Although Overland Storage (Nasdaq: OVRL) claims to have enough cash to operate for the next several months, the company's accountant has raised doubts about the data systems group’s future. The company, in January, closed a deal for Tandberg Data Holdings Sarl, and closed a $2 million private placement.
San Diego-based Overland has a long history of operating losses and reported a $132.4 million deficit at the end of its fiscal year on June 30.
Overland accountant Moss Adams LLP says that the company's losses and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern, or without the threat of liquidation, according to a Feb. 13 filing with the U.S. Securities and Exchange Commission.
The company has experienced losses for the last eight fiscal years. During fiscal 2013, Overland reported a loss of $19.6 million.
In the filing, Overland projected that cash on hand and available borrowings under a credit facility would allow operation for the next 12 months. Overland may seek debt, equity or equity-based financing when market conditions permit, the company says.
Overland develops data management and data production systems that are designed for small and medium-sized businesses. The systems are sold under the names SnapServer, SnapSan and SnapScale. The company makes money by selling products and maintenance services.
"We expect to incur negative operating cash flows during fiscal 2014 as we continue to reshape our business model and further improve operational efficiencies," the company said.
In January, Overland completed the acquisition of Tandberg Data, a data storage and protection services provider. "We are focused on leveraging key areas where we believe we can drive growth in the business, and believe the combination of the two companies provides the scale and resources required for Overland to become a profitable and growing company," CEO Eric Kelly said in a statement.
Overland paid for Tandberg with about 47 million shares of common stock. On March 4, the company's stock opened at $1.
Also in January, the company raised $2 million through the private placement of convertible notes.
The company had $10.6 million in revenue for the quarter ended Dec. 31, down from the $12.6 million it had in the same period of 2012. Overland was able to decrease operating expenses to $8.2 million in that time frame, down from $8.7 million in the same time period in 2012.
For the quarter ended Dec. 31, Overland reported a $4.3 million loss, compared with a $4.3 million loss in the same quarter of 2012. As of Dec. 31, the company had $3.5 million outstanding under a credit facility and $7.5 million under convertible notes.
For last week's edition of Turnaround Tuesday, see "Turnaround Tuesday: Violin Memory Restructures."
For more struggling companies, see Mergers & Acquisitions Distressed Company Watch List.