Storage Computer Updates Shareholders.

Business/Technology Editors

NASHUA, N.H.--(BUSINESS WIRE)--Dec. 20, 2000

Storage Computer Corporation(R) (AMEX:SOS), sent the following letter to its Shareholders today:

Dear Fellow Shareholders:

We want to take this opportunity to update you on the events that have occurred since the acquisition of CyberStorage Systems and on the progress we have made toward consolidating our management operations, product development and distribution.

We also want to address the recent price volatility in SOS common stock and ask for your participation in efforts to dampen the speculative activities that have affected the price of your SOS stock in recent weeks.

First, I would like to address managerial changes. With the acquisition of CyberStorage, we have gained new talent and expertise. We have organized our management team to capitalize on the strengths of our key people. Here's how our team looks right now:

-- Ted Goodlander, CEO is focusing on Industry issues and strategic customer
development.

-- Ed Gardner, President is managing the Company's Patent and Intellectual
Property rights and focusing on strategic alliances and partnering
opportunities.

-- John Thonet, COO, is concentrating on running day-to-day operations and
executing an aggressive sales and marketing plan.

-- Peter Hood, CFO, is consolidating the record-keeping, budgeting and
financial planning of Storage Computer and CyberStorage.

-- Ricardo Velez, CTO, is focusing on sustaining our product leadership by
continuing to evaluate technologies and our future direction and strategy in
the storage world.

That's what's happening in the executive offices. We are looking for a few more key people in sales and marketing to round out our team. Meanwhile in the plant, a dedicated, talented group of individuals appears to have been re-energized by the merger with CyberStorage. The mood is optimistic and upbeat.

We have much to be upbeat about. We would like to share a couple of developments fueling our renewed optimism.

-- Last month, along with Lucent Technologies, InformaTech,

DeJarnette Research Systems and others, we participated in the

Radiological Society of North America (RSNA) Show. We

demonstrated how local and wide area optical capabilities can

be merged with storage capabilities to let physicians and

researchers access centralized data storage archives directly

over the hospital network, or over high-speed wide area

connections without connecting through a server.

This technology has tremendous ramifications for improving the

quality and speed of all variety of image related diagnosis by

replacing traditional films with digital images. Our

technology was enthusiastically received by the medical

community.

-- Our development activities are progressing well and we

anticipate new product announcements in January 2001 to arm

our sales channels with solutions that competitors in the

industry are not forecasting for another 18 to 24 months.

The Company has no bank debt and has the cash on hand to fund our 2001 marketing and development plans. Since last spring, we have raised $22 million dollars through a series of sales of convertible preferred stock, culminating with the sale of $12 million dollars of Series C Convertible Preferred Stock on October 31, 2000. The transaction is structured as a "market value conversion" and permits the holders of these securities to convert these shares into shares of our common stock at the then fair market value, however such conversion rate shall not be less than $13.25 per share prior to August 1, 2001. At the company's option, an additional $3 million is available from this investor under similar terms and conditions, provided the market price of the Company's common stock is greater than $10.00 at the time the option is exercised. If all of the remaining Series A and Series B stock were converted using yesterday's closing price of $6.50, the Company would have issued approximately 1,255,500 additional shares to its currently issued and outstanding 14,825,548 shares of common stock.

We believe our institutional investors are strong funds with a long term view of the storage markets and their investments in our Company. In connection with the pending registration statement, the common stock of the Goodlander family is also being registered to enable the family to make fundamental financial planning decisions, including the ability to make charitable gifts in stock. The Goodlander family has never sold a share of SOS stock, and has no current plans to sell. Our confidence as stockholders is based on the strong fundamentals of the storage markets, the advanced technology products of the Company, and the ability of our management team to execute our growth plan.

In general, tech stocks have seen significant price declines since early November. However, we believe our company came under a large short selling attack by one or more traders who continue their short selling activities today. This short selling can only continue as long as the sellers are able to borrow our stock from your broker and sell it. Unlike futures and options markets, short sellers can only short sell in the equities markets if they can borrow stock that exists. If your stock exists in the form of a certificate you hold at home or in a safety deposit box, it cannot be borrowed. If your stock is held in a brokerage account that is a "cash account," you might call your broker and request that your SOS stock be brought in house and marked "not borrowable" or "no borrowing out." However, if your stock is held in a margin account that has a debit balance, you may need to put additional cash or other marketable securities in to the account in order to get the company's stock out of the loanable base. Every share that a short seller can't borrow is a share they can't sell. In fact, the more shares which are deemed not borrowable, the greater the likelihood that the stock already borrowed by the short sellers would be called back in and the short seller would be forced out by lack of borrowable shares available in the trading market. Your assistance in these endeavors would be greatly appreciated by the Company and your fellow stockholders.

About Storage Computer

Storage Computer Corporation develops and manufactures software-driven multi-host storage solutions used to drive core business applications. Storage Computer solves its customer's business problems through its StorageSuite(TM) product line and patented OmniRAID and OmniFORCE storage software. Storage Computer Corporation is a publicly held company traded on the American Stock Exchange under the symbol SOS. The Company's worldwide headquarters are in Nashua, New Hampshire, with subsidiaries and distribution in over 30 countries. Company information may be found on the World Wide Web at http://www.storage.com.

The Private Securities Litigation Reform Act of 1995 contains certain safe harbors regarding forward-looking statements. From time to time, information provided by the Company or statements made by its directors, officers or employees may contain `forward-looking' information, which involve risk and uncertainties. Any statements in this report that are not statements of historical fact are forward-looking statements (including, but not limited to, statements concerning the characteristics and the growth of the Company's market and customers, the Company's objectives and plans for future operations, possible acquisitions and the Company's expected liquidity and capital resources, and the possible outcome of litigation. Such forward-looking statements are based on a number of assumptions and involve a number of risks and uncertainties, and accordingly, actual results could differ materially. Factors that may cause such differences include, but are not limited to: the continued and future acceptance of the Company's products and services, the rate of growth in the industries of the Company's customers; the presence of competitors with greater technical, marketing and financial resources; the Company's ability to promptly and effectively respond to technological change which meets evolving customer needs; capacity and supply constraints or difficulties; and the Company's ability to successfully integrate new operations.