Qualstar Reports Fiscal 2013 First Quarter Results

Qualstar Reports Fiscal 2013 First Quarter Results 
SIMI VALLEY, CA -- (Marketwire) -- 11/07/12 --  Qualstar(R)
Corporation (NASDAQ: QBAK), a manufacturer of data storage solutions
and high-efficiency power supplies, today reported financial results
for its first fiscal quarter ended September 30, 2012. 
Fiscal 2013 First Quarter Financial Results
 Revenues for the first
quarter of fiscal 2013 were $3.5 million, compared to $4.6 million
for the same quarter of fiscal 2012, a decrease of $1.2 million or
25.3 percent. Loss from operations was $1.9 million compared to
income from operations of $13,000 in the first quarter of fiscal
2012. GAAP net loss was $1.9 million or $0.16 per basic and diluted
share. Excluding charges of $325,000 in inventory reserves, $94,000
in legal settlement fees and $882,000 in facility restructuring
expenses, non-GAAP net loss was $645,000 or $0.05 per share. This
compares to GAAP net income of $57,000, or $0.00 per basic and
diluted share for the first quarter of fiscal 2012. 
Storage revenues were $1.9 million for the first quarter compared to
$2.4 million in the first quarter of fiscal 2012, a decrease of
$500,000, or 21.1 percent. This year-over-year decrease in revenues
was a result of legacy products that were discontinued in the fourth
quarter of fiscal 2012, as well as lower sales of XLS tape libraries,
media and service. This decline was partially offset by strong sales
of our RLS library products, which increased 15.5 percent from the
same quarter last year. N2Power revenues were $1.5 million for the
quarter, compared to $2.2 million in the prior year quarter, a
decrease of $700,000, or 29.9 percent. The decrease in revenues was
due to an inventory tightening by our OEM customers in two of our
stronger markets, servers and telecom. 
Gross profit decreased to $944,000 or 27.3 percent of revenues, for
the three months ended September 30, 2012, from $1.7 million, or 37.1
percent of net revenues, for the three months ended September 30,
2011. The decrease was due to higher inventory reserves and lower
absorption of manufacturing overhead. 
Engineering expenses for the first quarter of fiscal 2013 were
$666,000, or 19.3 percent of revenues, comparable to $648,000 or 14.0
percent of revenues, for the first quarter of fiscal 2012. Sales and
marketing expenses were $531,000, or 15.4 percent of revenues,
compared to $461,000 or 10.0 percent of revenues, in the
corresponding period last year. The increase was due to compensation,
advertising and promotional expenses. General and administrative
expenses were $740,000 or 21.4 percent of revenues, compared to
$592,000, or 12.8 percent of revenues, for the same period last year.
The increase in G&A expenses was attributed to an increase in
compensation expenses. 
Cash, cash equivalents and marketable securities were $19.6 million
at September 30, 2012, down $1.3 million from $20.9 million at June
30, 2012. Inventory, net of reserves, at September 30, 2012 was $4.1
million, compared to $4.5 million at June 30, 2012. 
"While the lingering effects of the proxy contest impacted our fiscal
first quarter performance, we are encouraged by our growing bookings
and long-term trends in our markets," said Larry Firestone, President
and CEO. "With the recently initiated strategic plan and new
management in place we have taken significant steps to restructure
the company and lower our breakeven with much more to come. We are
expanding Qualstar's portfolio of products across its power
conversion and storage markets and are targeting a variety of new
market opportunities to drive long-term growth and profitability." 
Qualstar Corporation Conference Call
 Company management will hold a
conference call to discuss its first quarter and fiscal year 2013
results today at 2:00 p.m. Pacific (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 877-941-8631 or
480-629-9723. An audio replay will be available through November 21,
2012, by calling 800-406-7325 or 303-590-3030 and entering access
code 4572757. 
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, 2012, and to the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" sections of its Form 10-K. 


 
                                                                            
QUALSTAR CORPORATION                                                        
CONDENSED STATEMENTS OF OPERATIONS                                          
(in thousands, except per share amounts)                                    
(UNAUDITED)                                                                 
                                                                            
                                               -----------------------------
                                                     Three Months Ended     
                                               -----------------------------
                                                       September 30,        
                                                    2012           2011     
                                               -------------  --------------
                                                                            
Net revenues                                   $       3,453  $        4,624
                                                                            
Cost of goods sold                                     2,509           2,910
                                               -------------  --------------
                                                                            
Gross profit                                             944           1,714
                                               -------------  --------------
                                                                            
Operating expenses:                                                         
  Engineering                                            666             648
  Sales and marketing                                    531             461
  General and administrative                             740             592
  Restructuring Expense                                  882               -
                                               -------------  --------------
    Total operating expenses                           2,819           1,701
                                               -------------  --------------
                                                                            
(Loss) income from operations                         (1,875)             13
                                                                            
Other (expense) income                                   (71)             44
                                               -------------  --------------
                                                                            
(Loss) income before income taxes                     (1,946)             57
                                                                            
Provision for income taxes                                 -               -
                                               -------------  --------------
                                                                            
Net (loss) income                              $      (1,946) $           57
                                               =============  ==============
                                                                            
Loss per share:                                                             
                                               -------------  --------------
  Basic and Diluted                            $       (0.16) $         0.00
                                               =============  ==============
                                                                            
Shares used to compute earnings per share:                                  
                                               -------------  --------------
  Basic and Diluted                                   12,253          12,253
                                               =============  ==============
                                                                            
