Fiscal 2012 Third Quarter Financial Results
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Qualstar Reports Fiscal 2012 Third Quarter Results

(May 10, 2012)

SIMI VALLEY, CA -- (Marketwire) -- 05/10/12 -- Qualstar® Corporation (NASDAQ: QBAK), a manufacturer of automated tape storage solutions and high efficiency power supplies, today reported financial results for the third quarter of fiscal 2012 ended March 31, 2012.

Fiscal 2012 Third Quarter Financial Results
Revenues for the third quarter of fiscal 2012 were $4.6 million, compared to $4.2 million for the same quarter of fiscal 2011, an increase of $0.4 million or 8.5 percent. Loss from operations was $601,000 compared to $561,000 in the third quarter of fiscal 2011. Net loss was $553,000 or $0.05 per basic and diluted share, compared to a net loss of $514,000, or $0.04 per basic and diluted share for the third quarter of fiscal 2011.

Tape library segment revenues were $1.9 million for the third quarter, compared to $2.0 million in the third quarter of fiscal 2011, a decrease of $0.1 million, or 4.3 percent. This decrease in revenues was due to lower sales of TLS and RLS tape libraries and service, partially offset by increased sales of XLS tape libraries and media. Power supply segment revenues were $2.7 million for the quarter, compared to $2.2 million in the prior year quarter, an increase of $0.5 million, or 20.0 percent. The increase in revenues is related to an increase in overall demand.

Gross profit decreased to $1.2 million, or 25.8 percent of net revenues, for the three months ended March 31, 2012, from $1.4 million, or 32.3 percent of net revenues, for the three months ended March 31, 2011. The decrease in gross profit is attributed to a change in product mix.


Research and development ("R&D") expenses for the third quarter of fiscal 2012 were $696,000, or 15.1 percent of revenues, compared to $656,000 or 15.4 percent of revenues, for the third quarter of fiscal 2011. The increase is due primarily to higher consulting expenses. Sales and marketing expenses were $451,000, or 9.8 percent of revenues, compared to $604,000 or 14.2 percent of revenues, in the corresponding period last year. The decrease in sales and marketing expenses is attributed to lower compensation expenses and decreased advertising and promotion expenses. General and administrative expenses were $644,000 or 14.0 percent of revenues, compared to $672,000, or 15.8 percent of revenues, for the same period last year.

Commenting on the Company's business results, Bill Gervais, president and chief executive of Qualstar, said, "We are finding traction with the new RLS 10U and 6U product line. We are also seeing more activity overall in the market, compared to last quarter. In the power supply segment, we shipped approximately 43,600 units, yielding the highest quarterly revenue for power supplies to date."

Fiscal 2012 Nine-Month Financial Results
Qualstar reported revenues of $12.8 million for the first nine months of fiscal 2012, compared with $13.6 million for the first nine months of fiscal 2011. The Company's net loss for the first nine months of fiscal 2012 was $1.5 million, or $(0.12) per basic and diluted share, compared with a net loss of $0.6 million, or $(0.05) per basic and diluted share, in the first nine months of fiscal 2011.

Cash, cash equivalents and marketable securities were $21.6 million at March 31, 2012. Inventory, net of reserves, at March 31, 2012 was $6.1 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 third quarter results on Thursday, May 10th, 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 1-877-941-0843 or 1-480-629-9770. An audio replay will be available through May 24th, 2012, by calling 1-800-406-7325 or 1-303-590-3030, and entering access code 4536084.

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 Nine Months Ended -------------------- -------------------- March 31, March 31, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- --------- Net revenues $ 4,608 $ 4,247 $ 12,787 $ 13,595 Cost of goods sold 3,418 2,876 $ 9,056 8,495 --------- --------- --------- --------- Gross profit 1,190 1,371 3,731 5,100 --------- --------- --------- --------- Operating expenses: Research and development 696 656 1,994 2,088 Sales and marketing 451 604 1,360 1,821 General and administrative 644 672 1,977 1,971 --------- --------- --------- --------- Total operating expenses 1,791 1,932 5,331 5,880 --------- --------- --------- --------- Loss from operations (601) (561) (1,600) (780) Investment Income 48 47 133 137 --------- --------- --------- --------- Loss before income taxes (553) (514) (1,467) (643) Benefit for income taxes - - - - --------- --------- --------- --------- Net loss $ (553) $ (514) $ (1,467) $ (643) ========= ========= ========= ========= Loss per share: --------- --------- --------- --------- Basic and Diluted $ (0.05) $ (0.04) $ (0.12) $ (0.05) ========= ========= ========= ========= 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) --------------------------- March 31, June 30, 2012 2011 ASSETS (Unaudited) (Audited) ------------- ------------- Current assets: Cash and cash equivalents $ 3,777 $ 4,970 Marketable securities, short-term 7,999 10,713 Receivables, net of allowance for doubtful accounts of $154 as of March 31, 2012 and $180 as of June 30, 2011 2,695 3,005 Inventories, net 6,082 5,673 Prepaid expenses and other current assets 224 312 ------------- ------------- Total current assets 20,777 24,673 ------------- ------------- Property and equipment, net 176 232 Marketable securities, long-term 9,778 6,981 Other assets 51 49 ------------- ------------- Total assets $ 30,782 $ 31,935 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,518 $ 1,293 Accrued payroll and related liabilities 419 495 Other accrued liabilities 1,123 945 ------------- ------------- Total current liabilities 3,060 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 March 31, 2012 and June 30, 2011 18,875 18,869 Accumulated other comprehensive income 19 38 Retained earnings 8,806 10,273 ------------- ------------- Total shareholders' equity 27,700 29,180 ------------- ------------- Total liabilities and shareholders' equity $ 30,782 $ 31,935 ------------- -------------

For more information, contact:

Nidhi Andalon
Vice-President and CFO
Qualstar Corporation
(805) 583-7744
Email Contact


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