Fiscal 2012 Second Quarter Financial Results
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Qualstar Reports Fiscal 2012 Second Quarter Results

(January 31, 2012)

SIMI VALLEY, CA -- (Marketwire) -- 01/31/12 -- Qualstar® Corporation (NASDAQ: QBAK), a manufacturer of automated tape storage solutions and high efficiency power supplies, today reported financial results for the second quarter of fiscal 2012 ended December 31, 2011.

Fiscal 2012 Second Quarter Financial Results
Revenues for the second quarter of fiscal 2012 were $3.6 million, compared to $4.1 million for the same quarter of fiscal 2011, a decrease of $0.5 million or 13.4 percent. Loss from operations was $1.0 million compared to $0.3 million in the second quarter of fiscal 2011. Net loss was $971,000 or $0.08 per basic and diluted share, compared to a net loss of $296,000, or $0.02 per basic and diluted share for the second quarter of fiscal 2011.

Tape library segment revenues were $1.6 million for the second quarter, compared to $2.6 million in the second quarter of fiscal 2011, a decrease of $1.0 million, or 39.0 percent. Power supply segment revenues were $2.0 million for the quarter, compared to $1.5 million in the prior year quarter, an increase of $0.5 million, or 29.4 percent.

Gross profit decreased to $0.8 million, or 23.3 percent of net revenues, for the three months ended December 31, 2011, from $1.6 million, or 39.4 percent of net revenues, for the three months ended December 31, 2010. The decrease in gross profit is attributed to a change in product mix, lower absorption of labor and overhead and an increase in rework expenses and inventory reserves.


Research and development ("R&D") expenses for the second quarter of fiscal 2012 were $650,000, or 18.3 percent of revenues, compared to $725,000 or 17.7 percent of revenues, for the second quarter of fiscal 2011. The decrease is due primarily to lower compensation expenses related to reductions in personnel. Sales and marketing expenses were $448,000, or 12.6 percent of revenues, compared to $581,000 or 14.1 percent of revenues, in the corresponding period last year. The decrease in sales and marketing expenses is attributed to lower compensation expenses related to reductions in personnel. General and administrative expenses were $741,000 or 20.8 percent of revenues, compared to $650,000, or 15.8 percent of revenues, for the same period last year. The increase in general and administrative expense is due to higher legal and bad debt expenses.

Commenting on the Company's business results, Bill Gervais, president and chief executive of Qualstar, said, "We had a challenging quarter, particularly in the data storage sector of our business. Sales were impacted by a number of purchase delays around the globe but primarily among companies with a presence in southern Europe or U.S companies with customers in that region where Euro uncertainties have brought normal business activities to a near halt. Also, we took a conservative approach and increased accounts receivable reserves for three long-time customers in Portugal, Italy and Belgium."

"Our recently-announced RLS-8350 tape libraries began shipments late in the quarter and have received favorable customer comments.

"In the power supply segment, we shipped nearly 35,000 units but incurred higher than normal rework expenses resulting from a defective semiconductor lot that was not discovered until after the products were delivered. We have taken corrective action to prevent this in the future," he said.

Fiscal 2012 Six-Month Financial Results
Qualstar reported revenues of $8.2 million for the first six months of fiscal 2012, compared with $9.3 million for the first six months of fiscal 2011. The Company's net loss for the first six months of fiscal 2012 was $0.9 million, or $(0.07) per basic and diluted share, compared with a net loss of $0.1 million, or $(0.01) per basic and diluted share, in the first six months of fiscal 2011.

Cash, cash equivalents and marketable securities were $21.4 million at December 31, 2011, Inventory, net of reserves, at December 31, 2011 was $6.3 million, compared to $5.7 million at June 30, 2011.

Qualstar Corporation Conference Call
The Company will hold a conference call to discuss its fiscal 2012 second quarter results on Tuesday, February 14th, 2012 at 2:00 p.m. Pacific standard time (5:00 p.m. Eastern). Investors are invited to listen to the call live via the Internet using the link under the "Investors" section at www.qualstar.com. Please go to the Website at least 15 minutes early to register, download and install any necessary audio software. A replay of the Webcast will be available after the live conference call. Additionally, participants can dial into the live conference call by calling 1-888-549-7750 or 1-480-629-9770. An audio replay will be available through February 21, 2012, by calling 800-406-7325 or 303-590-3030, and entering access code 4511426.