                                                                            
                                                                            
                            QUALSTAR CORPORATION                            
                          CONDENSED BALANCE SHEETS                          
                               (in thousands)                               
                                                                            
                                               -------------- --------------
                                                September 30,    June 30,   
                                                    2012           2012     
                    ASSETS                       (Unaudited)     (Audited)  
                                               -------------- --------------
                                                                            
Current assets:                                                             
  Cash and cash equivalents                    $        8,241 $        7,381
  Marketable securities, short-term                     7,709          7,135
  Receivables, net of allowance for doubtful                                
   accounts of $54 as of September 30, 2012                                 
   and $38 as of June 30, 2012                          2,616          2,995
  Inventories, net                                      4,121          4,475
  Prepaid expenses and other current assets               287            151
                                               -------------- --------------
                                                                            
    Total current assets                               22,974         22,137
                                               -------------- --------------
                                                                            
Property and equipment, net                               293            268
Marketable securities, long-term                        3,649          6,369
Other assets                                               52             50
                                               -------------- --------------
                                                                            
    Total assets                               $       26,968 $       28,824
                                               ============== ==============
                                                                            
     LIABILITIES AND SHAREHOLDERS' EQUITY                                   
                                                                            
Current liabilities:                                                        
  Accounts payable                             $        1,158 $        2,039
  Accrued payroll and related liabilities                 458            332
  Other accrued liabilities                             2,198          1,374
                                               -------------- --------------
                                                                            
    Total current liabilities                           3,814          3,745
                                               -------------- --------------
                                                                            
Other long-term liabilities                                26             26
Commitments and contingencies                                               
Shareholders' equity:                                                       
  Common stock, no par value; 50,000 shares                                 
   authorized, 12,253 shares issued and                                     
   outstanding as of September 30, 2012 and                                 
   June 30, 2012                                       18,892         18,878
  Accumulated other comprehensive income                   16              9
  Retained earnings                                     4,220          6,166
                                               -------------- --------------
    Total shareholders' equity                         23,128         25,053
                                               -------------- --------------
                                                                            
    Total liabilities and shareholders' equity $       26,968 $       28,824
                                               ============== ==============
                                                                            
                                                                            
                                                                            
                            QUALSTAR CORPORATION                            
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            
                   THREE MONTHS ENDED SEPTEMBER 30, 2012                    
                  (in thousands, except per share amounts)                  
                                (UNAUDITED)                                 
                                                                            
Non-GAAP net earnings are GAAP net earnings with the following              
 modifications: (1) elimination of inventory reserve; (2) elimination of    
 litigation settlement expense and (3) restructuring expenses.              
                                                                            
                                                                            
                     ------------------------------------------------------ 
                              Three Months Ended September 30, 2012         
                     ------------------------------------------------------ 
                                                                            
                                             (2)                            
                                 (1)      Litigation      (3)               
                              Inventory   Settlement Restructuring    Non-  
                       GAAP    Reserve     Expense      Expenses      GAAP  
                     -------  ---------  ----------- -------------  ------- 
                                                                            
Net revenues         $ 3,453          -            -             -  $ 3,453 
                                                                            
Cost of goods sold     2,509       (325)           -             -    2,184 
                     -------  ---------  ----------- -------------  ------- 
                                                                            
Gross profit             944        325            -             -    1,269 
                     -------  ---------  ----------- -------------  ------- 
                                                                            
Operating expenses:                                                         
  Engineering            666          -            -             -      666 
  Sales and                                                                 
   marketing             531          -            -             -      531 
  General and                                                               
   administrative        740          -            -             -      740 
  Restructuring                                                             
   Expenses              882          -            -          (882)       - 
                     -------  ---------  ----------- -------------  ------- 
    Total operating                                                         
     expenses          2,819          -            -          (882)   1,937 
                     -------  ---------  ----------- -------------  ------- 
                                                                            
Loss from operations  (1,875)       325            -           882     (668)
                                                                            
Other (expense)                                                             
 income                  (71)         -           94             -       23 
                     -------  ---------  ----------- -------------  ------- 
                                                                            
Loss before income                                                          
 taxes                (1,946)       325           94           882     (645)
                                                                            
Provision for income                                                        
 taxes                     -          -            -             -        - 
                     -------  ---------  ----------- -------------  ------- 
                                                                            
Net loss             $(1,946) $     325  $        94 $         882  $  (645)
                     =======  =========  =========== =============  ======= 
                                                                            
Loss per share*:                                                            
                     -------  ---------  ----------- -------------  ------- 
  Basic and Diluted  $ (0.16) $    0.03  $      0.01 $        0.07  $ (0.05)
                     =======  =========  =========== =============  ======= 
                                                                            
Shares used to                                                              
 compute loss per                                                           
 share:                                                                     
                     -------  ---------  ----------- -------------  ------- 
  Basic and Diluted   12,253     12,253       12,253        12,253   12,253 
                     =======  =========  =========== =============  ======= 
                                                                            
* Financial measures have not been provided for the three months ended      
 September 30, 2011 as no non-GAAP financial measures were reported.        

  
For more information, contact: 
Nicki Andalon 
Vice-President & CFO 
Qualstar Corporation 
(805) 583-7744 
nicki.andalon@qualstar.com  
Vanessa Lehr/Annie Leschin
Investor Relations
StreetSmart Investor Relations
(415) 775-1788