amortization of acquired
        intangible assets                      394      208      810      347
       Write-off of acquired in-process
        research and development                 -        -        -      620
           Total operating expenses         15,253   11,055   44,696   30,700
     Loss from operations                   (2,470)   1,368   (7,433)     991
 
     Other income (expense)
       Interest income                         814    1,111    3,305    2,384
       Interest expense                        (15)     (16)     (46)    (656)
       Foreign exchange gain (loss)             84      (48)     (18)     (52)
       Other income (expense)                    -        -     (152)       -
         Total other income (expense)          883    1,047    3,089    1,676
     Income (loss) before income taxes      (1,587)   2,415   (4,344)   2,667
 
     Provision (credit) for income taxes       796      312     (531)     333
 
     Net income (loss)                     $(2,383)  $2,103  $(3,813)  $2,334
 
     Net income (loss) per common share
       Basic                                $(0.07)   $0.07   $(0.12)   $0.09
       Diluted                              $(0.07)   $0.07   $(0.12)   $0.08
 
     Shares used for computation
       Basic                                32,630   28,837   31,707   26,374
       Diluted                              32,630   32,084   31,707   29,604
 
 
                                   OTG Software
                        Selected Balance Sheet Information
                                  (in thousands)
 
                                               September 30,       December 31,
                                                  2001                2000
                                               (unaudited)
     Assets
     Current assets
        Cash and cash equivalents                   $93,134          $102,197
        Accounts receivable,
         net of allowance                            24,713            20,613
        Deferred income taxes                         1,976             2,066
        Other current assets                          3,585             2,919
           Total current assets                     123,408           127,795
     Other assets
        Property and equipment, net                  10,221             4,744
        Goodwill, net                                11,494             2,510
        Other intangible assets, net                 10,455             1,212
        Deferred income taxes                         1,229             1,302
        Other noncurrent assets, net                    580               759
           Total other assets                        33,979            10,527
              Total assets                         $157,387          $138,322
 
     Liabilities and Shareholders' Equity
     Current liabilities
        Accounts payable                             $3,471            $4,080
        Income taxes payable                              -             1,143
        Accrued expenses                             10,037             7,572
        Current portion of long-term debt             4,039                61
        Current portion of note payable               2,625               225
        Current portion of notes payable
         to shareholders                                 68                67
        Deferred rent                                   281                 -
        Deferred revenues                             8,676             7,586
           Total current liabilities                 29,197            20,734
     Other liabilities
        Long-term debt, net of current portion            -                23
        Note payable, net of current portion            469               225
        Notes payable to shareholder,
         net of current portion                           -                18
        Deferred rent, net of current portion         2,439                 -
        Deferred revenues,
         net of current portion                         984               446
           Total other liabilities                    3,892               712
              Total liabilities                      33,089            21,446
     Shareholders' equity
        Preferred stock                                   -                 -
        Common stock                                    331               309
        Additional paid-in capital                  151,044           140,025
        Deferred compensation, net                   (1,004)           (1,637)
        Accumulated other comprehensive loss            (11)              (28)
        Accumulated deficit                         (24,494)          (20,741)
        Shareholders' equity before stock
          subscription receivable and
          treasury stock                            125,866           117,928
              Less: stock subscription
               receivable                            (1,112)           (1,052)
              Less: treasury stock                     (456)                -
                 Total shareholders'
                  equity                            124,298           116,876
                    Total liabilities and
                     shareholders' equity          $157,387          $138,322
 
 
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SOURCE OTG Software, Inc.

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