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BKF Urges Qualstar Shareholders to Focus on the Real Facts and Issues and Vote to Elect the BKF Nominees at the 2013 Annual



  BKF Urges Qualstar Shareholders to Focus on the Real Facts and Issues and
  Vote to Elect the BKF Nominees at the 2013 Annual Meeting

Business Wire

BOCA RATON, Fla. -- June 21, 2013

BKF Capital Group, Inc. (OTCQB: BKFG), the second largest shareholder of
Qualstar Corporation (NASDAQ: QBAK), today commented on the real facts and
issues in BKF’s contest to replace the Board of Directors of Qualstar and
elect BKF’s highly experienced, highly qualified and highly motivated nominees
at the Qualstar Annual Meeting of Shareholders on June 28, 2013.

Steven Bronson, BKF’s chief executive officer, remarked: “As the contest for
the future of Qualstar approaches its final stages, shareholders should focus
on the real facts and issues, and not be swayed by the Company’s assurances of
recovery at some unspecified future time, or the formulaic analyses of the
proxy advisory services which we believe are simply wrong.”

“The facts are that the Company is burning through its cash and does not have
a large runway for recovery. Qualstar’s results for the nine months ended
March 31, 2013, under the Company’s new CEO Lawrence Firestone, were the worst
ever. Unlike BKF, the current Board has only a nominal investment in Qualstar.
Its strategy is to throw money at a problem—the continuing drain of the tape
storage business—that cannot be solved by money alone.”

“BKF’s nominees are highly skilled and experienced and are incentivized to run
the Company for its owners, because BKF is a substantial owner. We want what
you want—prudent cash management, a strategy for the tape storage business
that is based on market realities and a return to profitability in the very
near turn.”

Mr. Bronson concluded: “We ask our fellow shareholders to read this release in
full, together with BKF’s other materials, and vote to elect BKF’s nominees on
the GOLD proxy card.”

Money: The Board is Spending the Company’s Money Like It Belongs to Somebody
Else

As BKF has been saying for well over a year, there are serious challenges
facing Qualstar, particularly in its tape storage business. The solution of
the Board and CEO Lawrence Firestone has been to throw money at the problem,
substantially increasing G&A, increasing Sales and Marketing costs, and
increasing Engineering costs. The consequence of this strategy has been a
staggering cash burn of over $6 million in the past nine months, even with the
Board’s highly touted outsourcing of manufacturing operations.

The Company’s approach to this proxy contest is just one example of the
disregard that the Board and Mr. Firestone have for shareholder money. After
spending over $600,000 to thwart BKF’s non-coercive partial tender offer in
January, the Company says it will be spending $500,000 in this proxy contest.
That’s a total of over $1.1 million!

In this proxy contest, BKF sent out one mailing. The Company sent out three.
BKF did a simple homegrown investor presentation. The Company posted two
versions of a graphically enhanced, professionally designed presentation. And
why not? It’s not their money.

Is Qualstar a Start-Up Company? The Current Chairman of the Board Seems to
Think So

On the Company’s investor call this week, the current Chairman of the Board,
Allen Ally said “Qualstar has the feeling of a very exciting startup company.”
What does that mean? It means a company that can run through its cash, with
the anticipation that somebody, somehow is going to come up with more. It
means a company that’s under no pressure to earn a profit. It means a company
that expects its stock price to be buoyed by promises of future success and is
not grounded in current performance.

If that’s what the Company’s current Chairman believes, then shareholders can
begin to understand why Qualster is headed in a direction of unconstrained
spending, no profitability and promises instead of performance.

Of course, Qualstar is not a startup. It has been in business for almost 30
years. The markets and shareholders rightfully want to see profits and
performance now.

Unfortunately, ISS Got It Wrong—Shareholders Should Not Make the Same Mistake

The Company is touting its ISS recommendation. Unfortunately, ISS is wrong in
its analysis, and were shareholders to make the same mistake, BKF believes
they will see the value of their investment in the Company continue to erode.

ISS looked at TSR (Total Shareholder Return) for the 12 month period ending
June 2012, noted that the Company’s TSR rose from November 2012 to May 2013
and attributed this to the actions of the current Board. But of course on May
14, 2013—when the Company released its third quarter and nine month numbers
with record losses—the Company’s stock price plummeted to its November 2012
levels.

ISS says “There is little doubt the company’s restructuring efforts combined
with uncertainty surrounding a myriad of events, particularly, BKF’s tender
offer and the ensuing proxy contest, were distractions that may have impacted
negatively on the company’s TSR since May 2013.”

Really? This is the Company’s story. The abysmal nine month numbers are the
fault of BKF. Shareholders should be the judge of whether this makes any
sense. In the view of BKF—and BKF believes that other shareholders agree—it
does not. The Company’s stock price simply reflects the fundamental flaws in
the overdrive spending strategy of the current Board that was revealed in the
Company’s third quarter results.

So What Is the Fundamental Flaw in the Strategy of the Current Board?

As BKF has repeatedly explained, no matter how much of the Company’s remaining
cash—which has already been substantially depleted—the Board throws at the
tape storage business, it will not cure the basic problem. The Company cannot
go it alone in this business. Technology is moving away from tape storage,
customers are bundling their tape storage with other hardware purchases and
other players in this space—think for example IBM and Oracle—are far larger
and have many times the resources of the Company. That is why the Company’s
most direct competitors—Overland Storage and Quantum Corp., which are larger
than Qualstar—are hurting.

