Qualstar: Fiscal 2Q08 Financial Results

Qualstar Corporation reported financial results for the second quarter of fiscal 2008
ended December 31, 2007.

Revenues for the second quarter of fiscal 2008 were $6.0 million,
compared to $5.3 million for the same quarter of fiscal 2007, an
increase of $766,000 or 14.5 percent. Loss from operations was $483,000
compared to $817,000 in fiscal 2007. Net loss was $59,000, or break-even
per basic and diluted share, compared to a net loss of $446,000, or
$(0.04) per basic and diluted share for the second quarter of fiscal
2007.

Tape library segment revenues were $5.0 million for the quarter, up from
$4.4 million for the same quarter of the prior year. The increase was
attributed to higher revenues from the Company’s
XLS, RLS and TLS tape libraries and drives along with higher media
revenues, partially offset by lower service revenues.

Power supply segment revenues increased 20.8 percent, or $180,000, to
$1.05 million for the quarter from $866,000 for the same quarter of the
prior year.

Gross margin in the fiscal 2008 second quarter was 33.8 percent,
compared to 30.9 percent in the year-ago quarter. The increase in gross
margin percentage was primarily attributable to efficiencies achieved in
material management.

Research and development expenses for the second quarter of fiscal 2008
were $770,000, or 12.7 percent of revenues, compared to $756,000 or 14.3
percent of revenues, for the second quarter of fiscal 2007. Sales and
marketing expenses were $840,000, or 13.9 percent of revenues, compared
to $883,000 or 16.7 percent of revenues, in the corresponding period
last year. General and administrative expenses in the second quarter of
fiscal 2008 were $918,000 or 15.2 percent of revenues, compared to
$812,000, or 15.4 percent of revenues, for the same period last year.

Cash, cash equivalents and marketable securities were $34.1 million at
December 31, 2007, compared with $33.3 million at June 30, 2007.
Inventory at December 31, 2007 was $5.3 million, down from $5.9 million
at June 30, 2007.

Commenting on the Company’s second quarter
results, William Gervais, president and chief executive officer of
Qualstar Corporation, stated, “I am pleased
with our second quarter results, which were highlighted by good revenue
growth and solid net cash provided by operating activities. The strength
of our second quarter revenues was the result of gains across several
tape library product lines, including our XLS enterprise class
libraries, which are continuing to gain recognition in the marketplace
from a broad array of applications including banking, research,
aerospace and entertainment. In addition, I continue to be pleased with
the progress of our N2Power business, which is positioned to capitalize
on the strong demand for high efficiency power supplies resulting from
increasing worldwide power costs and clean energy concerns.”

Mr. Gervais continued, “The second quarter
marked the third consecutive quarter where Qualstar generated positive
net cash provided by operating activities. Given our strong liquidity
position and improved operating performance, I am pleased with the
decision by our Board of Directors to authorize a cash dividend of $0.06
per common share beginning this quarter. I believe the payment of a
dividend represents our confidence in the long term success of our
business and the Company’s commitment to
enhancing shareholder value.”

Fiscal 2008 Six-Month Financial Results
Qualstar reported revenues of $11.4 million for the first six months of
fiscal 2008, compared with $9.9 million for the first six months of
fiscal 2007. The Company’s net loss for the
first six months of fiscal 2008 was $265,000 or $(0.02) per basic and
diluted share, compared with a net loss of $1.0 million or $(0.08) per
basic and diluted share, in the first six months of fiscal 2007.

Qualstar Corporation