QBAK Qualstar Corporation

Data Storage Business Nearly Breakeven

2nd Quarter Loss Excluding Non-Recurring Items Under $75,000

Qualstar® Corporation (Nasdaq: QBAK), a manufacturer of data storage solutions and high-efficiency power supplies, today announced its financial results for the second fiscal quarter ended June 30, 2016.

(All amounts are in thousands, except per share data):

Results for the Three Months Ended June 30, 2016 vs. 2015

• Net revenue decreased 27% to $2,370 from $3,249
• Total operating expenses decreased 21% to $1,099 from $1,383
• Net loss was $336 or ($.16) per basic and diluted share vs. $254 or ($.12) per basic and diluted share

Results for the Six Months Ended June 30, 2016 vs. 2015

• Net revenue decreased 25% to $4,520 from $6,054
• Total operating expenses decreased 22% to $2,163 from $2,757
• Net loss increased slightly to $750 from $741 or ($.37) per basic and diluted share vs. ($.36) per basic and diluted share
• The use of cash decreased 16% to $459 from $546 year-over-year

Highlights for the Quarter and Six Months Ended June 30, 2016

• Data Storage business segment reduced loss before taxes to $3
• Nonrecurring expenses of severance, inventory reserves and legal expenses were $262 and $384, for the quarter and the six months, respectively
• Implemented one-for-six reverse stock split
• Regained compliance with NASDAQ continued listing requirements

Qualstar’s board of directors has determined to pursue divestures or potential acquisitions that are either synergistic to our business or represent an attractive growth industry. As we work on this strategy, we intend to simultaneously work to increase our product offerings and evaluate operating expenses for cost savings.

“We are encouraged by the ongoing reduction in our net loss, and remain confident in our ability to return the Company to profitability once our restructuring efforts are complete,” said Steven N. Bronson, CEO and President of Qualstar. He continued, “For the second quarter the net loss was under $75,000, excluding the $262,000 of nonrecurring expenses. This is in line with our expectations, given the soft business conditions that existed during the period for both business segments.”

About Qualstar Corporation

Qualstar, founded in 1984, is a diversified electronics manufacturer specializing in data storage and power supplies. Qualstar is a leading provider of high efficiency and high density power supplies marketed under the N2Power™ brand, and of data storage systems marketed under the Qualstar™ brand. Our N2Power power supply products provide compact and efficient power conversion for a wide variety of industries and applications including, but not limited to, telecom, networking, broadcast, industrial, lighting, gaming and test equipment. Our Qualstar data storage products are used to provide highly scalable and reliable solutions to store and retrieve very large quantities of electronic data. Qualstar’s products are known throughout the world for high quality and Simply Reliable™ designs that provide years of trouble-free service. More information is available at www.qualstar.com or www.n2power.com or by phone at 805-583-7744.

Cautionary Statement Concerning Forward-Looking Statements

Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. These forward-looking statements are based upon the current expectations and beliefs of Qualstar's management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The information contained in this press release is as of the date of this press release. Notwithstanding changes that may occur with respect to matters relating to any forward looking statements, Qualstar does not expect to, and disclaims any obligation to, publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Qualstar, however, reserves the right to update such statements or any portion thereof at any time for any reason. In particular, the following factors, among others, could cause actual or future results to differ materially from those suggested by the forward-looking statements: Qualstar’s ability to successfully execute on its strategic plan and meet its long-term financial goals; Qualstar’s ability to successfully implement and recognize cost savings; Qualstar’s ability to develop and commercialize new products; industry and customer adoption and acceptance of Qualstar’s new products; Qualstar’s ability to increase sales of its products; the rescheduling or cancellation of customer orders; unexpected shortages of critical components; unexpected product design or quality problems; adverse changes in market demand for Qualstar’s products; increased competition and pricing pressure on Qualstar’s products; and the risks related to actions of activist shareholders, including the amount of related costs.

For further information on these and other cautionary statements, please refer to the risk factors discussed in Qualstar’s filings with the U.S. Securities and Exchange Commission including, but not limited to, Qualstar’s Transition Report on Form 10-KT for the transition period July 1, 2015 to December 31, 2015, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of such Form 10-KT, and any subsequently filed reports. All of Qualstar’s filings are available without charge through the SEC’s website (www.sec.gov) or from Qualstar’s website (www.qualstar.com).

QUALSTAR CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

Three Months Ended

June 30,

  Six Months Ended

June 30,

2016 2015   2016 2015 Net revenues $ 2,370   $ 3,249   $ 4,520   $ 6,054 Cost of goods sold   1,596       2,120         3,097       4,008 Gross profit   774       1,129         1,423       2,046 Operating expenses: Engineering 223 352 618 666 Sales and marketing 357 529 657 981 General and administrative   519       502         888       1,110 Total operating expenses   1,099       1,383         2,163       2,757 Loss from operations (325 ) (254 ) (740 ) (711 ) Other income   (11 )     -         (10 )     (30 ) Loss before income taxes (336 ) (254 ) (750 ) (741 ) Provision for income taxes   -       -         -       - Net loss $ (336 )   $ (254 )     $ (750 )   $ (741 ) Loss per common share: Basic and diluted $ (0.16 )   $ (0.12 )     $ (0.37 )   $ (0.36 ) Weighted average common shares outstanding: Basic and diluted   2,042       2,042         2,042       2,042  

QUALSTAR CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands)

    June 30,

2016

    December 31,

2015

(Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 3,504 $ 3,963 Accounts receivables net 1,668 1,630 Inventories, net 1,877 2,444 Prepaid expenses and other current assets   132       219 Total current assets 7,181 8,256 Non-current assets: Property and equipment, net 365 446 Other assets   56       25 Total assets $ 7,602     $ 8,727   Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 646 $ 756 Accrued payroll and related liabilities 222 332 Deferred service revenue, short term 866 994 Other accrued liabilities   409       467 Total current liabilities   2,143       2,549 Long term liabilities: Other long term liabilities 63 27 Deferred service revenue   97       104 Total long term liabilities   160       131 Total liabilities   2,303       2,680   Commitments and contingencies (Notes 7 and 8)   Shareholders’ equity: Preferred stock, no par value; 5,000 shares authorized; no shares issued — — Common stock, no par value; 50,000 shares authorized, 2,042 shares issued and outstanding as of June 30, 2016 and December 31, 2015 19,063 19,061 Accumulated deficit   (13,764 )     (13,014 ) Total shareholders’ equity   5,299       6,047 Total liabilities and shareholders’ equity $ 7,602     $ 8,727

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Qualstar CorporationSteven N. BronsonChief Executive Officer and President805.583.7744 ext. 154