To compound the issue, according to the Company’s recent investor
presentation, Qualstar is now proposing to move to the higher end tape storage
market where it would be competing directly with the likes of IBM and Oracle.
This, we believe, is a recipe for disaster.

Why Did BKF Decline Mr. Firestone’s Offer to Join the Current Board?

The Company has faulted BKF for refusing to accept its offer of two Board
seats. First, BKF needs to set the record straight.

  * Before the special meeting in June of last year, BKF approached Mr.
    Firestone with a fair proposal for equal representation on the board, a
    mutual agreement on the fifth seat and a modification of Mr. Firestone’s
    employment agreement to reduce his egregious compensation package. Mr.
    Firestone never responded to the offer despite giving his word to get back
    to BKF within two weeks.
  * Mr. Firestone then reached out to BKF at the end of 2012 to get BKF to
    register, and perhaps sell its shares, as part of a shelf registration
    paid for with the Company’s money. BKF declined.
  * BKF didn’t hear from Mr. Firestone again until April 2013, when it was
    clear that BKF was following through on its previously disclosed
    intentions of running a slate for the annual meeting.
  * Mr. Firestone did not, as the Company claims, offer BKF two Board seats.
    He offered BKF one Board seat, with a second Board seat for Alan Howe. BKF
    is proud to have Mr. Howe, with his reputation and experience, on its
    slate, but Mr. Howe is independent of BKF. As Mr. Firestone well knew, Mr.
    Howe was suggested to BKF by another major Qualstar shareholder and has no
    prior relationship with Steven Bronson, BKF’s CEO.

Second, BKF took Mr. Firestone’s offer of Board representation under careful
consideration but decided to wait until the Company announced its third
quarter and nine month results. When BKF saw those results, with record losses
and cash burn, it determined that working to change the direction of the
Company with the existing Board would be futile. Moreover, BKF was concerned
with the fact that on May 8, 2013, Qualstar increased the size of its Board to
7 members and appointed Bud Lahber, a friend of Mr. Firestone, as a new member
of the Board.

Why Does BKF Lack Confidence in Current Management?

Mr. Firestone, who was named CEO in June 2012 and has presided over the
Company’s abysmal performance in the first nine months of fiscal 2013, has no
prior experience as a CEO.

The other current members of the Board that the Company has nominated for
re-election have long standing relationships with Mr. Firestone—they are
handpicked, as the Company likes to say. For example, on the recent investor
call, Bud Lahber explained the reason he joined the Board was his personal
relationship with Mr. Firestone.

In June 2012, Mr. Firestone committed the Company to breakeven or profitable
operations by June 2013. That of course has not happened, and the Company is
not even close to achieving this milestone. In the recent investor
presentation, Mr. Firestone made no commitment as to when the Company will be
profitable and has established unquantifiable “mid-term” and “long-term”
targets, so as to not be held accountable

What is the Strategy of the BKF Nominees?

If elected, the BKF nominees will run a lean organization. Our nominees
realize that the Company’s resources are limited and that every dollar must be
spent prudently.

Our nominees will reward management, but executive compensation will
principally be performance based.

Our nominees realize that the only way for the Company to extricate itself
from the problems that are plaguing the tape storage business will be to
partner with another strategic player to leverage resources and increase
market penetration.

Our nominees will thoroughly review all strategic options, from continuing to
operate as a standalone company to a business combination or reorganization.
There will be only one objective, and that is to maximize value for all
shareholders in which BKF will share proportionately.

Why Should Shareholders Trust the BKF Nominees?

The current Board still has only a nominal financial investment in the
Company. In contrast, BKF is the Company’s second largest shareholder, with
millions of dollars invested in Qualstar. The interests of BKF are directly
aligned with the interests of all other shareholders, and its fortunes will
rise or fall with the fortunes of everyone else.

What Should Shareholders Do?

BKF has determined that the only way to fix Qualstar is to replace the Board
with new independent directors. BKF is therefore asking for the help of all
shareholders to elect the directors nominated by BKF on the GOLD proxy card.

Therefore no matter how many or how few shares a shareholder owns, it is
important to return the GOLD proxy card and vote FOR the election of the five
nominees of BKF, and as recommended by BKF on the other proposals at the 2013
Annual Meeting.

Do not return the WHITE proxy card or any other card furnished by or on behalf
of the Company. Remember that only the last vote will count. Even if a
shareholder has voted on the Company’s WHITE proxy card, that vote may be
revoked by returning a later dated GOLD proxy card in favor of the BKF
nominees and as recommended by BKF on the other proposals.

If shareholders have any questions, require assistance in voting their shares,
or need additional copies of BKF’s Proxy Statement, please contact BKF’s proxy
advisors—

                             AST PHOENIX ADVISORS

                              6201 15^th AVENUE

                                  3^RD FLOOR

                              BROOKLYN, NY 11219

                        CALL TOLL FREE: (877) 478-5038

                BANKS AND BROKERS CALL COLLECT: (212) 493-3910

About BKF Capital Group Inc.

BKF Capital Group Inc. is a publicly traded company that intends to create an
asset management platform with investment vehicles that focus on areas of
portfolio management that typically receive less attention from investors but
also present unique investment opportunities. BKF is also engaged in seeking
to arrange an acquisition, with an operating business with revenues, at least
three years of operating history and unique value opportunities. For
additional information please visit: www.bkfcapital.com.

Contact:

BKF Capital Group, Inc.
Maria Fregosi, 561-362-4199 x 209
mfregosi@bkfcapital.com
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