About Qualstar Corporation
Qualstar, founded in 1984, is a diversified electronics manufacturer specializing in data storage and power supplies. The company'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.

Forward-Looking Statements
Statements concerning the future business, operating results and financial condition of the Company are "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's current expectations and are subject to a number of uncertainties that could cause actual performance and results to differ materially from the results discussed in the forward-looking statements. Factors that could affect the Company's actual results include the Company's ability to increase sales of its products; rescheduling or cancellation of customer orders; unexpected shortages of critical components; unexpected product design or quality problems; and, adverse changes in market demand for its products. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Further information on these and other potential factors that could affect the Company's financial results or condition are included in Qualstar's filings with the Securities and Exchange Commission. In particular, reference is made to the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2011, and to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of its Form 10-K.

-Financial Tables to Follow-

QUALSTAR CORPORATION CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (UNAUDITED) Three Months Ended Six Months Ended -------------------- -------------------- December 31, December 31, 2011 2010 2011 2010 --------- --------- --------- --------- Net revenues $ 3,555 $ 4,107 $ 8,179 $ 9,348 Cost of goods sold 2,728 2,490 5,638 5,619 --------- --------- --------- --------- Gross profit 827 1,617 2,541 3,729 --------- --------- --------- --------- Operating expenses: Research and development 650 725 1,298 1,432 Sales and marketing 448 581 909 1,217 General and administrative 741 650 1,333 1,299 --------- --------- --------- --------- Total operating expenses 1,839 1,956 3,540 3,948 --------- --------- --------- --------- Loss from operations (1,012) (339) (999) (219) Investment Income 41 43 85 90 --------- --------- --------- --------- Loss before income taxes (971) (296) (914) (129) Benefit for income taxes - - - - --------- --------- --------- --------- Net loss $ (971) $ (296) $ (914) $ (129) ========= ========= ========= ========= Loss per share: --------- --------- --------- --------- Basic and Diluted $ (0.08) $ (0.02) $ (0.07) $ (0.01) ========= ========= ========= ========= Shares used to compute earnings per share: --------- --------- --------- --------- Basic and Diluted 12,253 12,253 12,253 12,253 --------- --------- --------- --------- QUALSTAR CORPORATION CONDENSED BALANCE SHEETS (in thousands) December 31, June 30, 2011 2011 ASSETS (Unaudited) (Audited) ------------ ------------- Current assets: Cash and cash equivalents $ 4,786 $ 4,970 Marketable securities, short-term 7,631 10,713 Receivables, net of allowance for doubtful accounts of $154 as of December 31, 2011 and $180 as of June 30, 2011 2,834 3,005 Inventories, net 6,256 5,673 Prepaid expenses and other current assets 212 312 ------------ ------------- Total current assets 21,719 24,673 ------------ ------------- Property and equipment, net 181 232 Marketable securities, long-term 8,947 6,981 Other assets 51 49 ------------ ------------- Total assets $ 30,898 $ 31,935 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,241 $ 1,293 Accrued payroll and related liabilities 313 495 Other accrued liabilities 1,099 945 ------------ ------------- Total current liabilities 2,653 2,733 ------------ ------------- Other long-term liabilities 22 22 Commitments and contingencies Shareholders' equity: Common stock, no par value; 50,000 shares authorized, 12,253 shares issued and outstanding as of December 31, 2011 and June 30, 2011 18,873 18,869 Accumulated other comprehensive income (9) 38 Retained earnings 9,359 10,273 ------------ ------------- Total shareholders' equity 28,223 29,180 ------------ ------------- Total liabilities and shareholders' equity $ 30,898 $ 31,935 ------------ -------------

For more information, contact:

William J. Gervais
President & CEO
Qualstar Corporation
(805) 583-7744
Email Contact


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